What the American Airlines loyalty program changes mean for your rewards strategy

As Delta and United already did this year, American Airlines is making massive changes to its rewards program. Instead of rewarding travelers for miles flown, it will reward them for dollars spent. Once all the planned changes roll out (by the second half of 2016), no U.S. legacy carrier will have a miles-based rewards model.American loyalty program changes

Read on for a description of the changes – and how they might impact your rewards card strategy.

What’s changing

American’s program is undergoing three major adjustments:

1. How miles are earned

You will earn miles based on dollars spent on tickets (government taxes and fees excluded) and your elite status level, instead of the distance (number of miles) flown:

AAdvantage reward-earning chart (beginning 2nd half of 2016
Status levelMiles earned
Basic AAdvantage member (no status)5 miles/dollar
Gold7 miles/dollar
Platinum8 miles/dollar
Executive Platinum11 miles/dollar

2. How many miles you need for a free flight

These changes will go into effect March 22, 2016. According to American’s press release, American is slashing the number of miles needed for flights under 500 miles in the U.S. and Canada (as low as 7,500 miles each way). Currently, the lowest redemption level is 12,500 miles each way unless you have an AAdvantage credit card, which gives you access to lower redemption amounts on limited itineraries.

More changes are only apparent through examination of AA’s award chart. For some destinations and redemption levels, the number of miles required is decreasing – for others, it’s increasing. There are a lot of changes in store, but here are some of the most significant:

  • Economy off-peak SAAver fares to South America Zone 2 (Argentina, Bolivia, Brazil, Chile [excluding Easter Island], Paraguay, Uruguay) will no longer be available. Formerly, these fares cost 20,000 miles each way. Now, the lowest redemption level will be 30,000 miles (at the regular SAAver level).
  • Economy off-peak rewards fares to Asia Region 2 (Bhutan, Brunei, Guam, Hong Kong, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Saipan, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam) will now be available at the SAAver level (for 32,500 miles). Previously, the lowest redemption fare for this region was 35,000 miles each way.
  • Business class SAAver fares to South America Zone 2 and to Europe will jump from 50,000 miles each way to 57,500 miles each way.
  • Business class SAAver fares to Asia are going up. Asia Region 1 (China, Japan, Korea, Mongolia) is going up from 50,000 miles each way to 60,000 each way. And Asia Region 2 is increasing from 55,000 miles each way to 75,000 each way.
  • Business class SAAver fares to the South Pacific are leaping from 62,500 miles each way to 80,000 miles each way.
  • First class SAAver fares are increasing across the board. None of it’s pretty, but the biggest jumps will be seen in fares to Asia Region 2 (from 67,500 miles each way to 110,000 miles each way and to Europe (from 62,500 miles each way to 85,000 miles each way).

The bottom line: Despite some minor fluctuations, economy fares won’t see many changes. But first-class international rewards fares are hitting new highs.

3. Elite status qualification

American will be streamlining its elite-qualification process a bit. There used to be three ways to qualify for elite: 1) elite-qualifying miles (actual miles spent in an airplane seat); 2) elite-qualifying segments (point-A-to-B segments flown); and 3) elite-qualifying points (bonus points you got for purchasing higher classes of service).

American is doing away with option No. 3. After the changes go into effect, you’ll earn bonus elite-qualifying miles for purchasing higher classes of service:

Service classEQMs earned
Discount economy1 per mile flown
Full-fare economy1.5 per mile flown
Discount first/business class2 per mile flown
Full-fare first/business3 per mile flown

That may be welcome news, because, for some fliers, that third elite currency (“points”) was frustrating. If, for example, you had the Citi Executive AAdvantage card, you would earn 10,000 elite-qualifying miles if you spent $40,000 on the card within a year. Meanwhile, you may have earned a bunch of elite-qualifying points for flying first class. Because you couldn’t convert EQMs to EQPs and vice versa, you might have ended up with not enough of either currency to get elite status. With everything in miles, you can combine the EQMs earned with your card and those earned from first-class tickets.

Here’s some more good news: Unlike Delta, American isn’t introducing spending thresholds. Members of Delta’s rewards program are required to spend at least $2,500 on flights per year to get into Medallion status.

Which travelers will benefit – and which ones won’t

In general, tying rewards to revenue is advantageous for high spenders and less so for budget travelers.

If you’re on a budget, you’ll likely jump on the lowest economy fare you find. If money is no object (perhaps you’re traveling for business or flying first class), you’ll pay more for your ticket.

Under the old system, both these scenarios would net you the same number of AAdvantage miles because the distance from New York to London doesn’t change, no matter how much you spend on the journey. Under the new system, however, the second scenario will likely earn you more miles – especially if you have elite status.

True, some budget travelers may be able to take advantage of the new lower-cost short-haul rewards fares. But, in general, when it comes to AAdvantage rewards, you’ll need to pay more to play in 2016. Just look at all the interlocking parts of American’s new system: Spending more on higher classes of service feeds your elite status, which, in turn, gets you more miles per dollar spent.

What AAdvantage cardholders need to know

These changes won’t directly impact AAdvantage cardholders, whether you have one of Citi’s AAdvantage cards or if you’re a former US Airways cardholder with a Barclaycard AAdvantage Aviator card who’s simply along for this bumpy ride thanks to the AA/US merger.

However, having a co-branded American Airlines credit card (whichever type) could affect your rewards strategy going forward:

Still want to fly American and make up for any losses under the new system?
Use your card on all the purchases you can to pad your rewards balance. That way, you can still take inexpensive flights and still earn some extra points for your everyday purchases.

The Citi AAdvantage Platinum Select card ($95 annual fee) and the Citi/AAdvantage Executive card ($450) annual fee both give you 2 miles per dollar on American Airlines purchases and 1 mile per dollar on everything else. The Aviator Blue ($49 annual fee) and Red ($89 annual fee) cards do the same. And the Aviator Silver ($195 annual fee) gives you 3 miles per dollar on American purchases, 2 miles per dollar on hotels and car rentals, and 1 mile per dollar on everything else.

Want to get elite status without flying more?
Elite status is a sure-fire way to profit from the new system, and the Executive card from Citi gives you 10,000 EQMs any year you spend $40,000 on the card. If that bumps you up into the next elite level, you’ll see your rewards earnings kick into a higher gear.

Ready to kiss airline loyalty goodbye after all these changes?

If you don’t like the path that airline loyalty programs are traveling, there are plenty of credit card rewards programs to consider as an alternative. Generic travel rewards cards (such as the Capital One Venture) give you fixed-value points you can put toward tickets on any airline. If you do like playing the miles game, some cards let you transfer points earned with your card to a bunch of airline programs – so you get the benefits of real airline miles, no loyalty required.

Check out the offers below (American Express is a CreditCardForum advertising partner):

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