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American Ups Award Prices, Requires $5 Payment to Book Free Tickets Online
This is already being much discussed elsewhere, but American has imposed a $5 fee for website award bookings.
The old argument was that reservation centers were more costly than web, an airline wanted to (a) push its reservations online to lower costs and (b) charge a fee for the ‘extra’ service of having a person handle the booking.
Now, even the cheaper online booking will come at a fee. Why? Because they’re looking for revenue sources, and because they can. Online booking is still cheaper than booking by phone, and American has a captive market to some extent amongst AAdvantage members looking to redeem their miles. With millions of awards redeemed annually, multiply those out by $5 and they’re predicting serious revenue.
Of course, AAdvantage members aren’t really captive at least in terms of their future earning choices, there are plenty of other mileage programs out there to choose from. Of course American’s bet is that the whole point of mileage rewards programs is to make consumer choice to some extent inelastic, and thus they believe a ‘modest’ $5 fee won’t drive members away to competitors that don’t charge such a fee (and there’s some change of course that other programs will follow American’s lead here).
Back in January I predicted that airlines would eventually pass on fuel surcharges like their European counterparts do. This doesn’t go that far but I do expect it’s a baby step in that direction. If this fee is passed on without much commotion or consequence, it will make perfectly good sense to add on additional fees. Somehow the old parable about how to boil a lobster seems to apply here.
An award redemption fee really does smack right at the heart of the very idea of using miles for a free ticket. What’s more, they’re imposing the fee at the very same time they’re also announcing increases in mileage award levels. Premium cabins to Europe, Asia and South America get (incrementally) more expensive. Several “AAnytime” awards get more expensive. Although in fairness the changes hardly represent a bloodbath. Of course it’s only been a few years since the last major set of changes.
Poor showing, American.
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Posted by May 30th, 2008
Comments (5)
May 30th, 2008 at 2:23 pm
Somehow I think we’ll see $5 “fees” on any online booking on airline websites by the end of the year. After all, the same logic as for award tickets applies — where else would you go to avoid it? (other than Priceline)
May 30th, 2008 at 11:19 pm
This is very wrong. You’re supposed to be saving up for a “free ticket” — not a $5 ticket. I assume there’s no place you can now go to redeem your award ticket without a fee.
Hopefully, some greedy lawyer will launch a class action suit against this policy and AA will have to incur the costs of defending it. They would deserve it.
May 31st, 2008 at 7:49 am
Ack! Everytime I read your prediction about passing on surcharges on FF tickets, my toes curl!!!
Fingernails on a blackboard!
June 2nd, 2008 at 8:08 am
[...] (Thanks to View from the Wing): [...]
June 12th, 2008 at 9:23 pm
[...] fee American introduced a $5 fee for booking a free ticket online. Purely spiteful, as Gary Leff argued when this first arose. Online distribution was intended to lower costs, but now it’s just a [...]