Thursday, March 2, 2017

SQ HAS DEVALUED ITS KRISFLYER AWARD CHART. HERE’S WHAT YOU NEED TO KNOW

Wow. Back when I wrote about the Krisflyer devaluation that took place in May of 2016 I confidently said the program was safe for at least another year, since no one would devalue a program twice in quick succession (To be fair, the May 2016 devaluation wasn’t really much of a devaluation; award prices largely remained the same (with the exception of the consolidating Europe into one zone))
Shows what I know. Here’s SQ’s 70th anniversary present to you, a surprise email announcing a devaluation effective 23 March 2017. The old award chart is here. The new award chart is here. To summarize-

The Good

  • SQ has removed its much maligned fuel surcharges from award redemptions. I nearly fell off my seat when I read this, because the cynic in me has always seen that as an easy money maker for SQ.

The Bad

  • Award prices are going up across the board (we’ll look at how much in the detailed analysis) and there is no longer any 15% discount for online redemptions

Detailed Analysis

What you need to realise is that this devaluation changes everything.
That sounds dramatic, but the fact is that the underlying math has changed, and now we need to reconsider a lot of the conclusions I’ve come to in other articles on this site. They’ll be updated gradually, but let’s do some analysis here first.

How much have award prices increased?

Standard awards, saver/standard upgrade awards and premium economy saver awards have not been touched in one sense, but in another they now all cost 15% more because of the removal of the online redemption discount. 
I’ve put together the new and old saver redemption rates for comparison-


click to enlarge

Observations-
  • Surprisingly, the awards that have gone up the most (in % terms) are Economy Savers to Japan/South Korea and Australia (ex Perth and Darwin) + NZ. These awards go up by ~30%.
  • But premium cabin awards to medium and long haul destinations have also been hit hard. Business and First Class to Japan/South Korea/Australia (ex Perth and Darwin)/ New Zealand/ Europe and the USA have all gone up by 25-30%
  • Short haul and China routes see the smallest increases- Business and First Class to South East Asia and China have gone up by 18%
A 30% increase is certainly not to be sniffed at, and it’s going to hurt those people who have been trying to save up for an award only to see the goalposts moved 30% further.
Why would SQ remove the online redemption discount? I’m sure the original reason for introducing it was because it costs less (in terms of customer service time and overheads) to issue an online award ticket than one issued over the phone. However, SQ’s crappy website meant that people had to call in to book the following types of awards
  • Upgrades that required waitlisting
  • Upgrading one leg after the first leg had been flown
  • Mixed cabin awards
In practice these would all receive 15% redemption discounts too because they couldn’t be done online. So perhaps SQ felt it was time to face that reality and simply stop discounting. Or perhaps the creation of a channel through which 15% discounts could be obtained created the idea in peoples’ minds that they should never be paying full price, even when they used the call centre for an award that could be easily ticketed online. It was probably easier for SQ to eliminate this altogether than have to deal with (admittedly unreasonable) customers like this.
That said, it would be unfair to straight away conclude that all Krisflyer award tickets are now “worse value” because we need to first consider the carrot that SQ has thrown us…

What are the implications of removing fuel surcharges?

Image result for Airplane refuelling
This has the potential to be a silver lining. I’ve said it before and I’ll say it again that fuel surcharges are the junkiest of all charges. They make absolutely no sense. It’s like a restaurant charging you separately for ingredients and saying your base price only includes the cooking.
I applaud SQ for removing fuel surcharges (the conspiracy theorist in me is now wondering if Singapore is going to introduce legislation ala HK, the Philippines and Brazil that outlaws fuel surcharges in the next few months…) because that’s the right thing to do.
The question then is- does the absence of fuel surcharges make up for higher redemption rates?
I’ve pulled out a few award bookings I made in the past few months to check the YQ (Fuel surcharge) component. Here’s what I found (fuel surcharges in SGD)
It seems that on long haul flights (SYD, JFK, IAH), the savings in terms of fuel surcharges do not offset the additional miles you need to pay. 
Take SIN-SYD for example. I now need to pay 16,250 more miles, for which i save S$195.30 in fuel surcharges. This values one of my miles at 1.2 cents, which is way below the 2 cent threshold. Same goes for JFK and IAH.
It’s interesting to note that for my Bali and Bangkok redemptions, I do get a bit more in the way of value per mile. I wouldn’t call this enough to make the increase less painful however, given that I don’t advise people to redeem miles for short haul routes.
Long story short- no. Fuel surcharges are annoying, but you don’t come out on top with their removal because the number of miles needed has increased.

Are premium economy redemptions now worth it?

IMG_20160123_144830
When SQ made premium economy saver redemptions available in May 2016, I said that they weren’t worth it because they cost ~80% the price of a business class award. Given the huge gap in comfort and the small gap in miles, I advised people to save up just a bit more.
Here’s what the ratio between premium economy and business saver awards is before and after the devaluation.
As you can see, it’s still not a good deal. Premium Economy awards still require 75-85% the miles of a Business award. I’d stay clear of these.

Are Star Alliance awards better value now?

Star Alliance awards were not touched by this devaluation, and they never had a 15% discount for online redemptions, thereby leaving the effective price the same.
I wrote an article not too long ago comparing the cost of Star Alliance awards to Krisflyer awards. That obviously needs to be reworked, and the revised working is very interesting


click to enlarge. The % in the last 6 columns refer to the premium (in miles) that you are paying for redeeming via *A as opposed as to via SQ

It is now cheaper to redeem Star Alliance partner awards than Krisflyer awards for certain locations.  Ignoring fuel surcharges for a moment (some partner airlines will charge them, others will not)
  • Singapore to North America in F: 112,500 miles with *A vs 118-120,000 with SQ
  • Singapore to Europe in F: 107,500 miles with *A vs 115,000 with SQ
  • Singapore to Europe in J: 80,000 miles with *A vs 85,000 with SQ
  • Singapore to Australia in F: 75,000 miles with *A vs 80,000 with SQ
  • Singapore to Australia in J: 55,000 miles with *A vs 58,000 with SQ
  • Singapore to Japan/S Korea in F: 60,000 miles with *A vs 65,000 with SQ
  • Singapore to Japan/S Korea in J: 40,000 miles with *A vs 43,000 with SQ
That’s a really, really interesting dynamic change, because I always assumed SQ was actively trying to encourage people to redeem awards on SQ metal rather than *A metal (to avoid having to pay *A partners a reimbursement fee). And now that SQ doesn’t even collect fuel surcharges on award tickets, does the elimination of more miles from their balance sheet outweigh the potential higher volume of cash outflow to *A partners for award redemptions?
More thoughts on this later. In the meantime I’d strongly consider you to think about a Star Alliance award if you cannot find saver space with SQ. It’ll be a good time to try some different products. 

Conclusion

I’ve always felt SQ’s award chart was much “better” compared to those of competitors because award costs were much lower. That evidently needs a rethink. SQ rightly pointed out that the last devaluation took place in 2012 and to their credit they didn’t try to spin this as an enhancement, but it does seem a bit on the nose to do this in the year they’re celebrating their 70th anniversary.
I will have a lot more to write about this in the days and weeks to come, I’m sure. How does this affect the valuation of a mile? Should you start looking at alternative programs like Asia Miles?
If you have an existing award ticket, my advice to you would be to hold on to it, because I don’t think when you factor in the additional miles required you don’t come out on top by saving fuel surcharges.
Breathe people. Breathe.
Please see the complete article at the following URL below:
http://milelion.com/2017/03/01/sq-has-devalued-its-krisflyer-award-chart-heres-what-you-need-to-know/

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