American Raises Miles Needed for Free Travel on Busiest Days

Apr 08, 2014 4:29 pm ET

(Updates with shares in seventh paragraph.)

April 8 (Bloomberg) -- American Airlines Group Inc. is doubling the amount of frequent-flier award miles needed to gain a free one-way ticket for flights on the busiest travel days.

The increase, to 50,000 miles for trips on days like the Sunday after Thanksgiving, is among changes American announced today to better match its policies with those of merger partner US Airways. The new rules also eliminate blackout dates for members of US Airways’ Dividend Miles program.

The moves may push American closer to loyalty program changes adopted at smaller competitors Delta Air Lines Inc. and United Airlines, which are tweaking their plans to link at least some awards to ticket price instead of miles flown. American and US Airways combined have the largest loyalty program, with 110 million members.

“We believe such a change likely lies ahead -- possibly by year-end,” Jamie Baker, a JPMorgan Chase & Co. analyst, said of American’s AAdvantage program in a note to investors today.

Delta said in February it would base awards on the amount spent to better reward travelers who pay the highest fares and penalize those seeking the cheapest price. This year, United Continental Holdings Inc. began requiring passengers to spend $10,000 and travel 100,000 miles, or 120 segments, in order to gain the top status of Premier 1K in its MileagePlus program.

Baker estimated Delta will increase annual earnings by about $150 million from the switch, an amount he said American likely would surpass.

American rose 0.6 percent to $35.98 at the close of trading in New York. The shares have risen 46 percent from when the two carriers merged on Dec. 9, compared with a 2.4 percent gain in the Standard & Poor’s 500 Index in that period.

Effective Today

Members of AAdvantage previously needed 25,000 in accumulated miles for a free one-way ticket. Under changes announced today, miles needed for an economy AAnytime award will increase to 30,000 miles from 25,000 during part of the year. The rate for the remainder of the year will decline to 20,000 miles one-way, American said in a statement, without specifying dates.

The update on blackout dates is effective today for travel starting June 1, the Fort Worth, Texas-based airline said.

“Making these changes will ensure that our customers know what to expect when traveling on either carrier and help them better plan their travel,” American said in a statement sent to managers at both airlines.

Travelers using miles to get a free ticket may have to pay to check their suitcase under the new rules.

AAdvantage Gold members and Dividend Miles Platinum and Gold travelers will receive one fewer free checked bag, while customers traveling on an AAnytime award or a full-fare economy ticket will no longer get any free checked luggage.

South America

Both airlines will remove the charge for a second checked bag on flights to and from South America. Holders of American’s branded Citi credit card will continue to receive one free checked bag, a benefit that will be extended to customers with certain US Airways MasterCards beginning on April 30, the airline said.

The bag fee changes are effective for tickets issued starting today on American flights, and starting April 23 for US Airways.

Earlier today, American said first-quarter operating margin would slip to a range of 5 percent to 7 percent, down from a January forecast of 6 percent to 8 percent, because of winter storms that disrupted operations at its largest hubs.

Airbus Purchase

Heavy snows, ice and frigid temperatures that battered large swaths of the country, including Charlotte, North Carolina, Chicago, New York and Dallas-Fort Worth, forced the airline to cancel 34,000 flights. Revenue was reduced by $115 million and operating profit by about $60 million, American said.

The airline also said today it will purchase 62 Airbus Group NV A320 aircraft that had been on lease financing because it was able to negotiate better rates. The planes will be delivered between the first quarter of 2015 and third quarter of 2017.

In conjunction with that change, the carrier converted firm orders for 30 Airbus A320neo aircraft to options. Those planes would have been delivered in 2021 and 2022. Casey Norton, an American spokesman, couldn’t comment on the reason for that change. In July 2011, American ordered 260 Airbus A320s and 200 Boeing Co. 737s to replace its aging single-aisle fleet.