American Increases Cost To Buy AAdvantage Miles

While this seems like bad news on the surface, I’m not reading into this too much yet.

American now sells miles for 3.5 cents each

Buying airline miles can often represent a great value, and American AAdvantage is one of the loyalty programs that’s aggressive about selling miles. American has a promotion on purchased miles just about every month, though the value proposition differs.

American has raised the cost to purchase miles by roughly 19% overnight:

• Previously American miles could be purchased for 2.95 cents each plus a 7.5% tax, for a total of 3.17 cents
• Now American miles can be purchased for 3.5 cents each plus a 7.5% tax, for a total of 3.76 cents

These are the costs to purchase miles before any other promotions. For example, American is offering a 35% discount on purchased miles all month. Up until yesterday buying 150,000 miles cost $3,144.38.

Now the cost to purchase the same number of miles is $3,668.44.

Why I wouldn’t read too much into this yet

The increase in cost to purchase miles here is drastic, though personally I’m not sure there will necessarily be big implications:

• Even if American wants to increase the cost to buy miles, at the end of the day consumers will decide on the value of the offers, and American will adjust accordingly
• While there are great uses of AAdvantage miles, I tend to think there’s a lot more interest when the cost to buy miles with a promotion is under two cents
• Since American constantly has promotions on purchased miles, it could be that the company is just trying a new strategy, and wants to offer a bigger discount or bonus on purchased miles

Regarding that last point, previously American sometimes had up to a 40% discount or up to a 75% bonus on purchased miles. Maybe in the future American will instead have a 50-60% discount or a 100% bonus on purchased miles. Just look at Avianca LifeMiles, which frequently has promotions on purchased miles, and the minimum bonus you see is usually 140%.

The “list price” to purchase AAdvantage miles is ultimately irrelevant, since the airline is very rarely charging that. So while those buying miles in the latter part of January will pay a higher price, I’m curious to see what promotions look like in February and beyond.

Bottom line

American AAdvantage has increased the cost to purchase miles from 2.95 cents to 3.5 cents (pre-tax). That increase is significant, though in fairness American constantly has promotions on purchased miles, so the list price is largely irrelevant.

I’m curious to see if American is going to try to increase the cost to buy miles during promotions, or if this is just a strategy to offer bigger bonuses or discounts on purchased miles, so that consumers might be tricked into thinking that they’re getting a better value.

What do you think American’s strategy is with increasing the “standard” cost to purchase AAdvantage miles?

(Tip of the hat to @lexSayzzz)