Good news, bad news: American Airlines keeps expanding dynamic award pricing

Oct 21, 2019

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With almost any frequent flyer program change, there are winners and losers. When U.S.-based airlines switched to revenue-based mileage earnings, high-spending business travelers began earning a lot more miles. Meanwhile, those of us that flew cheap economy mileage runs lost the ability to generate tons of miles from flying.

Similarly, airlines changing from static award chart pricing to dynamic award pricing, some travelers are winning and others are losing.

Later in October, we will reach the one year mark since American Airlines implemented “Economy Web Specials.” What was billed as a “discount program” has turned out to be AA’s way of implementing dynamic award pricing. While it started out as a limited program on just six routes, American Airlines has since expended the program across the U.S., to Europe, the Caribbean and most recently Australia.

Let’s look at why this program is both good news and bad news by taking a look at Economy Web Specials on routes to Australia.

When dynamic award pricing is a good thing

According to the American Airlines award chart, the cheapest economy awards between the U.S. and South Pacific region — which includes Australia — are 40,000 miles each way. Now, with Economy Web Specials implemented, awards have now dropped as low as 27,500 miles each way between New York City and Sydney (SYD):

Even nonstop awards — which AA typically prices at a premium — are now available as cheap as 27,500 miles each way between Los Angeles (LAX) and Sydney:

This means that — if you’re flexible on dates — you can fly to Australia for fewer AAdvantage miles than perhaps ever before. However, this implementation comes with a dark side.

When dynamic award pricing is bad news

As discussed above, American Airlines is using Economy Web Specials to implement dynamic award pricing while still (kinda) having an award chart.

For the past year, Economy Web Specials have focused mainly on domestic itineraries. On the positive side, we’ve seen awards as cheap as 5,000 miles each way. But, they can be much, much higher than that on other dates and routes.

When available, Economy Web Specials pricing will always be less than the MileSAAver or AAnytime award pricing available for that date. However, that doesn’t mean that it will be cheap.

For example, consider the following week in mid-December on the route between New York City and Sydney. While some dates cost “just” 75,500 miles each way, Economy Web Special pricing starts at a whopping 131,500 miles one-way on Dec. 18:

131,500 miles is an extraordinary amount to pay for a one-way economy flight. At current TPG valuations, that’s $1,841 worth of miles for flying just one direction. Even buying a one-way international cash ticket with a reasonable layover on the same date is cheaper than that:

For what it’s worth, that 131,500-mile Economy Web Special price is cheaper that the economy AAnytime award pricing of 150,000 miles each way:

If you think 150,000 miles seems extreme for an economy award, you’re right. It’s literally off the American Airlines award chart. The highest stated level (AAnytime Level 2) is 90,000 miles each way.

Technically, American Airlines has had off-the-chart AAnytime Level 4 award pricing for years, but it wasn’t expanded to U.S.-South Pacific business- and first-class awards until August 2016. At the time, AA confirmed economy awards would max out at 120,000 miles each way, but that’s clearly changed.

While a “special” price of 131,500 miles each way sounds awful, it actually gets worse. American Airlines is pricing awards between Atlanta (ATL) and Sydney as high as 149,000 miles each way through Economy Web Specials. And this particular award option requires a 13+ hour layover in Los Angeles to save 1,000 miles off the current maximum AAnytime Level 4 price of 150,000 miles each way.

What more AA dynamic award pricing means

American Airlines management has been clear to investors that the airline is moving toward dynamic award pricing. And in a statement to TPG in May, an American Airlines spokesperson confirmed that the airline is continuing to add “dynamic awards called web specials.” So, the expansion of dynamic pricing/Economy Web Specials to more routes shouldn’t be a surprise.

As we point out above, it’s not all negative. From just one credit card sign-up bonus, you can now generate enough AAdvantage miles to fly nonstop between the U.S. and Australia. The Citi® / AAdvantage® Executive World Elite™ Mastercard® is currently offering 50,000 bonus AAdvantage miles for spending $5,000 on purchases in the first three months of account opening.

Combining the 50,000-mile bonus with the 5,000+ miles you’ll earn from meeting the minimum spending, you now have enough miles to fly round-trip between Los Angeles and Sydney:

Alternately, small-business owners could consider the increased offer on the CitiBusiness® / AAdvantage® Platinum Select® World Mastercard®. You’ll earn 70,000 American Airlines miles after spending $4,000 on purchases in the first four months of account opening — more than enough for a round-trip flight to Australia, with miles left over for another trip.

However, dynamic award pricing generally is bad news for those looking to travel during peak travel periods and at the last minute.

Featured photo by Patrick T. Fallon/Bloomberg via Getty Images.

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