Pluses and hidden devaluations in AA’s dynamic pricing for domestic awards

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Yesterday, American Airlines debuted fully dynamic award pricing. We now see prices running the gamut from a few thousand miles (5K or 6K) up to hundreds of thousands of miles one way on some international routes. I set out to write this post intending to offer what I expected would be a contrarian opinion: to argue that the move to dynamic pricing isn’t that bad after all and might even be a good thing in some ways. Unfortunately, while looking for data to support my premises, I just couldn’t argue that with a straight face. American has pulled a switcheroo, appearing to increase value in some spots while simultaneously making the program a little worse. Here’s a look at the benefits that first caught my eye and the hidden devaluations with regard to domestic award tickets on American Airlines.

American Airlines Planes

Variable pricing looks potentially good on the surface

Delta’s move to a similar dynamic/revenue-based model years ago earned its currency the moniker “SkyPesos” within the frequent flyer community. However, its move to dynamic pricing has enabled Delta to occasionally shine over the past couple of years with flash sales that sometimes offer award prices like 10K miles round trip on select routes in the US or under 20K round trip to parts of the Caribbean and Mexico.

At first glance, I thought that this move towards a more revenue-based system was doing the same for AA in giving them a chance to charge few enough miles for award tickets to make sense in domestic scenarios where they had previously presented poor value. This could be a win-win in helping American clear the books of miles by filling otherwise empty seats on their own flights while also offering better value to the consumer. Perhaps it was overly optimistic of me, but I thought that this could work out to be a little better than the previous scheme. Admittedly, that hope comes from what a poor value AA miles have presented for travel on their own flights for years — there wasn’t far to sink. Initially, this new dynamic model looked as decent as I expected on my test searches.

For example, I searched from my smaller local airport (Albany, NY) to San Jose, California on a random date. I was surprised to see an award on a decently-timed itinerary for just 10K in economy class or 20K in business class

Those numbers seemed pretty acceptable to me. The economy class award doesn’t provide amazing value, but at about 1.5c per point it isn’t a terrible use of miles when compared to a cash rate of $157 for the same flight.

Better yet, flying up front for 20K is certainly reasonable as compared to the cash price of $431 for the same itinerary.

 

Before the switch to the dynamic model, I’d have had to have paid more miles / gotten less value for the same flights.

I found other similar opportunities looking at routes to and from various cities, with business class showing some decent values. The good news regarding dynamic pricing is that those opportunities are real. If you’re looking to book domestic business class awards, you may find some better values than before.

However, there are also a couple of devaluations at play.

Devaluation #1: a loss of flexibility

One of the strengths of using American Airlines miles has long been their flexibility. AA has long allowed changes of date or route for free provided that your origin and destination remained the same. This essentially allowed you to lock up seats on something and then continue to search to see if a better award opened up later (whether better times, equipment, or in scenarios with international flights, better partners). With the debut of economy web specials, we began seeing more restrictive language indicating that “web specials” can not be changed and that they could only be cancelled for a fee.

When I began exploring flight options between New York and Los Angeles, I found that all of the options that priced below the old “standard” award pricing were noted as web specials that could not be changed or canceled. For example, there was this 8K award from New York to Los Angeles.

In that case, maybe one would reasonably consider that an “economy web special” since it does cost significantly less than the old “SAAver” 12,500-mile award (36% less). However, that trend continued when the economy award was 10K or 11K. Even a 12K award is considered a “web special” now. Anything priced under the old SAAver level is now a “web special”.

In this case, you’d be better off paying an additional 500 miles for the regular main cabin award so you could make changes to date or routing.

The same holds true for business class awards, where I did find some bookable space on New York JFK-to-Los Angeles flights priced at 24K in business class (keep in mind that premium transcon business class was 32.5K as a SAAver award rather than the usual domestic 25K rate).

However, you’re giving up the chance for free time or date changes when you book the new discounted “web special” award. That’s not necessarily a terrible trade: it saves you miles over what you would have paid before. Further, it took me one search to find premium cabin space on the JFK-to-LAX route, so maybe this variable pricing will lead to more award availability. But there is definitely a trade-off when accepting the lower “web special” pricing.

Devaluation #2: No partner availability despite “SAAver” “availability”

Looking at the above screen shots, one thing that stood out at me initially was that each “Web Special” award that I checked was also bookable at the old “SAAver” price for that cabin class. See the 8K and 12K economy class awards above that are also bookable for 12.5K. There were awards on the New York-to-Los Angeles route for 6K and 10K and 11K — all of which could alternatively be booked as regular main cabin awards for 12.5K miles.

Initially, that sounded like it could be a good thing in the sense that those 12.5K SAAver awards have traditionally been available to partners to book with their miles. Since all of these sub-12.5K awards could now alternatively be booked for 12.5K miles, I thought that perhaps that would mean greater availability to book American Airlines flights with partner miles.

It didn’t.

On a sample date in January, I counted 24 itineraries available in economy class for less than 12.5K miles from New York to Los Angeles (all of which could alternatively be booked at the old SAAver price of 12.5K miles). I checked the same date with partner miles and didn’t see nearly that much availability. As an example, Qantas showed two economy class itineraries available. And it wasn’t a matter of routing rules or max connect times getting in the way. There just isn’t a match in terms of 12.5K awards being available with partner miles.

It was a similar story in business class, though interestingly I did see the nonstop business class awards from JFK to LAX available via Qantas. That’s not interesting in terms of booking with Qantas miles (Qantas would charge 57K one way), but it means that those same seats should be available to other partners. Ideally, that’s the scenario I’d like to see in general.

A potential bright side: Will Reduced Mileage Awards be easier to come by?

I think it’s too early to make a judgment as to whether or not this will be of any benefit, but one potential upside I saw in this is the possibility to book reduced mileage awards. Reduced mileage awards are available to those who hold one of the various American Airlines credit cards (See the American Airlines page with current destinations and more information here). Select destinations (which change monthly) offer discounts of 3,750 miles one-way for those who have certain American Airlines credit cards.

These awards reduce a 12.5K SAAver award to 8,750 miles one way. At first glance, the addition of so many “web specials” looks to have expanded the availability of 12.5K awards (since the economy web specials are also available for 12.5K miles one way). Since the “web specials” are only available at AA.com, I would not expect the reduced mileage award discount to come off of those reduced rates. However, since those web special awards are also available for 12.5K miles, I would expect that you could use the reduced mileage awards discount to book with AA for 8,750 miles one way.

This might create a scenario where you can have your cake and eat it, too.

For instance, earlier in this post I showed that there was an award available from Albany, NY to San Jose, California in January for 10K miles one way in economy class.

That 10K “web special” is also available for 12.5K as a “regular” SAAver award. Albany also happens to be on the reduced mileage chart for flights in January.

That flight should then cost only 8,750 miles if booked over the phone as a reduced mileage award. This would then preserve the flexibility to change date, time, and routing while also getting a better price than the “web special”.

I don’t know that the spread of economy web special pricing will for sure increase the availability of 12.5K-mile awards, but on my initial searches I’ve seen more availability than I customarily do. That could just be a function of a relatively small sample size. On the other hand, I suspect that a combination of going fully dynamic and what I perceive to be AA’s desire to encourage us into the less flexible web specials may in fact create some more opportunities here. Reduced mileage awards are obviously limited in their utility and they will not always be cheaper than web special pricing, but it’s worth keeping them in mind for opportunities to preserve flexibility without overpaying for the award ticket.

Bottom line

The debut of fully dynamic pricing via American Airlines isn’t without some potential upside. For a brief moment in time, I thought there might even be an argument as to why dynamic pricing could be good in terms of getting more acceptable value out of miles for domestic travel. However, the hidden devaluations in terms of loss of flexibility and lack of availability to book those previous “SAAver” level awards with partner miles are bummers. Keep your eye out for reduced mileage award opportunities and chances to get good value for business class, but overall this doesn’t look great.

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