American Airlines Tightens Loyalty Program, Reflecting Industry Shift Towards Premium Revenue

FORT WORTH, Texas – American Airlines is tightening the screws on its most budget-conscious travelers, announcing that customers purchasing basic economy fares will no longer accrue frequent flyer miles or qualify for elite status starting December 17, 2025. The move, reported first by CNBC, signals a broader industry trend as airlines increasingly prioritize revenue from higher-fare passengers and seek to incentivize upgrades.

The Race to the Top: Airlines Prioritize Premium Spending

The decision by American Airlines isn’t occurring in a vacuum. Airlines across the globe are actively chasing customers willing to spend more for enhanced travel experiences. This strategy is particularly evident as the industry navigates the post-COVID recovery, with a significant surge in demand for premium cabin travel. American, however, has lagged behind key competitors like Delta Air Lines and United Airlines in capitalizing on this trend. The airline has been working to close the gap, and this latest adjustment to its loyalty program is a clear indication of that effort.

“We routinely evaluate our fare products to remain competitive in the marketplace,” an American Airlines spokesperson stated. While basic economy customers will retain perks like one free personal item, one carry-on bag, complimentary snacks, and in-flight entertainment, the removal of mileage accrual is designed to nudge travelers towards more expensive fare classes. Elite members will still be eligible for first-class upgrades on domestic flights even when traveling on basic economy tickets.

Loyalty Program Adjustments: A Growing Trend

American isn’t the first to take this step. Delta Air Lines already implemented a similar policy for its Delta Main Basic fares, eliminating SkyMiles accrual for those tickets. United Airlines, while still allowing mileage accrual on basic economy fares, restricts carry-on baggage for these passengers. This patchwork of policies highlights the complex balancing act airlines face: attracting price-sensitive travelers while simultaneously encouraging upgrades and maximizing revenue.

Interestingly, American previously attempted to restrict carry-on baggage for basic economy tickets but reversed course in 2018 following customer backlash. This demonstrates the sensitivity surrounding changes to basic economy offerings and the potential for negative public relations.

Economic Context: The Rise of Ancillary Revenue and Fare Segmentation

The shift towards devaluing basic economy fares within loyalty programs is intrinsically linked to the airline industry’s increasing reliance on ancillary revenue. According to the International Air Transport Association (IATA), ancillary revenues – encompassing everything from baggage fees to seat selection – are projected to reach $111.7 billion globally in 2024, representing approximately 14.8% of total airline revenue. This demonstrates a clear strategic move away from solely relying on ticket sales and towards maximizing revenue from add-on services.

Fare segmentation, the practice of offering different fare classes with varying levels of restrictions and amenities, has become a cornerstone of airline revenue management. Basic economy fares, while attracting price-conscious travelers, often yield lower profit margins. By removing mileage accrual, airlines aim to disincentivize frequent flyers from opting for these fares, encouraging them to upgrade to more lucrative options. This strategy is particularly effective given the increasing value consumers place on loyalty programs and the benefits associated with elite status.

Impact on Consumers and the Future of Airline Loyalty

The changes implemented by American Airlines, and mirrored by its competitors, will likely have a noticeable impact on consumers. Travelers who primarily choose basic economy fares to save money will find their path to earning frequent flyer miles and achieving elite status significantly more challenging. This could lead to a shift in travel patterns, with some consumers opting for alternative airlines or travel methods.

Furthermore, the move raises questions about the future of airline loyalty programs. As airlines continue to devalue basic economy fares, the perceived value of these programs may diminish, potentially leading to decreased customer engagement. Southwest Airlines, in contrast, has taken a different approach, launching its first basic fares this year while still allowing customers to earn miles, albeit at a reduced rate. This strategy could prove to be a differentiator in a competitive market.

The global airline industry is currently valued at over $800 billion, and the competition for both leisure and business travelers is fierce. According to the Statista, the global airline industry is projected to generate $936.90 billion in revenue in 2024. American Airlines’ decision reflects a calculated bet that prioritizing higher-spending customers will ultimately prove more profitable than catering to the most price-sensitive segment of the market. Whether this strategy will succeed remains to be seen, but it undoubtedly marks a significant shift in the landscape of airline loyalty and revenue management.