More implications of the Krisflyer devaluation

Ecclesiastes 1:2-3

You’d forgive many a Krisflyer member for feeling like Solomon on a Thursday morning as we take stock of the sudden Krisflyer carnage visited upon us last night.

Here’s a link to my initial take on the changes. After sleeping it over I’ve thought of some additional pointers raised by this devaluation. There will no doubt be more analysis in the days to come.

You should chase your waitlist to clear

I’m intrigued to see what SQ’s revenue management team will be doing in the 3 weeks we have before the devaluation takes place. We all know that the Krisflyer waitlist is cleared manually. But does the revenue management team

(A) Clear as many awards as possible between now and 23 March so as to maximise the money SQ collects from fuel surcharges or

(B) Deliberately hold up clearing the waitlist till 23 March so as to maximise the miles SQ clears off its balance sheet

It’s certainly an interesting thought exercise and I’m sure SQ management must have considered this already. The “fair” approach to take would be for SQ revenue management to follow exactly the same heuristics as they do now when clearing waitlists, but there’s nothing obliging them to do it.

Remember: it doesn’t matter when you waitlisted your award booking. All that matters is when it is ticketed. If you ticket before 23 March, you enjoy the old rates. If you ticket on 23 March or later, you pay the new rates (but no fuel surcharges).

I’ve established in my first article that the savings on fuel surcharges do not offset the higher mile requirements, so I’d recommend you pick up the phone and start chasing SQ.

SQ’s new cabin products will cost you more

Part of me wonders whether the timing of this devaluation has anything to do with the fact that SQ is intending to launch new cabin products for its A380 aircraft some time this year.

If so, this would suggest that SQ will not prevent KF members from redeeming its new cabin products at saver rates, a tactic it has used before when unveiling the 2006 new First and Business Class seats and the 2007 Suites product.

Of course there’s nothing stopping you from locking in award tickets at the current rates for 2018 now and hoping your aircraft gets switched to a new one, which brings me to my next point…

Your existing awards are protected even if your dates change

In theory, any ticket you redeem now will be protected against the future price increase so long as whatever changes you make do not require a reissuance of a ticket. 

Date changes do not trigger a reissuance. So if I lock in a round trip first class ticket to SFO today at 182,750 miles and subsequently change my dates in August, I will not be required to pay anything new.

That’s the theory at least. Whether front line SQ phone agents will be bright enough to see this logic remains to be seen, and I fully anticipate we’ll see more than a few complaints about this. If the agents refuse to honor the old rates, ask to speak to a supervisor. Let’s see how this goes.

You should now be channel agnostic when buying SQ tickets

Airlines do not discriminate among channels when awarding miles for air tickets. A Y fare class bought from Expedia enjoys the same accrual rates as a Y fare class bought from Priceline as a Y fare class bought directly from Singaporeair.com.

However, if you want to upgrade your full fare economy/premium economy/business class ticket to the next highest fare class using miles, you’d traditionally need to buy direct from SQ in order to enjoy the 15% miles discount.

I learned this the hard way after buying a premium economy ticket from SIN-FRA via Expedia in order to take advantage of the UOB PRVI 6mpd promotion.

I went online to try and upgrade my ticket to business class, but found that SQ was unwilling to offer the 15% online redemption upgrade discount because I’d bought the ticket through a 3rd party.

The additional 15% I had to spend ended up offsetting the additional 2mpd I earned through paying with my UOB PRVI Miles AMEX as opposed to my HSBC Advance.

With the removal of the 15% discount, however, there’s really no incentive to buy your tickets directly from SQ. This might be one of the unintended consequences of the Krisflyer devaluation (although Krisflyer might very well make a new rule that only tickets bought directly from SQ can be upgraded using miles. We shall see)

There are some loopholes in the Star Alliance award chart

I pointed out in my first article on the devaluation that it was now cheaper to redeem Star Alliance first class. It seems I’m not the only one who has noticed this, as the US blogs have picked it up. Their examples are US centric, so let’s take this from a Singapore point of view.

click to enlarge- the % in the last 6 columns refer to the premium you are paying to redeem via *A as opposed to via SQ

Suppose I wanted to fly to a destination in the US that’s unserved by SQ. Think Miami, Seattle, Portland, Washington DC, Las Vegas, Boston etc. All awesome cities, but not served by SQ.

If I wanted to use Krisflyer miles what I’d traditionally do is book an award ticket to the closest SQ-served destination and buy a cheap economy ticket for the rest of the way. This is because the additional Krisflyer miles I’d need to spend to redeem a Star Alliance award would more than offset whatever savings I’d have by not having to buy a separate revenue ticket.

In other words, a one way itinerary like SIN-HKG-SFO-PDX in First Class would price (before the devaluation) at

• 112,500 miles with *A
• 91,375 miles with Krisflyer (and I need to buy an additional ticket to get from SFO-PDX)

After the devaluation

• 112,500 miles with *A
• 118,000 miles with Krisflyer (and I need to buy an additional ticket to get from SFO-PDX)

What I’d do in this case is call up Krisflyer membership services and ask to book a Star Alliance award from SIN-PDX in First. Assuming award space is available, they’ll give me SIN-HKG-SFO in First and a connection on UA from SFO-PDX, also in First. So it costs me less to get to where I need to go!

This is certainly an interesting opportunity for any Krisflyer member who wants to explore more of the US and it remains to be seen how long this loophole will exist.

Your valuation of a mile needs to change

Let’s talk theoretical value as opposed to actual value, because, as I mentioned in my iPayMy webinar presentation on airlines, actual value is the product of some complex considerations including how much you value certainty, how available saver space is, how much you would really have been willing to pay for a ticket etc.

The theoretical value of a mile  has traditionally been 1-2 cents for economy, 4-5 for business and 7-8 for first.

With the devaluation, it comes down ever so slightly.  1-2 cents is still the threshold for economy class (in the example above I’ve used SQ’s lowest possible economy fares, which strictly speaking will not be a fair comparison because award tickets can be changed or refunded with minimal to no charges, whereas these cheap economy fares will not be), 3-4.5 cents for business and 4.5-7.5 for first.

Keep in mind that I’ve also not considered airport taxes on award tickets as part of the equation because they should be minimal, but that will bring down the valuation ever so slightly.

Conclusion

I’m sure this is only the tip of the iceberg. I know a lot of people are asking about Asia Miles now and whether they should transfer their DBS/UOB points there instead of to Krisflyer. I promise you we’re looking at that and will publish something shortly.

Guestwriters, help.