American Adds Frequent-Flier Rebates

American Airlines Inc., looking for ways to increase traffic and also eliminate free travel owed to millions of travelers, will let frequent fliers turn miles into money rebates on purchases ranging from cars to fur coats.

The rebates, ranging from hundreds to thousands of dollars depending on the product and miles exchanged, will be paid directly to customers from the product makers, Michael W. Gunn, American’s marketing vice president, said.

The program also will help manufacturers, such as auto makers, boost sales.

“Our customer research shows that while most members will still claim travel awards, a significant number appreciate the option of savings on products and services,” Gunn said at a news conference announcing a program called AAdvantage Extra.

Most other major airlines said they were studying American’s program, but Delta Air Lines spokesman Neil Monroe said the Atlanta-based carrier was pleased with its current frequent-flier program and planned no changes.

Gunn suggested that the program would be hard to match because it took American 11 months to assemble.

But Philip J. Lederer, a management professor at the University of Rochester who follows the commercial airline industry, said, “I would be surprised if the majors didn’t follow.”

Some analysts have worried that the buildup of free miles could haunt the industry by slashing revenue as customers cashed them in. The Internal Revenue Service and accounting standards groups have been considering whether individuals or companies should be taxed or held liable for the miles.

Randy Patterson, who publishes a magazine for frequent fliers, praised American’s program as a way to reward customers at the same time the company gets rid of the potential free travel.

“I don’t think they like the idea of having that liability on their books,” said Patterson, who estimated that the company owes customers about 70 billion frequent-flier miles. Last year, American flew 73.5 billion revenue passenger miles, which measures the total travel of paying customers.

Gunn would not confirm Patterson’s estimate and refused to provide company figures. Neither would he reveal American’s estimates of how many unused free miles the AAdvantage Extra program would eliminate.

Gunn said American had more than 11 million members in its AAdvantage program, but less than half are active and only 2 million will receive one of the slick catalogues listing the rebate items.

Under the AAdvantage Extra program, customers with more than 20,000 miles can trade some miles for cash rebates of up to $1,500 on three 1990 Toyota models, $1,000 on a GRiD Systems computer or $1,600 on a fox fur coat.

The largest awards were a $15,000 rebate on an Adolfo lynx coat from the Fur Vault in exchange for 120,000 miles and, with 90,000 miles, a 10% discount on Deck House homes costing more than $100,000.

College Savings Bank will also allow AAdvantage Extra users to buy certificates of deposit at a lower rate and higher yield than the general public. Quick & Reilly, a discount stockbroker, will charge reduced commissions in exchange for AAdvantage miles.

AAdvantage members earn miles through flying on American Airlines and some other carriers, staying in certain hotels and using some rental cars. Miles also can be accumulated through using some charge cards.

Generally, the miles are then exchanged for free or reduced-cost travel on American, or for other travel benefits.