Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, September 15, 1995 TAG: 9509150103
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: DALLAS MORNING NEWS
DATELINE: DALLAS LENGTH: Medium
American is recruiting banks and other financial institutions to offer one frequent-flier mile for every dollar of mortgage interest borrowers pay. The program is scheduled to begin in late 1995 or early 1996.
``For the first time, the American dream of home ownership will be combined with the American dream of travel,'' said Michael W. Gunn, American's senior vice president of marketing.
As anyone who checks the annual statement from the mortgage company can tell, mortgage interest can add up quickly. On a 30-year loan at 7.75 percent interest, a home buyer will pay $157,908 in interest to retire a $100,000 loan.
That amount would earn enough miles to get six round-trip tickets anywhere in the continental United States on American. It would take about 56 round-trips between Dallas/Fort Worth and New York to earn that many miles flying on American.
Those flights would cost at least $14,872 at the current cheapest fare. Flying 56 times would be a cheaper way to earn the free trips than the mortgage, but you wouldn't own the airplane after 30 years, either.
The new promotion, AAdvantage Program for Mortgages, is American's latest way to earn revenue by selling AAdvantage miles to other companies and to build up travelers' loyalty to American.
Already, AAdvantage members can earn miles on nine other airlines, at more than a dozen hotel chains and at three rental car companies.
But American also has aggressively expanded its program for nontravel linkups, including miles for eating at AAdvantage Dining restaurants, for using Citibank credit cards, for buying flowers through FTD Direct, for using MCI for long-distance and for investing in American AAdvantage mutual funds.
Recently, American has begun selling miles to businesses that want to award them as incentives to customers or employees. The standard rate that the businesses must pay is about 2 cents per mile.
That has led to unusual promotions such as free miles for test-driving cars and for shopping in certain retail malls.
``Clearly, it is an excellent way of building and solidifying customer loyalty to American Airlines, American spokesman Al Becker said. ``This is a highly competitive industry. Programs like this help strengthen the brand loyalty to American.
Becker said that most AAdvantage miles are earned by flying American, but the sale of AAdvantage miles to other companies has made the program ``a revenue-producing mechanism for the company.''
Becker said several dozen mortgage and banking companies plan to attend a meeting Wednesday to discuss the program.
by CNB