A mental shift appears to be taking place in American’s revenue management department, and it should be good news for travelers. I spoke with American’s VP of Revenue Management, Scott Chandler, to understand this shift toward action.
When American instituted a temporary policy change allowing AAdvantage members to use credits for other travelers, my attention was piqued. As a former pricer myself, I know that name changes were always off limits. It was the epitome of the “slippery slope” argument.
What do I mean by that? If airlines allowed name changes, it would completely ruin the entire revenue management house of cards. People would begin selling credits on the secondary market, and revenue integrity would fall apart. Then the world would plunge into never-ending darkness, and people would retreat into primitive tribes, fighting each other for scarce resources.
Ultra low-cost airlines have allowed name changes for some time, but that’s a different dynamic for a variety of reasons. For the network airlines, this has just been a scary, scary idea.
So it took me by surprise when, on October 6, American announced it would allow the practice through January 31, 2022. There were caveats, of course. A traveler couldn’t just change the name on an existing ticket and have the price stay the same. (That move prevented the certain doom of perennial darkness.) And both the credit owner and the new credit user had to be AAdvantage members so American could more accurately track usage. (It should be noted that the owner and user just have to sign up for AAdvantage before the exchange is done, so it’s not a meaningful restriction.)
In practice, this means if you have a $500 credit on American, you can give it to anyone else. And if you wanted to sell that credit for, say, $250 and pocket the cash? American might not like it, and it’s undoubtedly against the rules, but it’s entirely unclear how they could police it.
This is a big move and it addresses a huge pain-point for travelers who are stuck with credits that they can’t use, and that group is an ever-growing number of travelers. In our discussion, Scott acknowledged that American “built up, just like every airline, a pretty big mountain of credits over COVID time.” American wanted to start whittling that down, so it came up with this idea. And sure, there are naysayers who believe this won’t end well, but Scott counters that argument.
We have operated sometimes under the fear of what will happen without actually having data on what is happening. So we’re gonna track this…. I don’t want to operate under fear when it’s something that’s good for customers and we can go out and do it.
This is not the kind of sunny outlook I expect from my fellow cold-hearted revenue managers, but it’s actually a welcome change. And part of this change is because American actually has tracking capability now. Or as Scott says it, “before we had no idea how these things were being used.”
How is it possible that they didn’t have adequate tracking? This is a legacy systems issue. In another example, Scott says that it took 6 months of work by Sabre (American’s reservation system provider) just to be able to extend ticket expiration dates. They used to be automatically set at one year, and it took a significant investment to get that to change during the pandemic. Anything involving legacy systems takes a long time to change.
To help counter this issue, American is moving in the direction of having one type of credit instead of the 5,384,082 types of credits (rough estimate) the airline offers today. There are still paper vouchers out there that you have to mail in or use in person. There are flight credits (value tied to an unused ticket) and trip credits (a more flexible voucher that people can use for other travelers by default). In the end, American is hoping to consolidate around trip credits as a single holder of value that will exist in each traveler’s wallet to be easily redeemed online. Having a single type means that any IT work in the future will be quicker since it doesn’t require handling multiple different cases.
Trip credits have already given the airline insight into customer behavior. Scott explained that with trip credits, the airline “can track how much it’s used for the same person, for somebody who has the same last name, or somebody with a different last name. The vast, vast majority of those are same person or same last name.” That is the kind of data that emboldened American to put this plan into motion. The airline doesn’t seem to mind when people transfer credits within a family, and that’s what most people are doing.
Does this mean transferability could become a permanent feature? “Everything’s on the table,” says Scott. But he said it was too early to share any data with me on how it’s going so far. I’m sure there is data available, but he wasn’t willing to part with it.
Reading the tea leaves, American does seem to be moving in this direction. The trip credits that Scott hopes will become the single airline currency already allows travelers to book trips using the credits in the name of other travelers. This means travelers can’t just give someone a credit, but as long as they do the booking, they can do it in anyone’s name. That might be the blueprint for more sustained credit flexibility into the future.
Either way, Scott says this isn’t a one-off thing. American is interested in adding “incremental flexibility” in general when it can, but he noted that there can’t be 6 month IT projects to get them done. Simplifying credits and collecting better data should help the airline to do more experiments like these, and with any luck, those experiments will actually benefit the customer. Dare to dream, right?