American
Airlines is making it increasingly clear that it would rather sell
first-class seats than give them away as free upgrades to frequent flyers.
Speaking at the
Bernstein 42nd Annual Strategic Decisions Conference this week, American
Airlines CEO Robert Isom was asked whether the airline has gotten better at
selling upgrades instead of handing them out to elite loyalty program members. He
answered with a straightforward, “Absolutely.”
According to Isom,
American has done a phased revamped its mobile app so that it “definitely does
a better job of laying out what’s available and why there’s benefit to
potentially paying some more.” He talked about cabin upgrades, along with bag
fees and other add-ons, as just another retail product the airline can sell.
This strategy has
already been in play for about a year, The
Washington Times reported. Last summer, the carrier replaced its fixed
mileage upgrade chart with a variable pricing system (prices fluctuate based on
demand) that allows AAdvantage loyalty program members to purchase “instant upgrades”
using cash or miles. If using miles, however, they wouldn’t be worth much —
about 1 cent apiece.
The change is part
of a larger push to increase revenue from premium products. American has said
it plans to increase the number of lie-flat and premium economy seats in its
fleet by about 50 percent by the end of the decade.
From a business
standpoint, the reasoning is simple: A first-class seat that gets sold brings
in revenue, while a complimentary upgrade does not. But some airline industry analysts
have said the new approach could make elite status less appealing to frequent
flyers.
Gary Leff, who
writes the blog View from the Wing and first called out Isom's comments, noted
that the CEO himself has referred to the AAdvantage program as one of the
company's biggest strengths, calling it a key pillar of the airline's strategy.
Critics argue that, if free upgrades become harder to attain, travelers may
start to question the value of chasing loyalty status in the first place.
The potential of
scoring a first-class upgrade has long been one of the biggest perks of airline
loyalty programs. Many travelers have stuck with a single airline, paid higher
fares or accepted less convenient routes in exchange for that very possibility.
But, with airlines focusing more on selling premium seats outright, that benefit
will prove harder to come by.
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