American Kept Charging A $75 Award Fee After No More Work Was Was Required, Former Loyalty Chief Says

American Airlines used to charge $75 to book an award ticket within 21 days of departure. Now the former head of AAdvantage says the airline kept collecting its expedite fee even after the process it was supposed to expedite became automated. Maya Leibman, who ran AAdvantage before becoming American’s Chief Information Officer, discussed this on the this week’s Airlines Confidential podcast. The airline finally eliminated the fee in January 2020. Leibman was defending checked bag fees because there are people and equipment involved in moving bags. Then she offered an example of a fee she couldn’t defend. I think she’s wrong about bag fees based on cost of production (‘real cost fallacy’). Bags are charged as a form of price discrimination. Nonetheless, Leibman recalled the transition from a manual award process to online booking: “we were still charging an expedite fee, like, within 21 days.” The transaction, she pointed out, was “all done automatically.” The fee survived even though the narrative used to justify it was gone. The $75 close-in charge was waived for American’s elite frequent flyers. American Even Announced A $5 Fee For Booking Awards Online American once tried to go further. In May 2008 they announced a $5 charge for booking award tickets on their website. The argument for telephone booking fees had been that agents cost money, and customers could avoid that charge by doing the work themselves online. Here American wanted to charge for the cheaper booking channel, too. I wrote about the announcement on May 30, 2008. Multiply millions of award redemptions by $5 and it was clearly a revenue opportunity since they were the monopoly redeemer of the currency. Members couldn’t take their AAdvantage miles and book travel somewhere else. Except the airline had already used the prospect of an award to persuade customers to earn those miles. Adding a charge when they tried to use them reduced the value of a reward they’d earned, and made it less likely they’d earn in the future. It left a bad taste in the customer’s mouth at exactly the moment they’re supposed to feel best about giving the airline business. As I wrote years ago, American never implemented that fee. They backed away without announcing the reversal. They took the criticism for imposing it and didn’t claim credit for listening to members. The Airline Had Already Been Paid To Give You Those Miles I don’t think airline prices have to track the cost of each transaction. Two passengers on the same flight, in the same cabin, pay different fares every day. Airlines price based on demand. There’s even an economic argument for charging more for last-minute awards: the airline might otherwise sell that seat for an expensive ticket, or the customer might otherwise pay cash for that expensive ticket. In the former case, revenue management is supposed to price the award so that’s not an issue. And neither case requires someone to hurry up and process an electronic ticket. Ultimately, eliminating a cash fee doesn’t even necessarily mean make awards cheaper. When American dropped its $75 charge, I pointed out that United and Delta had moved towards collecting more miles for close-in awards instead. That’s a bad trade for elites who used to have the cash fee waived but don’t get the extra mileage requirement waived. American stopped discounting awards to elites. Topics on this page