What FCF Thinks 2019 Will Hold for Premium Air Travelers

What FCF Thinks 2019 Will Hold for Premium Air Travelers

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First Class seats keep disappearing, low-cost fares are scarce, and the strong economy keeps many premium seats sold, and as the airlines move to a “boil-the-frog” strategy, here’s how to continue to win at the low-cost upgrade game in 2019.

Let’s start with loyalty programs, where the news is mostly cautionary.

Miles and Points Outlook

Airlines Boil Us Frogs

You remember the fable: A frog that is put into a pot of boiling water will immediately jump out. But a frog that is put into tepid water that slowly comes to a boil will not notice the temperature change until it is too late.

So, too, with airlines. If they increase the cost of their mileage programs too drastically, they will immediately lose loyalty members who don’t want to be boiled by the higher rates. But if they increase rates more incrementally, say to one region at a time, members will be more inclined to accept them without perceiving the cumulative danger of one small change on top of another until it’s too late and they are cooked by the higher rates.

Two airlines are embracing the slow boil strategy: American and Delta.

American: Slow Frog Boil

It seems like American learned its lesson back in 2016 with its major across-the-board overhaul. So, trying a new approach for 2019, it is just changing one category at a time—that is, it’s boiling the frog slowly.

The airline has already posted new higher rates for Hawaii, going from 80,000 miles round-trip in Business Class until Jan. 16 to 110,000 round-trip thereafter—a whopping 30,000 mile (37%) increase. Going forward we foresee constant, steady increases rather than one-shot program overhauls like in the past.

Delta: Secret Frog Boil

Delta has always been somewhat of a leader when it comes to revenue-increasing innovations. At times, it introduced great changes, such as easyup fares in 2012, which American, United and other airlines matched. Now it is making incremental changes to award travel in economy by dividing it into two classes/prices: basic economy and main economy. Going forward, you’ll have to shell out even more miles for what used to be the baseline, main economy. For now, Delta is calling this a test, but the writing is on the wall. Mileage award prices are increasing, and if economy increases so will Business Class. In other words, Delta is slowing boiling its customer frogs.

Availability Using Miles and Points

Good airlines: These are airlines that often have low-cost mileage award space for many months, routes, and seats. Look for the trend to continue in 2019 with these airlines, which include All Nippon, Asiana, British Airways, Korean, Lufthansa, and Virgin Atlantic. Some examples:

Up to Four Fly Virgin Biz Class to/from London from Atlanta, Boston, New York

First Class 42% Off with Money OR 70% Off with Miles on British Airways from the West Coast to Europe

Lufthansa First Class for Less than Biz Found to/from Europe With Miles—OR 75% Off With Money

Fly First Class to Asia for Less than Business from Chicago, Houston and More, with United Mileage Plus, Amex, Chase, and Marriott Points

Many Months with First Class Seats from LA + NY to Asia at 67% Off with Miles *OR* 76% Off with Money

First Class Korean Air Awards Found to/from Asia from Chicago and Dallas

Okay airlines: These are airlines that sometimes have low-cost mileage award space. Again, look for the trend to continue in 2019 with these airlines, which include: Delta, Singapore, and American. Examples:

Fly Business Class to Hawaii Easy with American Miles

Get Delta Business Class to Sydney and Beyond

Hot: Singapore Air First Class 67% Off with Miles *OR* 77% with Money

Bad airlines: These are airlines for which it is hard to find low-cost mileage award space, especially in First Class, or to certain regions. Look for the trend to continue in 2019 with these airlines, which include: Japan Airlines in First Class and American to the South Pacific.

Using U.S. Airline Miles for First Class Partner Award Space: The situation is not good for the three major U.S. legacy carriers. For American, forget about booking First Class partner award space to Asia on Japan Airlines, unless you are booking First Class partner space on British Airways to Europe. For Delta, forget about it, because it offers no First Class award redemption. And for United, forget about booking First Class partner award space to Europe; First Class partner space on Asiana and at times All Nippon to Asia is somewhat reliable.

How Will 2019 Set the Stage for What Is to Come?

Through the beyond 2019 is probably not so great, there will be great flash deals now and then. Given the new ASC 606 Revenue from Contracts with Customers (whereby airlines need passengers to use their miles for the airline to record revenue), airlines want you to use your miles. So, look for them to slice up miles in many more ways and to do more unbundling. Many of these changes are in economy, but at some point, we should see the ever-emerging Premium Economy (PE) being offered at a lower cost than full-service PE. While that might not happen in 2019, eventually we will see PE split into basic PE and full-service PE, similar to what we’re seeing experimented with in economy today.

The Impact of Premium Economy (PE)

Watch for 2019 to set the stage for 2020 with Premium Economy. FCF’s team thinks it’s scary that all three U.S. carriers have PE, because it will bring about changes in fares and mileage redemptions. American created PE service first, back in 2016. At this point, AA is pricing tickets on most routes relatively low, and considering it still has no mileage award redemption for PE, is waiting to see what the others will charge. Delta started PE service in 2018 and for the most part is charging more for PE than AA is. The same holds true for United, which will start service later this spring and is also charging more for PE than AA.

Now that all the three majors have PE, what will that do to the PE fare and mileage landscape? FCF predicts that the PE cabin will be the key factor in driving up fares and mileage award redemptions for Business Class.

Why? Because United’s First Class cabin was pulled in late 2018 and six months later PE arrives. Plus, United is quickly rolling out its new Polaris Business Class, due to be completed by 2020. Look at Delta’s new One Suites, whose name already says it is more than just a Business Class seat. American will just follow what everyone else is doing.

Airlines will still continue to offer low-fare Business Class routes in 2019, but change is on the horizon for 2020.

Let’s just hope that domestic carriers don’t move to make upgrades work for just a one-class upgrade: from economy to PE and from PE to Business, as this would force paying a higher fare ticket for upgrades to Business Class.

Your Secret Weapon, For Now:
Mileage Upgrades

Continue to keep American and United mileage upgrades in mind for international flights, as the trend in 2018 was significantly more upgrade space than for free awards. We expect this to continue in 2019. Some recent examples:

American Upgrades to Barcelona, London, and Madrid—Best on the Return

Fly Business Class from East Coast to France, Italy, and Beyond with Chase Points and United Miles

Fistful of American Upgrade Awards to Hawaii

Elite Status

FCF must sound like a broken record by now to many of you, as we have been saying for a decade that elite status (unless top elite, but even there too) is old-school thinking. Why spend more and more each year to keep your elite status?

Just consider that Delta expects, “Strong growth prospects from premium products” and says that “30 percent of our total revenue stream is coming from premium products, which is twice what it was six years ago.” Proving that Delta is selling, and is expecting to sell, more premium seat and giving away less elite upgrades.

For “top” elites, the airlines are making you work harder in 2019. Both American and United announced an increase for top elite spending from $12,000 to $15,000 Elite Qualifying Dollars. (Delta is already at $15,000.)

Outlook For Premium Airfares in 2019

2018 First Class Fare Trend to Europe: In 2018 we saw First Class fares on the rise. At the same time, United’s low fares and competitor-matching practice dissipated with the elimination of First Class, and American had very few routes with a First Class cabin. Both of these airlines were leaders in offering many low-cost First Class fare routes—and that’s all gone now.

2019 First Class Fare Crystal Ball to Europe: With fewer airlines and routes with First Class seats this year, our best guess says prices will rise overall because there’s less competition to keep them down. Take Air France, for example. In early 2018 you could get New York to Barcelona for around $3,500; now that same ticket is $5,800+ ($2,300 / 40% more).

2019 First Class Fare Trend for Domestic Short Haul: American and United will have modest First Class fare increases, with Delta having higher ones. The trend of airlines trying to sell First Class instead of giving upgrades to elites will continue in 2019; their predictive analytics will be so good that there will seldom be unsold premium seats for elites.

General First Class Fare Mindset for 2019:

Business Class Fare Crystal Ball By Destination:

Europe: Continue to look for low-fare routes; what was hot in 2018 may not be in 2019. Always keep an eye on FCF’s fare alerts to show the new low-cost routes so you can avoid paying $4,000+ for Business Class tickets to Europe. Which will be the top destination for 2019? Palermo, Italy? Dublin, Ireland? Warsaw, Poland? They were hot in the past, but this target is always moving. At this point, we can’t say, but our alerts will identify the trend.

Asia: Beijing and Shanghai, China was the hot destination for 2018 (previous years saw Seoul and Tokyo). This could change in 2019; stay tuned.

Africa and South Pacific: These two regions are similar in behavior, perhaps because there’s relatively little competition. Either way, continue to look for modest flash sales in Business Class on some routes. Want comfort, but not willing to pay the price? Remember FCF’s buy miles in style strategy, still one of the best ways to get Business Class tickets for cheap to high-fare destinations such as the South Pacific and Africa. Also keep Premium Economy in mind with low fares often offered on Virgin Atlantic to Africa and on American to the South Pacific.

South America: Continue to look for LAN to have sales, as the big three U.S. airlines tend not to discount much to this region. The exception is Lima, where we see some deals now and then.

Domestic Transcon: FCF predicts that fares for the transcontinental routes, San Francisco/Los Angeles-New York, for 2019 will be lower than in 2018. (They often hovered in the range of $1,500 to $1,700 with a 30-day advance notice.) The reason for this decrease is Alaska Airlines, a newcomer to this route. With its purchase of Virgin America, it is now operating non-stop flights, which will drive some tooth-and-claw competition with the four majors (American, Delta, JetBlue, and United). Look for fares in the $1,100 to $1,300 range to become the new norm in 2019 for all the airlines. And expect more transcon routes from American, which just launched Boston, and JetBlue, which has many new ones planned (go here) as long as the economy is strong.