Why won’t American Airlines take my money?


I’m thrilled to bring back one of my favorite features: That’s ridiculous! I’ll be exploring some of the more senseless policies, rules and regulations and pointing out their absurdities. It’ll be fun! You can help by emailing me your tips.

Jim Loomis can’t be the only person with this question, so I’m letting him ask it: Why won’t American Airlines take his perfectly valid American currency?

The occasion was the five-hour flight between Maui and Los Angeles, which is probably one of the most boring flights in the world. (Look down! What do you see? Ocean — for five straight hours.)

Loomis, who’s been a member of American Airlines’ AAdvantage program for more than 20 years, had a seat in economy class, booked with award miles. Economy class was completely full, with one passenger standing at the gate hoping for a seat to open up.

Loomis asked if there were any seats available in first. There were two.

Could he buy an upgrade?


“So the flight left with me sitting in economy, two empty seats in first class, and one stand-by passenger still back in the Maui airport trying to get to Los Angeles,” he says.

“Meanwhile, American didn’t get my $300 for the upgrade and whatever they would have charged the stand-by passenger,” he says.

He adds,

I emailed a complaint to American and they replied that it was indeed the company’s policy because allowing those of us traveling on miles to buy an upgrade would lessen the value of the first class experience for the folks up there who paid cash for their seat.

Well, first, how would the rest of the first class passengers know how I had come to be sitting there amongst them? And, second, why would an airline in bankruptcy refuse $500 or $600 in found income?

You really have to wonder, don’t you!

Yeah, me too.

I find it odd that American could tell a passenger that the award miles he’d earned as the result of giving his loyalty and business to the airline were somehow worth less than cash, and indeed, are worthless. I mean, I’m sure the bean counters treat it as value-less scrip, but why would you tell a customer that their Weimar Republic points have no value?

Isn’t that what I’m supposed to do?

But beyond that, why on earth wouldn’t you take a customer’s real money when the benefits are so obvious: You get $300 and you also have another passenger, who is presumably paying a fare.

How tricky is that math?

Now I’m sure there’s a perfectly reasonable explanation for all of this which makes sense to the airline and the MBAs in charge of its yield management systems. But telling a long-time customer that his miles — indeed, his loyalty — has no real value is truly self-destructive. Almost as self-destructive as turning down $300, which could further enhance shareholder value.

Then again, when you’re only one of three remaining legacy airlines, you can pretty much do whatever you want to do. Thanks, US Department of Justice. Allowing the merger between American Airlines and US Airways made so much sense. You really had our backs on that one!

Should American have accepted Loomis' money?

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  • mjhoop

    Maybe MBA schools could add a class in logical thinking? Or maybe American has too many lawyers on staff and not enough thinkers. Actually, I hope this goes viral. One more sign of the degeneration of the country into third world status.

  • http://elliott.org Christopher Elliott

    Well, whatever happened here, American hasn’t really done a good job of explaining the logic behind it. That’s why it became a “That’s Ridiculous!” feature. To the non-elite, non-airline-apologist eye, it just looks pretty darned ridiculous.

  • Annapolis2

    I don’t think it’s ridiculous. People often pay more for a ticket that’s less restricted – refundable tickets cost more than non-refundable tickets, and upgradeable fares cost more than non-upgradeable ones. Buying a ticket on miles is a non-upgradeable fare, that’s why it’s cheaper than buying with cash. If you want an upgradeable ticket, buy one of those, and I’ll bet it costs more in cash than you think the miles are worth. If people could upgrade mileage tickets, it would cause many more people to book economy using miles in the hope of getting the super-cheap $300+miles first class that this passenger wants. The revenue lost on many future passengers booking mileage rewards and trying to upgrade them would be far more than what the airline gains from this one passenger.

  • Ron

    “Buying a ticket on miles is a non-upgradeable fare, that’s why it’s cheaper than buying with cash.”

    Frequently not true. If, for example, I use 50k miles – miles earned from flying, not from credit cards and so on – to get an economy ticket from, say, LAX to ORD – that will have “cost” me considerably more than the $350 or so cash fare.

  • Annapolis2

    Yes, there are certainly cases where mileage tickets aren’t a very good value.

    What I’m getting at is that a mileage ticket is a restricted fare, which costs less than an unrestricted fare. Maybe the airlines should offer upgradeable mileage tickets, but charge a premium for them? A mileage ticket cost 50K, an upgradeable mileage ticket costs 65K miles, or something like that?

  • BobChi

    Very few people should redeem 50k miles for a LAX/ORD $350 round trip. As you suggest, that’s wasteful unless you have tons of miles to burn. Most people would only use a saver award at 25k, if that, for that purpose.

  • backprop

    What if he had offered five dollars? Taking your complaint to its logical conclusion, AA should have taken that too. The food was already on board, the seat was there….

  • Annapolis2

    Exactly. Thank you for pointing out the absurdity of the “I should get whatever I want even for a price that’s lower than what the airline wants to charge for it, as long as that capacity looks empty to me” argument.

  • entonces_99

    Actually, it would have been irrational for the airline to reject his offer of $5 for the seat–unless, of course, someone else on the plane was willing to pay $6 for it.

  • Annapolis2

    Wrong – you are assuming that the cost of administering and transacting a bidding war for the vacant first-class seat is zero. There are both immediate transaction costs and follow-on damage to the value of future seats.

  • Carver Clark Farrow

    That takes a narrow approach of the situation. If it become known that AA would take $5 for an upgrade at the gate, Why would anyone pay $300. Its about taking a broader view of the revenue stream

  • mythsayer

    But they wouldn’t give it to him for any price. If they’d said “yeah, $2000” that’d be different. But they refused any price and flew with empty seats. That’s dumb. They could have offered the standby guy the seat for xyz money, too.

  • Annapolis2

    True, the letter doesn’t indicate whether the passenger offered to pay full fare for a walk-up first class ticket or whether the gate agent offered him that option. Obviously, the airline is required to sell a ticket to anyone because they are a common carrier, so yes, a walk-up first class ticket is always available for full fare if the seat is empty. And just as obviously, the traveler here wasn’t willing to pay that price.

  • mythsayer

    I understand that. But, as others have pointed out, it makes no sense at all to fly with empty seats if you can sell them. They clearly weren’t willing to sell the seat without a walk up fare price. That ludicrous if no one is willing to pay that price. My point was that if they didn’t want to upgrade him, they could have given the standby guy a chance to upgrade for a higher price.

  • Ron from Santa Monica

    Re Chris’s post about American:
    The gent says American responded: “miles to buy an upgrade would lessen the value of the first class experience for the folks up there who paid cash for their seat.”

    The more interesting question to me: how many of those in first actually PAID cash and didn’t simply use more miles than he used for economy. I’d be shocked if many there paid full fare.

  • http://elliott.org Christopher Elliott

    That’s an excellent question. Airfares change by the minute, thanks to carefully-calibrated yield-management systems. Only the system knows the real “value” of a ticket or a passenger.

  • Annapolis2

    People know the airline policy is not to upgrade mileage tickets, which is why they pay cash for economy tickets in hopes of upgrading them. If airline policy changes and mileage tickets become upgradeable, then fewer people will be willing to pay cash for economy tickets. It’s not hard at all to see how the airline loses money if it decides to allow people with mileage tickets to upgrade.

  • VoR61

    The logical extension of this would be that since I paid cash (literally) and you used a credit card, I get priority for the upgrade. It should not matter how anyone pays, especially in this case since the denial of the upgrade penalizes the “awards” passenger.

  • Annapolis2

    Now you’re just being deliberately obtuse. Miles aren’t money. If you converted the equivalent miles into the dollar value of a non-upgradeable ticket, and you know that an upgradeable ticket costs more, then the passenger in question here paid LESS for his non-upgradeable ticket than some other passengers paid for their upgradeable tickets. This passenger wants something for nothing – or more to the point, he wants to pay less than the airline wants to charge.

  • http://elliott.org Christopher Elliott

    I don’t have an opinion one way or the other on what @vor61:disqus said, but “deliberately obtuse” tends to come with the territory when you’re talking about loyalty programs. (And I’ve been accused of it a time or two … sometimes with good reason!)

  • Annapolis2

    Yes, sometimes it seems like the confusing-ness is intentional, doesn’t it?

  • whatup12

    normally would have a lot to say here, but think you covered it. 1) the airline knows it needs money 2) they have decided that incentivizing people to buy cheaper tickets and then upgrade is not in their best interest.
    HOWEVER, I will say this, many European Airlines will keep working to fill business on international flights with a tiered system of costs of upgrade ranging from 35k miles, 15k miles plus 300 Euros, all at the gate. US-based airlines are so busy filling business with non-revs that they do forget that they could likely systematically make more money as well. but indeed, i would say that every spare seat on international flights on airlines like delta and united are full with a non-rev.

  • Annapolis2

    That’s another good point – why didn’t the traveler just book a first class ticket with his miles if that’s what he wanted? I see two ways for him to get first class – book an upgradeable ticket and try to upgrade it, or book in first by paying miles or cash. A mileage ticket in economy is not and never has been upgradeable; that’s part of the value proposition. Paying miles for the ticket means you got a non-upgradeable fare. You had the option to buy a fare that was upgradeable! You chose to buy the not-upgradeable one! It’s not really about “lessening the value of the experience” as it is “making sure we collect a premium for each passenger who sits in first class”.

  • Annapolis2

    I think their reasoning is that if a frequent flyer wants to be able to upgrade, he should pay for the base ticket in the first place rather than using miles, because American Airlines wants to collect $2000 for the cost of a first class ticket, not $300 or $500 for the cost of an upgrade on a free ticket. This comes into our planning all the time – we can only use miles to buy an economy ticket if we are happy with a 0-percent-chance of upgrade. Instead, we often pay for the economy ticket in cash and then use our available upgrades or miles to try to get into that first class cabin. Every time I do that, I give the airline (United, in my case) an extra $1500 for the base ticket that I could have gotten for 40000 miles, but I have a pretty good shot of making it into the top class of service if I pay $1500 where I have no chance of top class if I pay 40000 miles.

    This is really just a gripe about – why can’t I buy a $3000 seat for miles plus a $300 upgrade fee? The price isn’t high enough to make that a good deal for American Airlines. They want you to pay more. Other people did pay more – they paid more for their base ticket in cash instead of getting it with miles because they wanted the option to upgrade.

    Now, if you want to argue that American should have a totally different rule in place that kicks in 1 hour before flight time that suddenly makes those paid upgrades available only if they haven’t filled the seats, okay, maybe. The fact that those seats flew empty on this one particular flight argues that maybe they could capture a bit more revenue by making first class upgrades super-cheap at the very last minute whenever they might fly a first-class seat empty. But remember that incorporating special processing and handling for another completely novel fare rule costs something too. Maybe it even costs more than $300 to change their fare rules airline-wide.

  • Ron

    Here I fully agree.

  • Carver Clark Farrow

    Agreed 100%. There are a finite number of first class seats. Some will go to upgrades. Accordingly there must be a method of allocating them, and one way of allocation is to exclude some people, in this case, the award passengers. A policy is made. In this case, it resulted in empty seats. But I bet you the next time he wants to try for an upgrade, he’ll buy his ticket with cash, not miles.

  • VoR61

    New definition of insanity: turning down legitimate revenue because of the message it sends about which no one will know. And once the flight left, what difference does it make?

  • VoR61
  • Uncle Jeff

    Makes perfect sense, actually. If customers knew they had a good chance of getting a cheap upgrade at the gate, they would change their behavior and not buy the premium cabin up front. I know people who fly Alaska and US Airways because of this – they’re always dumping first class seats on leisure routes for very little. I’m sure their paid first class bookings take a hit for this when the odds of playing them this way are pretty good and save a bunch of money.

    Delta seems to mitigate this by not allowing the lowest fares to upgrade for cash (you can be on a cheap fare, first could be empty, and you won’t be able to get up there). American disallows award tickets from upgrade.

    United allows everyone and their mother to upgrade for cheap (“tens of dollars” is what United frequent flyers refer to it as), and look at their revenues have gone from industry leading to worst in the industry, partly because of this.

  • Annapolis2

    Agree completely.

    Small detail: It’s not the case that everyone can upgrade on United. United also sells super-low fares that are not upgradeable for cash. United’s mileage award tickets are also not upgradeable; they have the same policy as American. I often choose to pay more for an upgradeable fare.

  • Ron

    “United allows everyone and their mother to upgrade for cheap ”

    Nonsense! I wish this were true.

  • BobChi

    I’m not sure why the confusion. When one books a seat with award miles, one chooses which cabin one wants to sit in, and the account is deducted accordingly. The airline has no responsibility to upgrade you for cash. The airline certainly didn’t tell the complainer his miles were worthless (that’s a typical Elliott confusion) – they provided him a seat to Maui and back for the miles he redeemed. Yield management isn’t mumbo jumbo; it’s a strategy for maximizing profits in the long run. If it becomes known that you can get first class by paying a modest upgrade from a free flight, that discourages people doing the things to get first class – specifically, booking it in the first place – that generate better business results for the airline. Or do you think gate attendants should simply auction off first class seats to the highest bidder at the gate? Maybe someone else would have given $301.

  • http://elliott.org Christopher Elliott

    Please don’t call them frequent flier miles. The preferred term is Weimar Republic points.

  • BobChi

    Just got back from Iceland and Norway using what you call “Weimar Republic points.” See you in Australia and Fiji next, Chris…

  • mythsayer

    A lot of times they WILL offer upgrades for less. We were offered business class for an extra $250 each once (we should have done it) and our tickets were basic economy. Nothing fancy.

  • Carver Clark Farrow

    I’d bid $302

  • Marcin Jeske

    First of all, calling flights purchased with award miles “free flights” is very misleading… those miles were collected by overpaying for flights, by getting kickbacks on credit cards, or through other means. Most airlines will just straight sell you the miles. They are a very real revenue source for the airline, and when you exchange some miles for a flight, you are indeed paying for it (in funny money, perhaps).

    As to choosing which cabin you want with miles… as has featured in past Chris articles, some airlines think they can put someone on a higher award into economy without any return of miles or compensation. Ignoring the influx of miles from other sources…. you would think the airlines remember that the people exchanging miles for travel are supposed to be their best customers the rest of the time. But even Alaska will upgrade a cut-rate sale fare for free before upgrading a mileage award.

    As to auctioning off first-class seats… why not… they are already doing it by varying prices and reducing the cost to upgrade as flight time approaches. All they did here was exclude some of the potential bidders… rarely a good auction strategy.

  • Ssallssz

    I don’t understand what is so confusing about the airline concluding that on balance it makes more money by not taking $300 in these situations.

  • Marcin Jeske

    I think what was confusing was that if one of the other passengers had walked up, even if they bought a much cheaper fare, but with cash, American would have taken their $300 for the upgrade.

    Obviously, if they are flying with empty seats, their yield management software didn’t do its job… and knowing that, they are then losing an opportunity to reward a loyal traveller by offering him what’s essentially discounted first class… or in general, giving some other passenger a taste of first class, which could encourage them to pay for it next time.

  • Ken Ascher

    Before bankruptcy in 2011, on my flight from Beijing to Chicago on American Airlines, most first class seats on my flight were empty while the coach and business sections were near capacity. I can’t blame the flight attendants for using the empty seats in the first cabin to help them relax when they were on break during this long flight.