American will charge $5 for ‘free’ tickets

When [% 2616921 | | US Airways %] announced it would be imposing fees on anyone redeeming frequent flyer miles for an award ticket, it was shocking. A line had been crossed: Free tickets were no longer on the table.

But it wasn’t a shock that US Airways would be the airline breaking faith with consumers. The new policy was altogether consistent with their charge-for-everything philosophy. And there was still the very real possibility that other airlines would resist the temptation to match US Airways’ move.

Today’s announcement by American that, beginning June 21, AAdvantage members will be required to pay $5 for every award ticket issued is the real game-changer.

The so-called Award Processing Fee applies to all award tickets, except those booked by Executive Platinum elite members and those already paying a fee, either for tickets booked within 21 days of travel or booked through the airline’s call center.

In short, the new policy marks the end of widely available, truly free travel awards at the industry’s first and largest mileage program.

In one sense, this is just another addition to the numbing litany of new and increased fees dumped on consumers by airlines desperate to attain profitability but unwilling to simply raise fares. No doubt American hopes it will be seen as such.

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But this latest gouge is also fundamentally different, applying as it does to the airline’s frequent flyer program rather than to the airline’s flights.

While American may well be losing money on its flying operations, its loyalty program (and the loyalty programs of other mainline carriers) is reliably assumed to be a consistently profitable enterprise. American generates in excess of $1 billion annually from the sale of AAdvantage miles to the hundreds of companies that award those miles as sales incentives. The costs of operating AAdvantage are relatively modest, because most awards consist of seats that would have been unsold anyway. So, viewed as a freestanding business, AAdvantage is already highly profitable. That makes additional fees even more unpalatable.

The timing is also worthy of comment. The announcement appeared on American’s website on June 20, with an effect date of June 21. That means that AAdvantage members were given a scant one day’s advance notice of a change which, by any measure, devalues the program and, in particular, any banked miles.

There’s no good time to break bad news, but I would argue that simple decency and basic ethics dictate that AAdvantage members should have been given at least several months’ advance notice of a new policy which so significantly changes the basic rules of the game.

For many years, the AAdvantage program was considered the gold standard among airline loyalty programs—innovative, generous, above board.

This latest move is none of those things. And today, sadly, neither is AAdvantage.