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$1,000 toward travel or transfer to United, Southwest, and more.
Think about the frustration with using miles, and the first thing you might conclude is that it’s too easy to earn them without flying. With intro deals sometimes 100,000 miles or more since 2009, it’s easy to think the airlines and banks are running out of control printing presses.
Most airlines are pretty hush hush about what goes on inside their mileage programs, but American AAdvantage is the only one that discloses every year since 2007 exactly how many miles are outstanding and how many it’s issued. It’s great detail that turns some mileage beliefs into myths and lets us say:
– There hasn’t been a huge runup in the number of miles in circulation
– You can blame the rise in cash airfares, not inflation in miles, for making it harder to find awards – at least on American
– There’s one number every AAdvantage member should worry about, and it’s one provided by US Airways
Are there too many miles on the sidelines?
Here’s the total nunber of AAdvantage miles outstanding since 2007:
AAdvantage miles outstanding
At the end of last year, it was about the same as six years ago. And growth has only been one or two percent a year. Hardly a rampant increase in miles out there, despite the proliferation of card bonuses of 50 or 100,000 miles and people claiming that ‘hacking’ travel has gone mainstream.
And Citibank has been among the most loose with letting people earn lots of miles via many sign on bonuses on its AAdvantage cards.
Are too many miles being printed?
American discloses how many miles it issues fresh each year, both from people who earn via flying and sales to partners like Citibank. Here are the stats:
AAdvantage miles issued
Again, last year the number of miles printed by AAdvantage was about the same as it was in 2007.
Yes, there was a lull during the recession, and ahead of American’s bankruptcy filing in the fall of 2011. But the number of miles printed even declined from 2012, when American was trying to keep members in the fold during its bankruptcy by offering bigger bonuses for flying.
So there is no runaway printing press here. About 1/3rd of miles outstanding get used up each year, either via redemption or expiration.
AAdvantage flights redeemed
(millions of one-way awards)
And to throw water on the theory that people are getting a lot better at redemption, the number of flights redeemed has pretty much kept pace with the number of miles issued.
It’s about what it was in 2008, and hasn’t changed much since 2011 at about 6 million one-way awards a year.
Why does it feel like rewards are getting harder to use?
The real culprit is airfares.
American, like other airlines, is getting better at charging more for its seats. In fact their average fare is up about 30% from 2007, thanks to fewer seats in the sky and an improving economy.
To keep up with that, you’ll find that the price in miles you pay is higher on average than it once was.
But it feels more painful when you use your miles because there are only a few mileage prices they can offer.
For example, a domestic coach ticket can be had for 12,500, 20,000, 30,000 miles each way (and sometimes as high as 50,000 miles).
That’s a gap of over 50% for each price band, so when you get moved up one band it’s a lot more noticeable than a cash ticket where the price can creep up gradually.
So don’t blame the miles themselves. Blame the airfares.
Average fare on American flights
(fare per available seat mile)
What’s different about American?
American hasn’t substantially increased base award prices since 2008. Instead, earlier this year it added 3 more bands of prices at the high end that let it better match mileage prices with cash prices. United and Delta both increased many of the low end prices of awards this year.
American is also the only major airline that doesn’t have third party bank points that can easily transfer in.
Delta lets you bring in points from American Express Membership Rewards, while United lets you bring in points from Chase Ultimate Rewards. These arrangements make it harder for Delta and United to control the number of miles outstanding, and both have suffered devaluations of the low end of their mileage prices over the last year.
Fliers should get nervous if Citibank starts to allow transferring points from its ThankYou program to AAdvantage, so be careful what you wish for.
What should you be scared of?
The good news is, because the price you pay in miles is rising mostly because of increases in the price of flights themselves, the purchasing power of your miles isn’t going down as much as you think.
You’re paying about 30% more in cash for the same ticket than you did several years ago. So a ticket that cost you 25,000 miles 5 years ago, but now costs you 32,500 miles is actually offering you similar cash savings for each mile.
The real risk is the way US Airways handles miles.
US Airways discloses that only about 3% of its flown seats are taken up by award tickets. It’s been that way for years.
That’s less than half of what it is on American, where 7-8% of seats are taken up by award tickets each year.
And it’s not because US Airways fliers are using their miles with partners. Only about 10% of US Airways awards are flown on non-US Airways flights.
American and US Airways’ biggest competitors United and Delta typically have 7-8% of their seats taken by award tickets, like American, so there’s no real competitive reason to get as stingy as US Airways.
The tools are there for the new American to go either way on this. It doesn’t need to make any changes to its award chart to get a lot more stingy. It just needs to make fewer seats available. And this is the issue you and every AAdvantage member should be aware of.
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