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Travel & Holiday

Loyalty does not pay when it comes to flying

Shop around, because frequent flier miles no longer count for much
The Straits Times - May 3, 2012
By: Karamjit Kaur
| More
Loyalty does not pay when it comes to flying PUNCHLINES: Loyalty does not pay when it comes to flying -- ST ILLUSTRATION: MANNY FRANCISCO

SIGNING up for a frequent flier card seems like an attractive proposition. The more you fly, the more miles you earn and when you have enough, redeem them for free flights. How nice.

But as frequent fliers know well, these days, it takes more than just miles to get around. Throw in airport tax, insurance, security fee and fuel surcharge and a round trip from Singapore to London on Singapore Airlines (SIA) could set you back more than $700, on top of at least 70,000 miles. The reason: Miles cannot be used to offset taxes and fees for international flights; just the basic fare.

A loyal customer cannot help but feel cheated. Having to cough up cash for a supposedly 'free' flight is not the only thing. There is also the unavailability of tickets. When airline loyalty schemes were started three decades ago, 100 per cent of seats were available to members each and every day, with no blackout dates. Today, it is almost impossible to get the flight you want unless you book at least six months in advance and even then, there is no guarantee you will get it.

There is also little transparency because airlines do not tell their customers how many redemption seats are available per flight. You just have to try your luck.

Another grouse is the low mileage from miles. It used to be that miles never expired; now, they typically die after three years. Marketing manager Tan Hua Hin, 45, said: 'You don't want your miles to die on you, so sometimes you end up on trips you didn't really plan for.'

On top of all that, loyalty now comes with fewer privileges, as Mr Mario Hardy, a senior executive of a London-headquartered company that provides aviation market intelligence, noted. The 46-year- old, who makes about 30 trips a year, noted that some airlines no longer allow their 'gold' members - the most-frequent travellers - to take a guest into the airline's airport lounge. Some have stopped giving upgrade vouchers.

The frequent flier programmes began some three decades ago, with American Airlines's AAdvantage - a reward programme with an enticing bait: A mile earned for a mile travelled. Over time, other offerings were thrown in. Some airlines partner other service providers so loyal customers can use miles to pay for other things as well, like hotel rooms. Miles can also be used to upgrade flights or to buy in-flight duty-free items.

Within airline blocs like Star Alliance, Oneworld and Flying Blue, members can also use miles chalked up with one carrier to redeem flights on another.

So, even as the benefits are trimmed, the strings attached to redemption programmes have grown. For the tens of millions of travellers with one or more frequent flier cards, a logical question, therefore, is: Does it pay to be loyal?

The answer: No. Unless you are a premium customer flying only business or first class, chalking up maximum miles. Then you may enjoy perks like plush lounges and VIP check-in treatment.

For others, there is not much value in sticking to one or two airlines just to accumulate miles which, in the end, may not count for much.

Mr Jonathan Galaviz, managing director of research and consulting firm Galaviz & Company, said: 'Smart airline executives listen to customers, especially their most loyal customers.'

But airlines do not always listen. A case in point is their treatment of the fuel surcharge which almost all international airlines levy amid rising oil prices.

Frequent fliers are not unreasonable. They understand the need for airlines to recover some of the cost of higher oil prices. What they do not understand is why the fuel surcharge, part of operating costs, cannot be offset using miles.

When the question was put to them, airlines did not answer. Instead, they stressed that the surcharge is paid by all travellers, is transparent and constantly reviewed. Airlines also pointed out that the fee collected does not cover the total increase in fuel cost.

Some aviation analysts like Mr K. Ajith of UOB Kay Hian and Mr Shukor Yusof of Standard & Poor's Equity Research said they understand the airlines' viewpoint.

Technically, there is no reason why the oil surcharge cannot be offset by frequent flier points. Practically though, there are challenges due to the volatility of jet fuel prices which have more than tripled in the last eight to 10 years to about US$140 per barrel, and the fact that fuel makes up such a huge chunk of total spending - about 40 per cent.

Collecting the fuel fee in cash allows airlines to recover very quickly not all, but part of the oil bill, which is critical to maintaining a healthy cash flow, Mr Shukor said. 'For a big airline with many flights a day, if everyone starts using miles to pay for the fuel surcharge, it would compromise the ability of the carrier to manage the cost of fuel.'

The International Air Transport Association which represents about 230 global carriers expects the industry's total fuel bill to hit US$213 billion (S$268 billion) this year.

Mr Galaviz did not buy the argument. He said: 'In our view, fuel surcharges are simply dumb... It's a very lazy way for airlines to generate revenue. It also makes many customers feel tricked.'

Frequent flier miles appear on the financial balance sheet of almost every airline, so they are essentially a currency, Mr Galaviz said. 'To not let customers use that currency to offset charges seems a bit obtuse.'

What then is a loyal customer to do?

The answer is clear: Forget about being loyal. The recent boom of the air travel industry in Asia, fuelled by strong economies and governments liberalising air routes, has led not just to the emergence of new carriers but the launch of many new markets and city links.

Travellers in this part of the world - the new heart of global aviation - are spoilt for choice. With so many different types of airlines - super-premium ones like SIA, second-tier full-service carriers such as Malaysia Airlines and Thai Airways, regional airlines, short-haul budget carriers, long-haul budget carriers - offering myriad product options, destinations and fares, travellers should shop around for the best deals. Because, this is one business where loyalty does not pay.


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