In 1982, American Airlines Made a Game-Changing Move. Here’s Why It Still Dominates (And What Has Evolved)

Picturing a business concept so ingenious, every competitor in your field adopts it as well.

One of the greatest joys in traveling is embarking on an incredible journey that seems almost cost-free because you've used rewards points, perhaps earned from less glamorous business trips. However, do you realize that there is a particular individual from history who deserves our gratitude for this concept?

That would be the late Thomas Plaskett, who was employed by American Airlines in the 1980s and is recognized as the pioneering airline executive responsible for initiating the AAdvantage frequent flyer program.

As Plaskett stated way back in 1982, the main idea behind implementing a loyalty program was to “ efforts to create brand loyalty within a commodity market .”

The circumstances were distinct in those days.

Now, I may have some reservations about the claim that Plaksett conceived the concept out of nowhere, considering we've examined how Southwest Airlines had so absurdly sexist you have to laugh; now we have a reward program from the 1970s .

This was part of the "Southwest Sweethearts Club," where female secretaries were rewarded with prizes for scheduling their male bosses on flights with Southwest Airlines.

Although Southwest currently appears to be racing to eliminate anything that may have distinguished it from being just another commodity, back then it possessed a certain zest—outdated as that might seem.

However, it was Plaskett who truly ran with the concept.

It's fascinating to examine who American Airlines has appointed to oversee the AAdvantage program now and consider how these programs and others like them have changed over time.

Dual utility?

This month, American Airlines transferred leadership of the AAdvantage program to Scott Long, an executive previously responsible for investor relations.

It's often claimed that having the right people is more crucial than having the right policies, and thus Gary Leff opined over on View From the Wing The reality that Long has taken over tells you something about America's objectives for the program.

Briefly put, contemporary airline loyalty programs serve two purposes:

• Here's what Plaskett suggested: the concept that passengers may show greater loyalty if they can earn rewards for their frequent patronage, which could include complimentary flights, upgrades aboard the aircraft, or various additional benefits.
• Moreover, we see the transformation of reward points into nearly their own form of currency, which airlines sell to credit card companies. These points are supported not by the U.S. government but by the reliability of corporations whose main business involves hurtling pressurized metal tubes through the sky at several hundred miles per hour.

When questioned about the significance of these programs for their operations, the airline initially hesitated to respond. However, during the pandemic, American Airlines embarked on an effort to secure $10 billion through bond issuance and leveraged loans, with backing from its loyalty program.

That was quite solid proof.

Finding a balance

As Leff highlights, the choice of Long—again, stemming from the investor relations initiative—indicates that American’s current objective may be to maximize revenue through its collaboration with Citibank. This partnership makes Citibank the sole banker for American Airlines' AAdvantage credit card program.

The difficulty lies in the fact that much like various aspects of business, this requires finding a equilibrium point.

To maintain the value of their miles, American Airlines must ensure that customers find it worthwhile to apply for, carry, and utilize Citibank credit cards so as to accumulate these rewards more quickly.

When I reached out to American Airlines for comment, they offered a somewhat more sophisticated perspective:

During his initial seven years at American, Scott was affiliated with the Commercial division, where he spent considerable effort developing strategies for AAdvantage. Even when he moved to the Finance department, he maintained close ties with the Commercial team.

As the recently appointed Vice President of Investor Relations and Corporate Development, he frequently updated investors and various stakeholders regarding American’s efforts to enhance the AAdvantage program for its members. This included details about the refreshed collaboration with Citi, anticipated to greatly expand both loyalty programs and reward opportunities for AAdvantage members and holders of Citi-branded cards.

The memo from our vice chair and chief strategy officer, Steve Johnson, regarding Scott’s promotion stated, "Scott is ideally suited to oversee the ongoing advancement of the premier travel rewards platform globally and guarantee the smooth rollout of our groundbreaking card collaboration with Citi."

Build a legacy

It’s been 43 years since Plaskett’s innovation, and nearly every airline globally has replicated AAdvantage. That’s quite an enduring impact, and it deserves recognition.

Create something that brings joy to customers and enhances your company's worth.

Moreover, create something so advanced that it becomes emulated by others within your sector. The potential for growth and gratitude from numerous individuals who may one day acknowledge their indebtedness to you is immeasurable.

This posting initially appeared at GudangMovies21com .

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