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Is AsiaMiles the answer to SQ’s ridiculous award surcharges?

I love tennis and have made plans to watch the 2016 US Open in New York in September.

usopen

The issue now: how to get there?

When researching possible routings I came to a stunning realisation: SQ’s award surcharges are a rip-off.

Ok it wasn’t that stunning.

Option 1: Singapore Airlines Krisflyer (Business- 144,500 miles + S$980)

SQ’s A380 business class. Old and worn product, but reliably good

The most obvious option would be to get a business/first class award on SQ26 for SIN-FRA-JFK. Of course, that’s easier said than done.

SQ25/26 is one of the hardest routes to redeem Krisflyer miles for. I can’t even waitlist at the saver level for business/first right now. So unless something opens up in the 2 weeks before departure, this won’t be an option anyway.

And even if it were, there’s the surcharges- S$980 is a ridiculous amount of surcharges to pay on an award ticket. The breakdown-

  • Airport/government taxes- S$205.60
  • Carrier surcharges- S$773.20

SQ pockets S$773.20 on a “free” ticket.  With oil prices at an all-time low, that’s almost criminal.

Option 2: Lifemiles (Business- 156,000 miles + S$88)

Evaair’s business class- hello kitty edition

If I wanted to avoid SQ’s ridiculous surcharges, Lifemiles would be the next way to go.

Lifemiles offers me a good variety of Star Alliance carriers to experiment with. I know for a fact that ANA, EVA and Asiana (less preferred than ANA and EVA because the SIN-ICN leg will be on their angled-flat business A330s) offer award space to JFK, but those typically open up 2 weeks before departure.

lifemiles1
EVA award space on Lifemiles. I know the date is wrong, but I wouldn’t be able to search for Sept award space on EVA at this point in time

My Lifemiles cost me 1.375 US cents each, so the imputed cost here including surcharges about S$2,960.

Not a bad option, but suppose I don’t fancy paying out of pocket?

Option 3: Cathay Asiamiles (Business- 145,000 miles + S$128 in taxes)

Cathay’s business class seat is inferior to SQ’s in my opinion, but it’s still an excellent lie flat product. And you don’t need to flip it over to go to bed mode

Until this afternoon I knew close to nothing about Asiamiles, so don’t take this as a primer on the subject. But since I have quite a fair amount of unconverted points in my DBS/UOB rewards account, I decided to sniff around and see if I could make this work. And I’m glad I did.

asiamiles2

The mileage required with Asiamiles to go from SIN-JFK is virtually the same as Krisflyer, but check out how low the surcharges are!

S$128 with Asiamiles, versus S$980 on SQ! 

This makes SQ’s surcharges even more of a jaw-dropping ripoff, and I’m seriously exploring other ways of routing to the States via Cathay, even if it means flying Cathay to Boston instead and taking a budget flight to NYC.

asiamiles

Immediate confirmation was not available so I had to waitlist. You can waitlist even if you do not have the required miles in your account. I am told that for my flight departing on 2 Sept, the ticketing deadline is 23 Aug, and based on what I’ve read on FT the waitlist can clear anytime between now and 23 Aug. Fingers crossed

Note: I know another option to redeem Cathay award tickets exists through Alaska’s Mileageplan, but I don’t want to spend money out of pocket buying Mileageplan miles given that I’ve not even finished using my purchased Lifemiles. In any case, the cost of redeeming a ticket through Mileageplan would be ~S$2,800, or about the same as buying through Lifemiles

For those of you interested in Asiamiles, here’s the award chart. Note that unlike Krisflyer, Cathay does not price one-way awards at 50% of the round trip cost

asiamiles2 asiamiles3

It is true that the one-way business class price is higher than SQ’s (85,000 vs 72,250), but consider

  • the differences in surcharges
  • the fact that a round trip business class ticket to JFK at 145,000 miles is practically the same cost of a round trip Krisflyer ticket
  • Cathay services other cities in the USA that SQ doesn’t (Boston and Chicago), so if you need to fly there it would be cheaper than redeeming a Star Alliance partner ticket with Krisflyer miles

Conclusion

If nothing else, this should serve as a reminder of how high surcharges can be a form of stealth devaluation. There is no reason why SQ should be charging close to $1K on an award ticket

I always knew that SQ’s surcharges were high, but I never envisioned them being so much higher than Cathay’s. Now that I think about it, I would recommend people give Asiamiles a serious look when deciding which FFP to transfer their DBS Points / UOB Uni$ to.

I really wish we had a strong regulator in Singapore who would speak up for consumer rights regarding airline surcharges. Look at Hong Kong-

scmp

The Civil Aviation Department said that the tumble in oil prices had made the surcharges “not warranted”. And they’re right. SQ isn’t even calling it fuel surcharge anymore, they’re using the nebulously defined “carrier surcharges”

But how fair is it that SQ’s customers scrimp and save their miles for a chance to try their business/first class product, only to be hit by surcharges that bring the cost close to that of a discounted economy class ticket?

Of course SQ can charge whatever the hell they want and you’re not obliged to redeem your miles with them, but you’d think that they’d demonstrate a basic appreciation for their customers (even when you redeem miles you earned from your credit card as opposed to flying, the banks paid SQ good money for those miles).

To quote Charlie Brown:

 

PS: If anyone fancies playing tennis do reach out to me to set up something. I’m about an NTRP 4.0-4.5, depending how much I ate the night before.

cover photo by kiefer

The looming spectre of a Krisflyer devaluation

Miles are the worst investment that you can possibly hold. They do not earn interest. They are not subject to any sort of investor protection. And over the long term, they are the one investment that is guaranteed to lose value (as we saw with Alaska’s unannounced devaluation of Emirates first and business class awards).

My dad used to tell me he was saving up all his Krisflyer miles for retirement to travel the world. I thought that sounded like a good idea 10 years ago, but now I’m not so sure.

That’s because your miles have no value until you spend them. And I believe Krisflyer is overdue for a devaluation. I have no hard evidence for this other than my gut. But my gut is telling me that we are likely to see a devaluation very soon.

Why?

The last significant devaluation was some time ago

Depending on how you define devaluation, there have been several devaluation events over the past 10 years (as this was way before my time, I am trying to piece this together from whatever I can google, so feel free to let me know if I’ve got it wrong)

2007-Devaluation of existing award chart. Unfortunately the links in this post are no longer working so I can’t work out the amount.

2008– introduction of Standard and Full award levels, one way awards made available at 50% of round trip

2012– redemption amounts for Saver, Standard and Full award levels are adjusted, SQ finally opens up saver redemption for the new cabin products (6 years after they were introduced!)

Given that 2012 was the last time they did a devaluation, it would seem that we are due for another one shortly.

Introduction of premium economy

IMG_20160123_144830

The introduction of a new cabin product is often grounds for a revision of the award chart. In an ideal situation, you’d have premium economy awards priced somewhere inbetween economy and business awards with both economy and business award prices remaining the same, but what is more likely to happen is that a new (devalued) awards chart will be introduced with the spin that they have enhanced the program by allowing redemptions for PY.

The premium economy product is still being rolled out and is expected to be completed sometime in the next 12 months. It could be the case that SQ is waiting for the rollout to finish before doing the award chart adjustment. My fear with this is that they will change the (already ridiculous) Y to J policy so that only customer who have purchased premium economy tickets can upgrade to J.

Influx of cheap miles from US-based credit cards

citithankyou

Our American friends have always had it better than us when it came to miles earning opportunities (Krisflyer co-brand card signup bonus of 5,000 miles for us whereas sign up bonuses of 20,000-30,000 miles are the norm in the states!), but at least they stuck to their own America-based programs. Well, “stuck” being the operative word. In 2014, both Chase Ultimate Rewards and Citi ThankYou points added Krisflyer as a transfer partner

Before this, the main options American credit card holders had to redeem SQ awards was to do it the long way round- through Star alliance partners like UA or US Airways (when it existed). And SQ was not in the habit of opening up premium cabin award space to partners.

SQ’s done well for itself in the sense that it’s increased the value of its Krisflyer currency by making it the de facto legal tender currency for redemption of aspirational awards like Suites and First. So when American credit card holders want to redeem that product, they have to convert their points to Krisflyer miles (which earns Krisflyer revenue from Chase/Citibank purchasing Krisflyer miles) instead of redeeming through other Star Alliance FFPs (for which the reimbursement rates are really low)

Because of financial pressure

sqshareprice

SQ’s loyalty is not to you. It is to its shareholders. And those shareholders like seeing a lean balance sheet.

sqdisclosure

Check out this interesting disclosure from the annual report. SQ recognises outstanding Krisflyer miles as a liability on its balance sheet.  The outstanding liability as of 2015 was S$612.5M, up 7% from 2014. Here’s the historical trend

2015 2014 2013 2012 2011 2010
Deferred revenue  (S$M) (oustanding Krisflyer miles liability) 612.5 572.9 532.5 497.0 445.1 460.1
YOY Growth* 7% 8% 7% 12% -3%

*does anyone with a better understanding of accounting want to explain this data? Intuitively I would have thought that the value would decrease in years where there were devaluations (2012) or jump more in years where the Krisflyer program got new transfer partners (2014) as more people exchanged UR/TY points for Krisflyer miles

The easiest way for an airline to tighten up its balance sheet is to devalue its miles. Remember that there is no regulation surrounding this, and it is entirely up to the airline how they want to value their liability. If they make award flights more costly, that liability goes down. Sure, it upsets customers, but which airline are Singaporeans going to switch to?

Stealth Devaluations

Of course, some can argue that devaluations have already been taking place. And they’re right, in a way.

Higher Surcharges on Award Tickets

lhrsurcharge

sfosurcharge

As the examples above show, Krisflyer charges very high surcharges on award tickets. Despite the dramatic decrease in oil prices, these surcharges have only shown a marginal decline in recent years. The higher the cash co-pay on your award, the less valuable it is.

Reduced Saver Award Availability

sqsaver

Or what about award seat availability? Certain routes are almost impossible to get saver awards on, no matter how far you book in advance. Try everyone’s favorite SQ25 route for example. This is the situation for booking almost 1 year out- 5th Feb 2017. No saver award availability, not even for waitlist (to be fair, if you look at the weekday departures 1 year out you might be able to find some saver waitlist, but nothing for instant confirmation. The general point about saver availability being harder and harder to find still holds)

Shifts towards a revenue-based program

This has been a long concern on my mind, given the developments we’ve seen in the US of United and Delta going revenue-based.

A revenue-based program has 2 aspects- the earning side and the redemption side.

On the redemption side: In 2013, Krisflyer announced that you could now use your Krisflyer miles to pay for your revenue tickets.

krisflyermilespay

Although this was spun as a positive introduction of choice and flexibility, it worried me to no end, because the value given to your miles when using them as currency was ~1 cent, below the value you’d get even for economy class redemptions. 

scoot

This valuation has been followed in the other noteworthy Krisflyer developments in the interim- both Tigerair and Scoot vouchers can be redeemed using Krisflyer miles, also at the paltry value of ~1 cent each.  Does this mean that SQ over the long term is looking to bring their program more in line with this valuation?

No airline has (yet) dared to convert to a revenue-based redemption program (airlines which run revenue-based redemptions (eg Jetblue) started off that way) and I highly doubt SQ will be the first. But SQ’s moves so far indicate that they see 1 cent per mile as the “ideal” value.

On the earning side: The recent developments on the co-branded card front where SQ offers the opportunity to get Krisflyer Elite Gold status by spending S$15,000 on SQ tickets in the space of slightly over a year may also be an attempt to test out how receptive people are to a revenue-based approach to status earning. We’ve seen this happen with PPS already where they put a S$25,000 minimum spend requirement in place

Conclusion

I could be totally wrong about this. And I hope I am. But the signs increasingly point towards Krisflyer doing some sort of devaluation in the near future. SQ likes to spin these things, so I imagine there will be a genuine improvement in the program to accompany the rest of the “enhancements”. My guess is they will open up premium economy for redemption.

The moral of the story is this: earn and burn. If you have a good store of Krisflyer miles now, you should actively be looking for a redemption opportunity for your next holiday. Holding on to miles is a losing proposition.

This has been a very sad and depressing article. Please now enjoy some photos of a cute shihtzu.

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chewie (3)

chewie 2

cover photo by stephenwolfe

 

 

Why Alaska why?

EDIT: Alaska has published an FAQ about the devaluation. TL;DR version- the devaluation is because of evil travel hackers, they were unable to give prior notice for this devaluation “given the dynamics of this particular award” but the policy remains to give 30 days notice of significant program changes “when at all possible”. If you bought miles on or before 1 March you can get a refund.

I was very excited to find out about Alaska Airline’s MileagePlan because it offered the opportunity to get cheap Cathay Pacific and Emirates premium cabin awards.

In the comments on that article, Jeriel asked me whether I’d be comfortable buying the miles speculatively. I said yes. After all, this is a reputable American airline, with due process and consumer rights and manifest destiny blah blah. There’s no way they’d do anything sneaky.

So of course they did.

The day the Mileageplan 40% bonus miles sale ended, Alaska Airlines did an unannounced devaluation of its Emirates award chart.  Recall that the original redemption rates for flights between North America and Asia were as follows

emirates

Revised award chart

Class of Service Region One-Way
Award Level
Round-Trip
Award Level
Economy Between North America and Asia 52,500 105,000
Business Between North America and Asia 105,000 210,000
First Between North America and Asia 180,000 360,000

Let’s ignore business because no one wants to fly Emirates business anyway. Everyone knows the reason you buy MileagePlan miles is to try out Emirate’s First Class product. And the number of miles needed to buy a one-way First Class ticket just increased 80%.

Assuming you buy your miles at 2.11 US cents per mile, that means an additional US$1,688 to the cost of your Emirates first class award ticket! The total cost of a one-way first class ticket is now US$3,798. Still a bargain, but an 80% increase in the cost, overnight, without warning is unconscionable behavior.

I think what annoys me the most about this is the timing- the devaluation is large, unannounced and takes place immediately after a miles sale which explicitly encourages people to buy as many miles as they can.

Unfortunately, there is little recourse that consumers have here. Airline FFPs are not regulated, and even though your miles are akin to a currency, they are not governed by the rules of fiat currency. So even though it’s hard to see this as anything other than a bait and switch, the most we can do is shake our heads and vow never to be cheated again. In a way, I’m relieved that I only wrote about the MileagePlan sale when it was too late to participate in the current sale (account needs to be open for 14 days before you can buy mile) because I’d hate for anyone to, relying on my advice, buy the miles and end up in a loss position.

This behavior does make me concerned about holding MileagePlan miles speculatively, and I do wonder about the future of Cathay awards. I imagine Alaska will take some serious heat for this, and maybe they’ll back down and allow a window for some redemptions to be done at the old rates. Who knows. What I do know is that it’s always buyer beware when it comes to buying miles, so earn and burn, not hold, is the rule of the game.

If you were thinking of getting onboard with MileagePlan, I’d only encourage you to do it if you already have a definite redemption in mind

cover photo by insapphowetrust