Here’s the big picture
This is the time of year when it is fun to predict the future. My annual “Crystal Ball” forecast is based on past data to help predict what the future will hold.
Arrogant? Possibly.
Useful? Hopefully.
The Pace of Change Will Speed Up Even More
Airlines are making increasingly bigger investments in technology, which will accelerate changes in airfares, loyalty programs, and the fine print. What “worked” for the premium traveler last month may not next month. Don’t get set in your upgrade ways. Rather, be optimistic and opportunistic: When one upgrade door closes, another usually opens.
The Two Hot Tickets for 2013
Paid Hot Ticket: Business Class to Asia. Look for more flash fare sales starting at $2,200 (or less) especially to China and Japan (see Nov. 27 FCF Alert). At this level, it’s not worth spending miles. Pay cash and bank the miles for more expensive trips. These deals will have a very short booking window—as short as a day. But then they will pop up again. Be clear on what you want to do, and stay on patrol. Remember what airlines allow for flexibility if you lock in something because it’s a deal, but want to change later. (See FCF November issue, page 2, for details on Flexibility Friendly Airlines.)
Award Hot Ticket: Short-Notice International First Class. Have tons of miles or credit card points—or willing to buy them? Get ready for last minute dream trips to the destinations you’ve always wanted to go—but were never available with miles. Last-minute First Class award availability will be rich. Especially on international airlines since they prefer to open up award space and have someone spend miles rather than have seats go empty.
Domestic Fares
Poised to Drop in More Markets. Last year saw every U.S. carrier drop domestic First Class fares significantly for bookings made 7 to 14 days in advance. It was the catalyst for changes in how U.S. airlines would price the premium cabins on international routes. Delta was the leader in bringing down domestic First Class fares, which made sense. Why give away First Class seats for free to elite status members if you can lower fares enough to get cash for them? (See FCF June and July for more on evolving premium domestic fare landscape.)
International Fares
Consistently Inconsistent. The overhaul in pricing domestic premium cabin fares is bleeding into international travel (see FCF December issue). Fares won’t always be proportionate, meaning LAX to London will have a very different rate than LAX to Amsterdam on the same airline. Discrepancies will be at an all-time high. There will be wide variations in prices by major carriers on the same international route, too, and Flash Sales will occur only on specific routes, as airlines get increasingly aggressive to take off with every seat filled and will care less about what other carriers are doing.
Look for Increasingly Frequent Flash Sales. In the last five weeks, First Class has been offered to three Asian cities at up to 72% off (see FCF December issue and Nov. 28 and Dec. 14 FCF Alerts), and Business Class to two South American cities at up to 60% off (see Dec. 14 FCF Alert). Flash Sales will make you wonder why you are working so hard to earn miles in a single airline program, since these deals are often not offered by every airline and will make many weep over going all-in with the wrong one.
Zero in on Carriers that Offer Business Class for the Price of Coach
The opportunities should be more frequent in 2013. Count on some of last year’s discount stalwarts to prove this along with some new players. Last year two European mileage programs, Flying Blue (Air France and KLM) and Miles & More (Austrian Airlines, Brussels Airlines, Lot Polish, Lufthansa, and SWISS) offered Business Class awards at up to 50% off—which often brought them down to the price of economy. Make sure you have miles banked in a credit card program that allows point transfers into miles with the programs mentioned above to get Business Class for the price of economy.
Current Example: Flying Blue’s 50% off promotion on KLM from Chicago to Europe via Amsterdam. Cost is 50,000 miles round-trip for bookings made by Feb. 26 (travel window: Jan. 9 to Feb. 28). See Dec. 7 FCF Alert for the most recent Miles & More promotion on Lufthansa. Look for more routes in 2013; we saw dozens in 2012 with both mileage programs.
For Sale: Everything (But Greater Complexity)
Seat 50C will soon be priced differently than seat 52A, and seats next to the lavatory will cost less than nearby ones. It will most affect those who buy economy class tickets with the hope of an upgrade.
An IBM study says 20% of travelers spend more than five hours researching and booking a single trip, and more than 40% of travelers spend more than two hours (and this is without any interesting booking strategies involved). Get ready to settle for a fare that’s low enough because exhaustive fare comparison will be more trouble than its worth. As always, seek value, not price.
Fare Bundles Will Sow Confusion
American’s new Choice Plus and Choice Essential “travel bundles” will add confusion to the basic question “what’s the all-in price?” Other airlines will come up with similar schemes. Many online and off-line travel agencies will not be able to keep up with the knowledge or technology needed to book the new fare bundles, which is fine with the airlines because they want you to book directly with them to eliminate easy fare comparison and to keep distribution costs down.
That’s why many fares will only be available through specific sites allowed to display specific deals. One example: American’s 25% discount for Priority Seating offered on Priceline last year. You’re going to have more homework to do—and wonder why you are still earning miles in a single airline program.
Elite Status & Loyalty Programs
Duel Mindset: Domestic versus International Mileage Programs. With domestic mileage programs, taxes and fees are low and award availability is at times limited. With some international mileage programs it’s the opposite: taxes and fees can be high but award space is often more plentiful on some carriers. So what will it be? Fly an international carrier on the dates you want, use a saver mileage rate and pay high taxes and fees, or change your dates to find saver mileage rates on a US carrier and pay low taxes and fees?
Worth Increasingly Less for Low-Tier, Mid-Tier, and Top-Tier Elites. That’s because the “soft perks” are increasingly being sold to anyone. Why fly all around the world just to get elite status if the perks it confers can be bought. Other ground amenities will be for sale, too, that aren’t already. Pick and choose what you need, when you need it. Don’t feel special because an airline gives you an elite card. Because you’ve likely overpaid for it already.
Does your preferred airline fly most places you go, at the lowest fares, with the best seats and in-flight comforts, and with the best times and routing? If so, then go for Elite Status. If not, as is the case for most travelers, then you need to take off your elite blinders in 2013. For one thing, your miles are being devalued by U.S. carriers lowering First and Business Class fares, which means fewer upgrades to be had for elites. (See FCF June and July issues for more on elite blinders.)
Loyalty Programs: Even More Confusing. A few fundamental mileage program perks, such as using miles for an upgrade or “anytime awards,” will be restricted to elites—to make them feel special. To get the last seat on United—at double the cost—you have to either be an elite or have the airline’s preferred credit card. With LAN, only elites can now upgrade with miles. So why bother having a LAN affinity card, if you’re not an elite?
Loyalty programs will change even more rapidly as airlines reinvent the meaning of “elite status.” This means that you have to rethink it, too, especially for entry level elites. Domestic elite upgrades (which used to be the top reason for being elite) will primarily be available only to mid-level and up—and even for them, less often, as airlines drop premium fares, making fewer elite upgrade seats available. Airlines will have to think of new ways to keep low-tier elites by taking something that is now open to every mileage member and making it an elite perk. While confusing for everyone, it will give you the “I am special” feeling once again to some extent.
All this should make you wonder why you’re earning miles in a single airline program. (There will be more on how to navigate the emerging elite paradigm in upcoming months.)
Loyalty Program Possibilities: The “Upgrade Mindset” required. Think possibilities, not entitlements. This is where people go wrong. They get that fuzzy feeling from a platinum card. Don’t throw in with just one program or even two, FCF has been trumpeting diversification since the 1990’s.
With Starwood Points, Membership Reward Points, and Ultimate Rewards Points, there are few opportunities you can’t jump on.
Finally, I see many, many opportunities for travelers who embrace the FCF Upgrade Mindset, and I predict that you will be as satisfied with our analyses in 2013 as you were in 2012—if not more.
Thank you for supporting FCF’s research efforts in 2012.