A Look at Simple and Advanced Strategies for Booking Travel for Next Year
Peace of mind or a piece of your wallet? That’s the dilemma that travelers face who feel they must get their itinerary lined up months—or even a year—in advance.
Since I started FCF’s Personal Help Desk (PHD) a few months back, I’ve learned that many more travelers than I thought book more than six months in advance. Maybe you’re deep into planning a summer trip right now.
Most major airlines sell tickets 11 months out, which puts you in the position of a commodities trader. Do you buy now to lock in a price or wait and see, gambling that fares will take a dip?
Here’s how I size up the situation for summer 2014 Premium Class travel to Europe. I’ll use Los Angeles-London as the sample route, but keep in mind that the approaches I’m outlining are valid from other U.S. gateways to other European cities. (Let’s call our traveler “Richard” for the example.)
Richard is at a fork in the road: $5,159 round-trip Business Class on Virgin Atlantic or $4,130 for a Business Class seat on United. He is also toying with the idea of locking in a Business Class fare via Amex’s 2-for-1 (also called the International Airline Program).
[aside headline="When Premium Fares Are Lowest" alignment="alignright" width="half" headline_size="default"]The cheapest time to travel to Europe in Premium Class is during Thanksgiving, when fares start at $1,600 (inclusive) in Business Class. Next best is Christmas, when Business Class fares start at $1,900. (See FCF July 2013 issue for more.)[/aside]
Timing it Right to Get the Lowest Premium Fare:
Business Class Basics
Based on two decades of following premium airfare trends—closely—I recommend that Richard consider waiting until December or January to book, as there is a very high probability that by then one or two airlines will come out with summer fare promotions, which are usually 40 to 55% lower than normal advance-purchase discounted fares. Within a few weeks, most of the industry follows suit, with the exception of British Airways, which often waits until February or March to join in.
Airlines set prices this way because an airline ticket is usually the first hurdle travelers jump, especially if they have to be somewhere at a specific time, say for a villa rental or cruise embarkation. The airlines figure, “Why discount when they’ll step up anyway?” Don’t fall for it.
First Class Basics
Same rule applies here. The only difference is that you have to be quick on the draw when fares drop because fewer airlines discount First Class, and when they do, the booking window is usually short.
Between February and April, over the last several years, United has started a First Class fare war for summer travel, offering up to 45% off on published fares. American, Lufthansa, and SWISS are among the carriers that have joined the fare-slash soirée, though not on all routes. FCF will monitor and analyze the opportunities for you as they come up, using our newsroom alerts to keep you up-to-date.
Still Can’t Wait?
Okay, here are two things you can do to minimize your outlay: Prepare to pay a hedge fee, or fly to a low-fare airport, even if it’s not your final destination.
Hedge Fee Strategy
As on Wall Street, “hedging” is cash invested to insure against a price change. With airfares, that means buying the lowest discounted Business Class ticket now. Your hedge is the option to cancel, which usually involves a fee, if you find a lower fare at a later date, on another route or airline.
Let’s say Richard’s finger is itchy, or has pressures from those he’s traveling with, to book now, and he decides to buy the Virgin round-trip Business Class ticket for $5,159. The cancellation/refund fee is $500. Let’s also say that in January, another airline comes out with a $3,100 fare that Virgin doesn’t match. That’s a fare difference of $2,059. Paying the cancellation fee (or hedge fee) still leaves Richard $1,559 in the black.
General Cancellation and Change Rules on Discounted Business Class Fares to Europe
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I Know What You’re Going to Ask Next
The key bit of knowledge is knowing which airlines allow refunds, because the last thing you want is a non refundable travel voucher for several thousand dollars with a year to use it. You want your money back, ideally. See the chart below to the left for cancellation and change rules for discounted Business Class fares on major airlines to Europe.
Often, the higher the fare, the more lax the refund rules. This is the case with First Class fares to Europe, which can easily surpass $10,000. See chart below for cancellation and change rules for First Class.
General Cancellation and Change Rules on Discounted First Class Fares to Europe
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Your Next Question…
If the airline you booked drops the fare before your departure—referred to by some airlines as a ticket downgrade and usually covered in the cancellation and change rule section of the fare—can you rebook the new fare and have the difference refunded?
You’re not cancelling the ticket, so you would think the answer is yes. But in many cases you receive the difference in the form of a voucher and you have to pay a change fee with most airlines. (But something back is better than nothing back.)
Thus, if Richard buys the United Business Class ticket for $4,130, and in January the fare drops to $3,100, he would receive a travel voucher for $580 ($1,030 - $450 change fee). As you can see, the fare drop has to be substantial to make this worth doing. (United’s general fare rule: “When a fare is introduced into the market or a current fare is reduced or booking code becomes available, the ticketed passenger may qualify for a refund residual via a voucher. All provisions of the new air fare must be met before departure. An administrative fee equal to the change fee will be assessed.”)
That’s why you should always find out the fare-change policy when you zero in on a fare. Some airlines, such as Air Canada, don’t even offer a voucher if the fare drops. The airline’s representative told me, “Once a customer purchases a ticket, we do not refund if the fare drops; similarly we do not go and ask for more money from someone who has bought a ticket if the fare rises.”
Another Buying Alternative: Low-Fare Airports
The most desirable destinations are often “high-fare cities.” Where there’s more demand, the price often goes up. The way around this is to arrive by the side-door, meaning flying to a second-tier airport to get a low fare, and then taking a connecting flight or going by car or train. You can turn this into a free side-trip, if you play it right.
The trick is to find the least costly cities in Europe from the U.S. It takes more time, but savings can be substantial—if not enough to pay for your otherwise free side-trip. Low-fare routes can save you thousands of dollars, as the chart below shows.
Low-Fare Routes: Business Class to Europe From 14 Major U.S. Cities
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Using Stopover Rules to Get a Free Side-trip
Richard is in luck as Virgin Atlantic is one of the few airlines that allows a free stopover on discounted Business Class fares (more on this coming soon). As the chart (page 4) indicates, Virgin Atlantic’s low-fare European destinations from LAX are Copenhagen and Oslo at $3,330 (inclusive). On this itinerary, that means Richard gets a free stop in London, which is his original destination anyway, and lowers his fare from $5,159 (LAX-London Business Class) to $3,330. How much fun could you have in Denmark or Norway with an $1,829 windfall per person?
[aside headline="The Travel Voucher" alignment="alignright" width="half" headline_size="default"]Unused, non-refundable tickets can turn into travel vouchers; usually valid for a year from the ticket-issue date; good for travel on that airline or on code-share flights with other airlines to any destination. Just keep in mind that change fees can really eat into the voucher.[/aside]
[aside headline="Reservation “Hold” Option" alignment="alignright" width="half" headline_size="default"]If you’re not content until a trip is nailed down, consider using the American Express International Airline Program (IAP), a two-for-one deal. Ticket prices are often high, but you don’t have to pay up until 30 days before departure, and you can back out altogether for $100 or less. Make sure to check the airline’s change and cancellation rules for IAP fares.[/aside]
Advanced Strategy: The First Class Hedge
Consider booking Business Class with a carrier that allows rebooking to First Class.
This will allow you to take advantage of extraordinary summer First Class promo fares, such as those offered last year—which could net First Class for the cost of Business Class on some routes, a low-cost upgrade on others. From this standpoint, Richard is better off booking United, because Virgin Atlantic does not have a First Class cabin, and because United has offered special summer First Class fares over the last few years, while other carriers have not.
If Richard buys a Business Class ticket now on United ($4,130), and on March 1 the carrier rolls out a First Class fare of $5,200 (as it did this year), he can upgrade to First without paying the $450 change fee because United waives the fee for passengers upgrading to another cabin at a higher cost. Not every carrier does this (waives the change fee for upgrades to First Class), so make sure you check in advance.
In Summary…
Wait until January if you can. If you can’t, book an airline that offers a refund on cancellations, or buy a ticket to a low-cost airport and change—and yes, pay the change fee—that ticket if a better deal comes up, such as a great First Class fare.