Why Unlimited Complimentary Upgrades are Bad for Frequent Flyers

Over the weekend I took a domestic flight on American Airlines where the first class cabin was only half full.

There were two factors at play, as I tweeted,

1) it’s Saturday 2) I like the @AmericanAir upgrade system please don’t change it..

American and US Airways Have to Decide How to Handle Upgrades as Part of Their Merger

With the merger between US Airways and American Airlines, the two carriers are in the midst of working through their differences and figuring out the policies and procedures that will prevail when the two airlines actually combine into one.

In a practice common to US airlines but not really done in the rest of the world, premium cabin seats on domestic flights that the airlines doesn’t sell are released as upgrades to elite frequent flyers.

US Airways — like Delta and United — offers ‘unlimited complimentary upgrades’ to all of its elites. If an elite member qualifies for an upgrade, they get it, free.

American’s 100,000 mile ‘Executive Platinum’ members get unlimited complimentary upgrades.

Meanwhile lower tier elites – Golds and Platinums – have to pay for their upgrades with 500 mile e-certificates (once known as ‘stickers’).

Those e-certificates are earned at a rate of 2000 miles (four 500 mile certificates) per 10,000 miles flown. Additional certificates beyond the free earned ones can be purchased.

Sidenote: Executive Platinums do not get free upgrades for their companions. If an Executive Platinum upgrades a companion, they have to support that upgrade with a 500 mile upgrade certificate. And they do not earn those from their flying, so they have to buy them (unless they have any accrued from when they were a lower-tier elite).

The sale of 500 mile upgrade certificates raises significant revenue. That’s hard for an airline to give up, but all major carriers other than American did just that.

Unlimited Complimentary Upgrades Aren’t Good for Frequent Flyers

Most US Airways flyers are going to want to keep the system they have. I expect the average elite frequent flyer to say, why should I have to pay for something they used to give me for free?

However,

The sale of stickers, combined with mileage upgrade co-pays that do not exempt elite frequent flyers even domestically, mean that American earns a revenue premium on their first class cabin.
A more profitable first class cabin also supports a better first class product. American flyers were in uproar as their first class meals were cut back even a little, more or less meeting the old US Airways halfway. The revenue lets American invest in the product. (I wouldn’t call American’s first class spectacular, but it is materially better than US Airways first class.)
Mid-tier and entry-level elites are actually better off without unlimited complimentary upgrades. When every passenger gets free upgrades, every passenger is requesting them almost every time. Elites who want to upgrade have to compete against every other elite every time.
When elites are rationing their free upgrades or they have to pay some amount, they actually have to make a decision when they care about getting the upgrade.
The upgrades go to the people who want them most.
And Golds don’t have to compete against all Platinums, and Platinums don’t have to compete against every other Platinum for the upgrade. That means upgrade percentages go up. You’re more likely to get the upgrade when you request it.

Unlimited complimentary upgrades mean fewer upgrades for lower-tier and mid-tier elites. Just ask most United Silvers and Golds what their upgrade percentages are like.

There are certainly US Airways silvers with good upgrade percentages, maybe based at DC’s National airport and flying lots of Tuesday and Wednesday mid-day flights in the extreme. Here’s How to Maximize Your Changes of an Upgrade.

But on the whole, a system that gives upgrades more often to the people who care about getting them most on a given flight is a better system, and when that system also helps the airline to invest in the premium cabin product, flyers are better off.

Even though that’s not as simple a slogan as “don’t make me pay for what used to be free,” it’s the system that works better for most frequent flyers. Think about it a bit, and tell me do you agree?

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