Thirty-five years after American Airlines launched the world’s first major frequent-flyer rewards scheme – AAdvantage – it is poised to become the last of the ‘big three’ US legacy carriers to complete a fundamental revamp of its particular loyalty program. Unlike the initial scheme offered back in 1981, allocating reward points to flyers based on the distances involved, American is now introducing a system from this July onwards that tilts the rewards earned to those who pay more for their tickets.
Both its main rivals, Delta Airways and United Airlines, have already pivoted in this direction. And while its commonly known that ancillary fees, charging for everything from baggage to priority boarding, from extra legroom to in-flight food – have become a crucial part of the airline’s revenue picture, less known is the importance of loyalty program revenue.
The top six domestic airlines (Alaska, American, Delta, Hawaiian, Southwest and United) earned 55 per cent of their total ancillary revenues – US$18.1 billion last year – from their reward programs. Delta alone made more than 62 per cent of its ancillary revenues from Sky Miles. This radical reshaping of the frequent-flyer rewards landscape is, not surprisingly, causing concerns among many travelers who are seeing the ability to achieve reward miles or points significantly reduced and the cost of redeeming those they already have rising.
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