The Milelion shares his thoughts on SQ’s premium economy with The Straits Times

The Milelion is pleased to be quoted in today’s (24 July) Straits Times feature about SQ’s recently launched bid-to-upgrade system. A shout out to Milelion reader Yu Herng, who also gets a quote in!

(If you want to be in formed of other media coverage opportunities be sure to sign up for the mailing list.  The journalist asked me if I was able to connect her with other people for more perspectives and I connected her with Yu Herng after sending out an email blast)

The full article can be found here, and a PDF copy can be found here for when the original link expires.  Or you can have a read below

straits times article 2

I’ve already flown SQ premium economy once, and although I certainly enjoyed my experience I was left uncertain about the sustainability of the product (the cabin was half empty) and whether I’d shell out my own money to pay for this on leisure travel.

IMG_20160123_144830

IMG_20160123_144947

It seems I’m not alone in being undecided on this, as this thread on Flyertalk shows similar mixed reviews.

The incredible thing is, no one on Flyertalk has actually posted how much they were offered to upgrade or any data points on bids yet. This means that either the system hasn’t gone widespread yet (possible) or people on FT have stopped sharing information (unlikely).  So I’m still not able to comment as to whether the starting bids/winning bids make this a worthwhile exercise.

and the mountains echoed. with silence.

One big question I still have on my mind, is this- is the winner of the upgrade determined on incremental revenue or total revenue? This is a question I have covered before, but to recap…

  • One might argue that you should reward passengers for total revenue generated. So if Passenger A buys a $1,000 economy class ticket and bid $300 for an upgrade, he should trump Passenger B who buys a $600 economy class ticket and bids $500
  • But others would argue that you should only reward incremental revenue because the base fare is a sunk cost for the customer. So Passenger B would trump Passenger A in the example above. Of course you could then say that the unintended consequences of such as system would be to train people to buy the lowest economy fares possible and try for the upgrade, and since upgrade space is limited the airline would lose out on overall revenue…

I concluded that the best option if I were SQ would be to stay mum about this, so people second guess themselves and pay as much as possible both for the base ticket and the upgrade. I think this might be a classical economics problem though, and would welcome any insights from semi-qualified economists.

I need to state again that I think that it will be a cold day in hell before SQ rolls this system out to cover business class upgrades.

SQ has historically been notoriously protective of their premium cabins. When they introduced their new full flat business and first product in 2006 they didn’t allow people to redeem their miles for it at the saver award level. SQ still routinely releases very little business saver award space, in fact a lot of routes are released straight to waitlist instead of being opened up for redemption. SQ only allows full fare Y to upgrade to business class with miles (until recently, of course, where they made it even harder by saying only PY could upgrade to business). When you book a Star Alliance round the world ticket in business or first class, SQ is the only carrier in the whole alliance to have a surcharge on top of the round the world fare if you want to fly on their 77Ws or A380s (i.e. their lie flat premium products. Technically Asiana has a surcharge too but only on one specific route). SQ barely upgrades its own top tier elites to business class. So that history is definitely there and it’s relevant here because it involves increased access to what SQ sees as hallowed ground.

If hell froze over and SQ did launch an upgrade system to business class, let me put on my Nostradamus cap and say

  1. It will only be available for passengers who have bought premium Y tickets, not economy (as SQ has a 1 cabin upgrade policy)
  2. The space for these upgrades will be taken away from award space, not revenue space. SQ will not want to lose paying customers and it’s financially better to reduce the pool of seats available to people using miles

So would I like the option? No, actually, because I’m afraid of point (2) happening. My company doesn’t pay for business class travel, so I’m relying on miles to get me into the business class cabin. If they open up bids, award space is likely to be sacrificed. When flying leisure, I wouldn’t use the system anyway because price becomes the most important factor and I wouldn’t pay for revenue premium economy.

But I don’t think they will anyway, because SQ’s load factors in J are still very solid thanks to business loads from Singapore and elsewhere in the region. There isn’t a pressing need to monetize this cabin the same way there is for premium economy.

Thank you all again for supporting and reading The Milelion, and hopefully it won’t be long before Maxim Singapore comes knocking for an interview.

Wait, what?

Leave a Reply

Your email address will not be published.