In a bid to modify its frequent flier program, premier passenger carrier American Airlines Group Inc.AAL plans to reward passengers on the basis of the fares paid by them rather than the distance flown. Travelers can start earning miles from the second half of 2016. Until then, members will keep earning miles based on the terms of the existing mileage program.
The change, which is identical to the ones made by its rivals like United Continental Holdings UAL and Delta Air Lines Inc. DAL , is primarily designed to benefit the elite members of American Airlines' AAdvantage program as they are the ones who spend the maximum on flights.
AAdvantage members will be rewarded with five miles for every U.S. dollar spent on the base fare and carrier-imposed fees. Likewise, Gold, Platinum and Executive Platinum members will earn seven, eight and 11 miles, respectively, for every dollar spent.
In order to boost its mileage program, American Airlines' passengers buying first or business class tickets will be awarded with extra miles. However, mileage redemption levels will be decreased by up to 40% starting Mar 2016. Passengers booking flights after Mar 22, 2016 to popular destinations like Mexico, the Caribbean and Central America will earn less redemption benefits as compared to the existing mileage program.
On the other hand, passengers traveling to Europe and Asia can expect a certain increase in mileage redemption levels, subject to changes in market pricing and demand.
Even elite members of AAdvantage program can enjoy auto-requested upgrades on domestic flights 500 miles or less while AAdvantage Executive Platinum members can enjoy the same facility on all domestic flights regardless of length.
American Airlines currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Southwest Airlines Co. LUV with a Zacks Rank #1 (Strong Buy).
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