Some Turbulence Ahead, but Good Opportunities on the Horizon
I will remember 2013 as the year of amazingly low published fares—back in January you could fly New York-Dublin in Business Class for $1,223 round-trip (without any strategy backflips)—that turned into fares that changed by the hour.
It was a year in which American and Delta (and then their followers) reinvented the Business and First Class pricing structure by severely reducing fares on many routes through advanced ‘yield management’ tactics, and one in which premium fares fell so low that it often made no sense to use miles for an upgrade—in fact, many upgrades priced out higher than a premium class fare.
Many airlines even ended the year by changing key restrictions on published Business Class fares (see FCF Dec. issue).
What’s in Store for 2014?
All indications lead me to think that 2014 will be a pretty good year for the strategic premium traveler, meaning those who know about flash First and Business Class fares, loyalty-currency deals, new Business and First Class seat arrivals, and service changes such as the increase in A380s on routes worldwide.
Prediction 1: American Airlines will Offer More— Significantly Reduced—Published First Class Fares to More Destinations That are Substantially Lower Than the Competition—Even its Partners
American’s emerging MO is to sell First Class year-round for much less than other airlines. The carrier should be your first choice if you are paying for First Class this year. Fares start at $3,100 to Asia, $3,200 to South America, and $4,700 to Europe, and the difference between First and Business is, at times, as little as $200. Compare that with fares to Asia on most other carriers—often at $11,000+; to South America, $9,000+, and to Europe, $8,500+.
Prediction 2: Great Business Class Fares will be Here One Day, but Gone the Next
But not as low as the beginning of 2013. Flash sales will occur on specific routes—Phoenix to Barcelona might have an EasyUp fare but New York-Barcelona will not—or vice versa— as airlines get increasingly determined to take off with every seat occupied, and more aggressive in undercutting competitors in strategic markets.
The airlines have had a year to get better at pricing routes that yield management identifies as “soft”. So look for many more flash and EasyUp fares to Asia, Europe, and South America starting at around $2,100 round-trip (including taxes) for Business Class.
These deals will have a very short booking window—a day, even just a few hours—but then they will pop up again, sometimes the same route, sometimes the same region. If you get a low EasyUp fare, pay cash and leave advanced ticketing strategies for more expensive trips.
Prediction 3: Airline Alliance Pricing will Vary Greatly on International Routes
There will be wide variations in prices by major carriers on the same international routes. A fare to Spain might have an EasyUp fare on SkyTeam airlines (Air France, Alitalia, Delta, and KLM) but not on oneworld (American and British Airways) and Star Alliance (Lufthansa and United). Airlines will care less about what other carriers—including their partners—are charging because alliances are breaking down to some extent. (And carriers are getting greedier.)
Here is what I predict for each alliance in 2014:
oneworld: American does its own thing when it comes to First and Business Class fares and will do so even more in 2014 worldwide. Two good examples of this are AA’s low First Class fares to London, which are as much as four times lower than British Airways, its partner. Same goes for AA flights to Tokyo in comparison with its partner, Japan Airlines, whose fares can be almost six times higher than American’s. The merger with US Airways won’t change this equation.
SkyTeam: Delta is the more experimental airline within the SkyTeam alliance, which means it will continue to try out new pricing structures on what it views as “soft routes”. Partners Air France and KLM will sometimes join in.
Star Alliance: United is predictable because it works in lockstep with its major European partner, Lufthansa, and major Asian partner, All Nippon. This will continue in 2014. The only time United may surprise us is with seasonal First Class fares to Asian destinations beyond Tokyo.
The Moral: Partnerships and Alliances are becoming more of an illusion, especially in regards to elite status earnings. Here we’re seeing a decoupling of reciprocal elite earning status credit, as airlines become less ‘us focused’ and more ‘me focused’. A good example: United’s requirement that members must take at least four paid flights operated on United. Or Delta’s requirement that in order to earn Medallion Qualification Dollars (MQDs) the partner airline tickets have to be ticketed as a Delta flight, and Delta only offers full Medallion Qualification Miles (MQMs) on some of its partners; on others it’s offered at a reduced rate, and with a few airlines (Korean), it’s not offered at all.
Fare- and mileage-award rate differences will become the norm in 2014, so don’t to assume that alliance equals consistency, perk parity, or predictability
Prediction 4: Mileage Upgrades will be More Important Than Ever on Expensive Routes
That’s because free tickets will be scarce on many of these routes and the odds of getting an upgrade confirmed is very often significantly higher than getting a free seat (see FCF Sept., Aug., and July).
For example, with United’s partner awards, we generally see decent availability because of the partnership’s extensive route network, especially for free First Class awards. That will all change as of Feb. 1, as the pricing will no longer be competitive. What will be? Mileage upgrades. For travelers with less schedule flexibility, or those traveling as two or more, or travelers who are elite-focused (and need to earn credit, which free tickets don’t offer), or business people flying on corporate or client expense, mileage upgrades will remain a powerful cost-reducing tool for premium travelers. United awards will dry up much faster, given the reluctance by most people to pay up to 85% more to get at its partner’s availability. (More on this another time.)
Prediction 5: Get Used to MileageAward-Chart Inflation
The airlines have distributed more miles, more cheaply, than seats they actually want to ‘give away’. So, what do they want to do? ‘Giveaway’ seats for more miles. The supply of miles they have sold exceeds the volume of seats they want those miles to be redeemed for. You could say, their mileage-selling business is going too well for them.
So, look for them to roll out milage-cost increases
Including upgrade surcharges (likely by American) and new fees, such as for award processing whether you book in advance and/or online or not.
This doesn’t bother me as much as you’d think because it reduces the competition for limited space. But your strategic move here is to maintain discipline in diversifying your Travel Asset Portfolio (TAP) to reduce the impact of inflation. So you will never get hit very hard when inflation hits this program or that one, because you have followed FCF’s one-of-a-kind advice on this topic over the last 17 years, and have not put very many eggs into one Travel Asset Basket.
Prediction 6: Mileage-Award Inventory will Continue to Decrease on Major Airlines
As airlines are able to price premium cabin fares with greater precision (so a flight can take off as close to full as possible), more and more seats will be sold for cash, albeit often at lower fares (see prediction #1 and #2).
The good news is that there is almost always decent availability for those who are flexible, who can go where the free seats are, as there are still far too many flights that take off with unsold seats. Until that changes there will be big opportunities to redeem miles.
Where are all the free mileage seats? I predict more free First Class award inventory on Middle Eastern airlines, such as Emirates (which just this month took delivery of two more A380s, it now has 44), Etihad, and Qatar. So put the Middle East—and points beyond—such as Africa and Asia, and more exotic locations, on your Bucket List Radar in 2014.
Prediction 7: The Right Credit Cards Have Never Been so Right
Not to beat a dead horse, but I’m continually amazed about how many readers take this core approach too casually: American Express Membership Rewards and Starwood Preferred Guest are by far the best plastic to carry for the premium traveler looking to use points to offset, significantly, the cost of flying
In general: Starwood is better for those with more flexibility, Amex Rewards for those without it
Don’t fall prey to the hype coming from ‘pop-media’ touting cards like the ones from Chase; they do that, unashamedly, because they get tremendous kickbacks from the credit card companies for doing so.
As always, perhaps as much in 2014, the best advice might be for some: Be careful who you listen to. Think about the kind of commission your Travel Asset Adviser is getting for recommending this investment or that investment to you. (FCF doesn’t operate that way; it isn’t in that kind of business.)
Bad advice is really easy to find ‘online’, right?
Prediction 8: Transcon Fares will Drop
I predict this overpriced route (LAX/SFO-JFK non-stop) will see major fare changes this summer, as the Domestic Big Three (American, Delta, and United) have to compete with JetBlue.
Will they drop to $1,200, Jet Blue’s (current) fare? No. The Big Three don’t have to be at the same level, they just have to drop to a point that makes it worth their loyalists to fly with them. Get ready to take advantage of by-the-week fare changes, periodic fare wars, ‘elite status incentives’, and elite mileage incentives (double for sure, triple perhaps), as the fare structure on this route finds its groove.
Most might think the opposite—that the price will only go up—given the big investment the airlines have made (seat and experience upgrades) on these routes. The only problem: The pressure to fill these seats will only go up. Transconnoisseurs will force competition, as the products are more clearly understood, leaving clear winners and losers. The losers will have to discount (and will) and the others will have to match to some extent.
Prediction 9: No Shortage of Great Trip Opportunities for the Flexible Traveler
Count on some of last year’s biggest discounters to offer similar promotions in 2014. Make sure you have miles banked in a credit card program that allows point transfers to the mileage programs mentioned below to have many opportunities to fly Business Class for a price close to coach, if not less than coach. 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
Deals like this will only become more frequent, as pressure rises to “get what you can” for a seat, so they don’t perish at takeoff, and keeps “airfare integrity”—if at the expense of their award chart integrity—but few notice the latter; certainly not Wall Street analysts, who place tremendous pressure on airfares, and all things related, except for this kind of discounting.
[aside headline="Premium Air Travel Predictions for 2014: For FCF Subscribers Who Live Abroad" alignment="alignright" width="half" headline_size="default"]
(or in U.S. Cities Not in Examples)
The article has no borders. The predictions deal with airlines around the world, and forecasts that specifically apply to the U.S. should be of interest to anyone coming from abroad.[/aside]
Prediction 10: The Airlines Will Put a Little More “Elite” Into Elite Status
Two major airlines, Delta and United, now require that elites spend a certain amount of cash to maintain their status. Which is a good thing because it will pare the list by 20% to 30%, I’m guessing.
This should translate into better odds at getting the limited supply of free elite perks.
As you know, I was the first (and still the only to my knowledge) to advise against elite status intoxication. For those of you who can’t shake it, things will appear to be a bit better, for a little while anyway. But it won’t be long, before the airlines ‘auction off’ (see AA last month) elite perks to anyone who will pay.
Overall, elite programs will continue to demand more than they give. The temptation will be stronger for many to stay hitched, and the urge to resist will only need to match the temptation. Much more could be said on that, but will leave it there, today, as I know I offend many with thoughts of a NonElite, Upgrade Free Agent Mindset.
Final Thoughts
While there are fewer suppliers of air travel, given all the mergers, differences in pricing and product experience won’t go away. So do not have a one-track-mind in 2014, meaning that your focus is only on one airline, one destination, or one credit card program. Expand your Big Opportunity Options by keeping your eyes open.
In other words: Don’t get set in your upgrade ways. What worked last month may not work next month. Be opportunistic: When one upgrade door closes, another usually opens. Above all, do not go steady with one airline or one credit card. Expand your options by carrying multiple cards and staying flexible when it comes to carriers. Don’t give it away.
Separately, I’d like to take a quick moment to thank you for your investment in FCF this past year. Without your inspiration—and continued pressure!—to dig up more new fares, pricing anomalies, and amazing loyalty program loopholes, and everything in between, we couldn’t begin to give you a leg-up on realizing the best opportunities the premium air travel world offers. Lots more in store for 2014…