Travel Hacking From Scratch – Part 2 – Credit Cards – Which Card and Why

By

-

November 4, 2019

This entry is part 2 of 9 in the series Travel Hacking From Scratch

Series Layout

Welcome to the Travel Hacking from Scratch Series – a series dedicated to getting those new into Travel Hacking up the curve as quickly as possible. Below is the layout of the series with links back to already published articles. Today our topic is Which Card and Why, a look into credit cards and which ones might benefit you the most.

The Benefits of Travel Hacking

Earning Points

Credit Cards – Which Card and Why

Category Bonuses

Churning Credit Cards

US Credit Cards (ITIN)

Referral Bonuses

Manufactured Spending

Using Your Points

Alternatives to DIY

Understanding the Power of Partners

Weighing Convenience vs Cost

How to Avoid High Taxes and Charges

Sweet Spots

How to Travel Better

Why You Need Status

Leveraging Status

Understanding Your Rights

Beyond Travel – Financial Freedom

A Quick Introduction to Credit Cards

I get a distinct feeling that people put their guard up when I start talking about how credit cards can get you free luxury travel. I get it … it sounds too good to be true, but I can tell you from many years of experience that it is completely possible.

That being said, we should lay out some ground rules that you really should follow to really get anything out of collecting miles and points:

You HAVE TO pay off your credit cards in full each month. The interest rates on credit cards are 18.99%+ and are usually higher on travel credit cards because of all the benefits that are offered. The people that carry balances are the ones that end up shouldering the cost of the benefits. Be good at paying off your cards and let others carry the burden. If you cannot pay off your cards each month, you need to get your financial house in order and then revisit this blog. I’m not trying to be harsh, I’m just trying to be realistic. I have heard too many stories of people drowning in credit card debt to not make this point.
You should understand what your credit score is and how it is determined. Luckily, I have written a couple of articles around how credit score works so take a minute to familiarize yourself with the topic.
Don’t dive in headfirst. Educate yourself and figure out what works best for you and your situation.

PointsNerd’s Strategy for Credit Cards

Almost every credit card offer out there provides a greater return on investment than the cost of the annual fee … at least for the first year. Banks and credit card issuers know that it’s more difficult to attract new clients than it is to keep existing ones, which is why you see very attractive sign-up offers. By comparison, credit card issuers do very little to retain their clients until you threaten to cancel. This is why you should be on the lookout for great sign-up offers as many of them can be quite lucrative and even offer first-year annual fee waivers.

The best use of your credit card miles and points is to trade them in for travel. Whether that be for business class seats across the world or for a suite in a luxury hotel. It’s going to be hard to find more lucrative uses for your points.

The first thing I do before I consider a credit card is ask the question “will these points help me to achieve my goal of taking X, Y or Z flight or allow me to stay in A, B, C hotel”. If the answer is no, then I’m very likely not getting the card.

The Scotiabank Scene credit card is a great example. Currently, you get 2,500 Scene points after $500 in spend. Those 2,500 points basically give you 2 free movie tickets and they don’t transfer to any airlines or hotels, so the card is completely useless to me even though I go to a lot of movies. Even though the card is a $0 annual fee card, it’s not worth the credit hit for me. I would rather use that credit hit on a card that serves my end goal of travel or at the very least provides benefits when I’m travelling.

If we are talking strictly travel programs, in Canada the choices are fairly limited with only a handful of airline or hotel programs having a co-brand card available to Canadians:

TD Aeroplan (Air Canada)
CIBC Aeroplan (Air Canada)
MBNA Alaska
MBNA Best Western
RBC Cathay Pacific
RBC British Airways
RBC WestJet
American Express Bonvoy

Due to this limitation, I often look to programs that have transferable points systems. For example, American Express’ Membership Rewards programs allow transfers to:

Below is the transfer ratio of (Membership Rewards Points to _________)

Air Canada Aeroplan (1 to 1)
Alitalia MilleMiglia ( 2 to 1.5 )
Cathay Pacific Asia Miles (2 to 1.5)
British Airways Avios (1 to 1)
Delta Skymiles (2 to 1.5)
Etihad Guest (2 to 1.5)
Hilton Honors (1 to 1)
Marriott Bonvoy (5 to 6)

These transferable programs give you many more options than the cobranded card I’ve listed earlier because you can transfer to the program of your choice based on need whereas with the co-branded cards, you are stuck in the currency they offer.

I almost exclusively concentrate on transferable currency cards and then if needed, to supplement my points totals, move to the co-branded cards.

This is why I almost always recommend the American Express suite of cards that offers Membership Rewards as a currency. In addition to being able to transfer to the loyalty programs listed above, AMEX provides incredible flexibility even if you don’t want to transfer your points. I covered off the incredible flexibility of Membership Rewards in a previous post.

My Specific Recommendations

I don’t really believe in recommending cards until I really understand what someone is trying to accomplish. Rather than recommend to you what I think you should have, I’ll tell you what I cards I would get if I were to start from ground zero.

If you do want specific recommendations, I would encourage you to write in the comments section and provide me with your end goal. Something like “I live in Winnipeg and I would like to fly my family of 4 to Japan next summer. I would prefer to fly in business class if at all possible but could live with economy class”. The more details, the better so I can help you to the best of my ability.

Best Cards for Flexibility

If you are looking to give yourself the most flexibility with the points you earn, there’s no better game in town than American Express’ Membership Rewards.

If you were to stick to the American Express family of cards, you would be able to do almost everything you want to do as it relates to travel. I fund my Aeroplan travel and Marriott stays with my Membership Rewards points and I would say the majority of Canadians will use their points for these programs.

What I love the most about Membership Rewards is the flexibility that they provide. While I can pretty much guess that most of my travel will be through Aeroplan redemptions, I don’t like to lock myself in until I am very sure. The way I think about it is that Membership Rewards (MRs) allow for transfers to all 3 major airline alliances; Star Alliance with Aeroplan, OneWorld with British Airways Avios, and SkyTeam with Delta Skymiles. That means that you can search for your award availability with almost any airline in the world. find the availability, then transfer your MRs to the appropriate currency.

A word of warning, the cards I would almost always carry an annual fee. There’s no sugar-coating it. These points will cost you money but the value you will receive when you redeem is worth much more. I never pay more than 1¢/point and when I redeem, as long as I redeem for more than 1¢/point, I am ahead. Typically, I have been able to redeem at 12-15¢/point, which is an incredible return. This math is called Cents per Miles or CPM. I’ll give each cards’ CPM (if applicable) when I talk about them below.

If you fall into the following categories, you should start earning American Express Membership Rewards:

You don’t know exactly what you want to book but want to be sure the currency you collect will for sure be able to help you down the road
You want the most flexibility possible
You want to earn points quickly for as little cost as possible
You want are likely to book an Aeroplan award

American Express Platinum Business

Annual Fee: $499
Points (Public Offer): 40,000
Points (Referral Offer): 75,000
Spend Requirements: $7,000 in 90 days
Additional Benefits: Priority Pass membership, which provides free access to all Priority Pass lounges for you and a guest. You also receive access to American Express Centurion lounges and 1.25 MRs per dollar spent.
CPM: 0.67

The American Express Platinum Business card is the card you should definitely start with when you are venturing into Travel Hacking. While the annual fee is probably much higher than most Canadians are used to, the number of points that you would receive is a staggering 75,000. Remember, you can transfer these 75,000 points to Aeroplan at a 1:1 ratio – that’s enough for a round trip economy ticket to Eastern Europe and you could even splurge for Premium Economy to Western Europe for the same price! For those same 75,000 points, you could fly Business Class to Colombia, Ecuador (including the Galapagos Islands), Guyana or Venezuela! Pure insanity. Take a look at the Aeroplan redemption chart to get a sense of where you could fly to for 75,000 points. Even if you think within Canada, that’s 3 round trip economy flights for $499 in annual fees.

Let’s not forget that for that $499 annual fee you also get the Priority Pass Prestige membership, which grants you access to 1,300 lounges worldwide for you and a guest. That membership retails for $429 USD and that doesn’t even get your guest in for free, so essentially, your annual fee comes with a benefit that provides even more value than what you pay.

You also get access to American Express’ famous Centurion Lounges. I reviewed the Centurion Lounge at Dallas-Fort Worth (DFW) Airport and at the George Bush International Airport in Houston (IAH) in previous posts. I’ll admit that it’s been a minute since I’ve been there last but I fondly remember how great these lounges are so if you are travelling to any of the airports that have a Centurion Lounge, you’ll thank your lucky stars you have the American Express Platinum Business Card.

Now you may ask yourself, how can I get a “business” card without a business? Well, the good news is that American Express considers sole proprietorships to be a business. AMEX uses your personal credit history to judge whether or not you should qualify for a business card so if you have a good credit score, then use it to get yourself this card. For every business venture I undertake, I always apply for a new Platinum Business card.

Apply for the American Express Platinum Business Card

So here’s where it gets interesting. If you get the American Express Platinum Business card as your first card, you can use it to refer your friends and family to the same card, the Gold Business, or the new Business Edge card. If your friends or family end up getting the card, you garner an additional 25,000 Membership Rewards points for the referral. You can even refer another business you have to the card!

American Express Business Gold

Annual Fee: $250
Points (Public Offer): 30,000
Points (Referral Offer): 40,000
Spend Requirements: $5,000 in 90 days
Additional Benefits: 2x Membership Rewards at your 3 selected preferred vendors.
CPM: 0.63

There’s nothing especially sexy about the American Express Gold Business card except for its relatively low annual fee and the low CPM. The CPM is actually lower than that of the Platinum Business but without the added benefits like lounge access, the Gold Business isn’t all that exciting but it does definitely play into your card strategy.

If you got the Platinum Business Card, you would have 75,000 Membership Rewards, then if you referred your other business to the Gold Business Card, you would earn 25,000 Membership Rewards. Finally, when you get the Gold Business card, you would receive an additional 40,000 MRs.

All said and done, you would have 140,000 Membership Rewards points for $749 ($499 Annual Fee for the Platinum Business and $250 Annual Fee for the Gold Business). If you add the minimum spend requirements and the points earned for that spend you would be at 153,750 MRs for $749. That’s enough points for a round trip in Business Class to almost anywhere in the world! If I told you that you could fly Business Class to almost anywhere in the world for $749 … would you call me crazy? Well, you shouldn’t because it’s mean and also … it’s definitely possible.

Apply for the American Express Gold Business Card

American Express Platinum Personal

Annual Fee: $699
Points (Public Offer): 50,000
Points (Referral Offer): 60,000
Spend Requirements: $5,000 in 90 days
Additional Benefits: Priority Pass membership, which provides free access to all Priority Pass lounges for you and a guest. You also receive access to American Express Centurion lounges, 3x MRs for every dollar spent at restaurants and 2x MRs for travel. $200 Travel Credit
CPM: 0.83 if considering the $200 travel credit of 1.17 if you don’t.

There are two schools of thought on this card. If you can use the $200 travel credit each card year, then you can effectively “reduce” the annual fee to $499 rather than $699. If you don’t think you would use the credit, then the annual fee is $699. Depending on where you land, and if you believe in my rule of keeping your points accumulation under 1 CPM, this may or may not be the right card for you.

I consider the Platinum Personal to be a good card and one to get if you need the points to get to your goal but if you are a couple and you want to travel in Business Class to almost anywhere in the world, I would strongly suggest you each get a Business Platinum and a Business Gold.

Best Cards For Western Canadians

I’ve written extensively about Alaska Airlines and the incredible value you can derive from their Mileage Plan program if you redeem those miles for partner airline flights. One of my all-time favourite redemptions was Cathay Pacific’s First Class flight from Los Angeles (LAX) to Hong Kong (HKG) and then onto Auckland (AKL) in Business Class (only because Cathay doesn’t have a First Class cabin down to Auckland). We did that for 80,000 Alaska Miles each and I booked myself, my wife, and my daughter.

What was great about this redemption is that it was mostly done through credit card sign-up bonuses and churning the card. For those that don’t know what churning it, it’s basically signing up for a card, meeting the minimum spend requirement, collecting the miles/points as part of the sign-up, cancelling the card and then repeating the process.

When you redeem Alaska Miles, you are allowed to fly Alaska + a partner airline. That means that you want to be in a city that is serviced by Alaska Airlines. Unfortunately, there are only 5 cities in Canada with that distinction: Victoria (YVR), Kelowna (YLW), Vancouver (YVR), Calgary (YYC) and Edmonton (YEG). For the rest of you Canadians, you’re a bit out of luck, unless you can position to the United States or any of the airports that Alaska’s partners service.

MBNA Alaska World Elite

Annual Fee: $99
Annual Fee (Referral): $39 – Apply through Great Canadian Rebates and receive $60 cashback, thus reducing your annual fee to $39.
Points (Public Offer): 30,000
Spend Requirements: $1,000 in 90 days
Additional Benefits: Annual Companion Voucher ($121 USD) and Free First Bag
CPM: 0.13

To me, this card is a real no brainer if you live in Vancouver, Kelowna, Victoria, Calgary or Edmonton. The card is churnable and the annual fee is very low, especially if you apply through the cashback site, Great Canadian Rebates. If you aren’t familiar with how cashback sites like Great Canadian Rebates work, check out my article on it here.

Apply for the MBNA Alaska Airlines World Elite Card

Best Card for Free Benefits

There are quite a few cards out there that have a $0 annual fee with some decent benefits. You often see cashback cards that offer a 1% return in this category as well as “introductory” cards that are used to get you hooked into a bank. Most of these cards don’t warrant your attention but there’s one card that I have been very impressed with.

Brim Financial Credit Card

Annual Fee: $0
Referral Bonus: Receive 1,000 points (good for $10 against any charge placed on card).
Spend Requirements: None
Additional Benefits: Free Boingo wifi including on airlines that support Boingo such as WestJet and EVA, 0% Foreign Exchange Fee, 1 point per dollar spent (1% return)
CPM: N/A

I wrote about the Brim Financial credit card a few weeks back under the article title “How to Get Free Wifi on WestJet and Other Airlines“. The card provides some excellent value for a no-fee card and it’s a card that I actually keep in my wallet. It has grown to be my go-to card for foreign transactions because of the true 0% Foreign Exchange (FX) fees.

I really like this card for almost everyone in Canada because there isn’t a better 0% FX card in Canada in my opinion. When you consider you get free airline wifi on planes that support Boingo, 0% FX and a points program, you kinda scratch your head and ask how they can afford to provide all these benefits. I honestly don’t know what the answer is but what I do know is that you should get you this card.

Get the Brim Financial Credit Card

Conclusion

Credit cards are a very personal decision and your choice should be made with some thought behind it. I’ve laid out the cards I would get if I were to start from scratch but these cards may or may not be the right choice for you. I would encourage you to provide me with your specific goals so that I can help recommend the cards that make the most sense for you. Just write in the comments section and I will do my very best to provide a meaningful recommendation with my rationale for why.

Next up, we’ll take a look at category bonuses and how you can start earning the most points possible.

Travel Hacking From Scratch – Part 1 – The Benefits of Travel Hacking

By

Jayce

-

October 27, 2019

4

This entry is part 1 of 9 in the series Travel Hacking From Scratch

Over the years, I have written almost 350 posts about Travel Hacking in one form or another. I’ve tried to make it easy to understand but I understand that it’s a daunting task to try to find all the relevant information you might need to understand whether this is something they want to undertake or not.

The site has gone through 3-4 design updates in an effort to keep things fresh, but more importantly, in an effort to try to make things easier to find for readers. While there is a search feature to the site, oftentimes, it’s difficult to even know what to search for.

Quite a few people have reached out to me in the past few weeks, both in-person and through the contact form, and the most common questions is around where to begin.

Rather than point you to the search functionality of the site, I thought it might be prudent to create a new series that puts the resources at your fingertips. I’m likely to cover most of the topics at a high level with links out to other pertinent articles I have written around the subject but I’ll give you enough of a taste that you’ll know whether you want to sit down for a meal.

Series Layout

Over the course of the next month or so (no promises … I have a demanding job), I will endeavour to layout Travel Hacking in an easy and concise series that will cover the following topics:

The Benefits of Travel Hacking

Earning Points

Credit Cards – Which Card and Why

Category Bonuses

Churning Credit Cards

US Credit Cards (ITIN)

Referral Bonuses

Manufactured Spending

Using Your Points

Alternatives to DIY

Understanding the Power of Partners

Weighing Convenience vs Cost

How to Avoid High Taxes and Charges

Sweet Spots

How to Travel Better

Why You Need Status

Leveraging Status

Understanding Your Rights

Beyond Travel – Financial Freedom

Each series post will start with the table above as a Table of Contents so you can jump around as you see fit. My end goal is to give you a helping hand in understanding this crazy world we play in. Hopefully, you’ll learn a thing or two along the way.

That said, let’s jump in.

The Benefits of Travel Hacking

As someone that has worked in Business Development for quite a few years, you meet a lot of new people from different walks of life, each with varied interests. Your goal is to build relationships and trust in an effort to win your company business.

There are many ways that you can begin a conversation but after the niceties of your name and what you do, you’re sometimes left with a daunting void of silence that you need to fill. I’ve found that one thing that almost all people like to talk about is … travel.

Whether they just got back from a once-in-a-lifetime trip to South Africa to pet a cheetah, or Rio de Janeiro to see Big J, or maybe from ringing in the New Year at the world-famous Sydney Harbour Bridge, everyone loves sharing the memories they have from travel.

Cheetah Outreach in Cape Town, South Africa

Countdown to the New Year – Sydney, Australia

I have a theory that travel is one of the most enriching things you can do to understand the world around you. Travel Hacking puts that right at your fingertips.

The Cost (Savings) of Travel

There are quite a few numbers floating around when you ask the question “what does an average vacation cost?” but it’s around $5,000 USD for a family of four. At the time of this article, that would be around $6,500 CAD. That’s quite a bit of money for most, which is why it’s no wonder why people don’t travel more. They simply can’t afford it.

Let’s imagine you saved that $6,500 for your vacation but then I magically took away the cost of your flights and accommodations. What could you do with that extra money?

You could eat at the finest restaurants, book a private tour for just your family, go deep-sea fishing, take that helicopter ride over the Grand Canyon you’ve had on your bucket list. At the very least, it would mean that you could take another vacation that same year. The possibilities are endless.

When we went to Australia at the end of 2017, we decided to splurge on GREAT seats for the New Year’s Eve festivities and paid $350 CAD per person. In almost every circumstance, I would have balked at spending that much money for 4-5 hours of entertainment but because we basically spent nothing on travel, the cash outlay didn’t hurt nearly as much.

Travel Hacking gives you options and allows you to have experiences that you might not have been able to afford otherwise.

I take pride in knowing that the term “once-in-a-lifetime trip” doesn’t apply anymore. It’s more like “twenty-five-times-in-a-lifetime trip” with the help of Travel Hacking.

Lifelong Learning

Throughout my years, I have started and stopped many a project or “hobby”, but none have piqued my interest as much as Travel Hacking. A lot of it centres around the Asian in me and “getting a great deal” but I’m also fascinated by the economic microcosm that is centred around loyalty.

In addition to the savings, through Travel Hacking, you learn a ton of skills that you can use throughout your career including:

Fiscal responsibility – through learning about and signing up for credit cards and credit products, you get a first-hand understanding of how these financial instruments work and how you can leverage them responsibly.
Cost/benefit analysis – when you work so hard to earn the points in your account, you learn how to use them in the most advantageous way possible. You learn to weigh your options and decide your best course of action on how to use your points.
Legal acumen – let’s face it, you read a lot of terms and conditions when you dive deep into this world. Learning how terms and conditions work helps you to understand where there are weaknesses in systems. You can leverage that knowledge to get even more bang for your buck.
Research acumen – if you want to be great at Travel Hacking, you’ll need to learn how to research things. Finding sources of information on the things you are interested in is an important skill you will develop naturally through your natural curiosity about the subject at hand.
Risk Mitigation – when you get really skilled and start experimenting with Manufactured Spend, you’ll start to understand what your risk appetite is. The term “no pain, no gain” rings true here. You’ll have to be willing to take a bit of a monetary hit to prove out some theories but in the end, it’s likely well worth it.

Finding Your Tribe

I’ve been at this for close to 20 years and every time I meet up with someone that is deep in the weeds with this stuff like I am, there’s a certain kinship that you naturally have. It’s a unique feeling knowing that there are other weirdos out there that share your passion. I did my best to help bring that community together through things like PointsU and I hope the Canadian Travel Hacking community is further along for it.

I expect to be able to do that again in the short term but it likely won’t be with PointsU, but don’t fret, there are brighter days ahead!

Up Next

In the next section, we’ll dive into the nitty-gritty of which cards are best suited for your particular needs and why. I’ll teach you about all the traps to watch out for and where you can make hay when it comes to credit card sign-up bonuses.

Stay with me throughout this series. It’s going to be a bit of a long journey but it should give you about 90% of what you need to be a great Travel Hacker. The remaining 10% developed through networks and friendships, something I hope to be able to provide you as well.

Alaska Airlines Devalues Intra-Asia Redemptions … Here’s Why

By

Jayce

-

October 20, 2019

5

This entry is part 12 of 12 in the series Booking Alaska Partner Awards

I swear it happens all the time. I write about the new benefits of a new program only to have it devalued shortly thereafter. On Monday I wrote an article about how to use Alaska Miles to book partner awards on Singapore Airlines. One of the areas of focus was around the sweet spot of SE Asia to SE Asia in Business Class (25K) and First Class (35K). Because China was considered SE Asia in the original award chart, you could do things like this:

Beijing to Singapore to Taipei for 25K in Business and 35K in First

Had you jumped onto this award prior to Alaska’s devaluation on Thursday, you could have flown about 10 hours in the air in Singapore First Class for 35K Alaska Miles, which was an extraordinary value. You could have also stopped in Singapore for up to 364 days, which opened up some significant loopholes, especially for those that were based out of SE Asia.

Imagine being based out of somewhere in SE Asia like Hong Kong. It meant that you could book Hong Kong (HKG) to Singapore (SIN), stop for up to 364 days, then go back to Guangzhou (CAN) in Singapore’s First Class cabin for 35K Alaska Miles.

Due to Hong Kong and Guangzhou geographical proximity and the fact that they are connected by high-speed rail, you could realistically get two First Class one-way tickets for the very low price of 35K Alaska Miles. Oh … and that train ticket between HKG and CAN? About $40-45 CAD.

But overnight, Alaska put an end to these types of routings by making two changes that ended this loophole:

No more intra-Asia stopovers – you can no longer stop in the hub city of Singapore. This is important because it has also affected the intra-Asia stopover for Japan Airlines (JL) on an Alaska Award.
Alaska has moved China out of SE Asia and into North Asia, meaning that the pricing is now as follows:

It’s definitely a devaluation because it’s a 140% increase in the cost of Business Class redemptions between China and SE Asia and a 115% increase for First Class. If you take into consideration the fact that you can no longer stop in Singapore, it’s quite the devaluation.

Here’s Why It Happened

During my time at WestJet, I was privy to contracts with our Frequent Flyer Partners (FFPs). I dealt with the Air France (AF), KLM (KL), Delta (DL) and Qantas (QF) contracts and relationships so I have had the unique experience of looking behind the proverbial kimono. I obviously cannot disclose the detailed internal workings of the contract but I can provide some insight into how these FFP partnerships work.

How Does it All Work?

Relationships between airlines are different depending on whether they are part of an Alliance, if they are in a Partnership, or if they are in a Joint Venture. WestJet was not part of an Alliance so I cannot claim to have a deep understanding of those types of relationships, but they were in partnership with four airlines (AF, KL, DL, QF). The relationship with Delta started out as a partnership but will eventually turn into a Joint Venture as soon as Antitrust Immunity (ATI) is received from the US Government.

Based on my dealings with these contracts, I can provide you with a high-level understanding of these relationships and agreements.

Distressed Inventory and Airline Economics

Those that have been in the Travel Hacking game for a while know that the award space that is opened up for redemption is distressed inventory. For those that haven’t heard of the concept, distressed inventory refers to a good or service that has a limited shelf life or expiry.

If you’ve been in a supermarket and have seen a sticker for 20% off a 4L of milk or a pound of ground beef, you have experienced distressed inventory. If compared the milk or beef that had the coupon attached versus those that didn’t, you would see that the items on discount expire within a day or two. This is because if they don’t sell the inventory, they will take a 100% loss on the item, so it would make sense to discount it to move it.

This is basic supply and demand economics and every industry faces it, including airlines.

Let’s think about airlines and the economic model they operate in. Let’s imagine an aircraft that has a hundred seats in it. As soon as an airline sells a seat, they have made a contract of carriage with the purchaser of the ticket. In most situations, this means that they are obligated to fly the plane to get the passenger to their destination. There are nuances to the rules but in general, this is what it means. When you provide an airline with money, they provide you with the promise of future travel.

Imagine for simplicity that the cost for the fuel, labour, landing fees, peanuts, etc. for that flight requires at least 60 seats to be sold to break even. What happens if they are a week out before the flight is scheduled and they have only sold 40 seats. Can they just not fly the plane and just refund everyone? No. They can’t. Imagine the news headlines if that happened.

So they just throw a seat sale together for that plane right?

Wrong.

In almost all cases, airlines will not do this. Why do you ask? Because it ruins their economics. It’s also logistically challenging to try to set up a sale that may only affect one particular flight. Imagine what it would be like to try to run sales on specific routes on specific days where sales are weak … it would be a nightmare.

If you have looked at airline seat prices, you will notice that prices generally do not decline at the last minute. This is because during the last 7 days or so prior to departure, business travellers take up the demand for the remaining seats. Often times, business travel is very last minute because of impromptu meetings, potential closing of business sales that require in-person meetings, last-minute changes to the schedule of business travellers, etc.

If airlines discounted tickets to move distressed inventory, business travellers, and eventually the general public, would begin to take notice and not book until the last minute. There are so many “when’s the best time to buy an airline ticket” articles out there. Almost all point to a time period of about 50-55 days from the date of travel. You won’t find an article touting the benefits of waiting until the last minute to book.

Essentially, it’s a cat and mouse game that airlines are playing in an attempt to maximize profits.

One way to “sell” the remaining distressed inventory seats is to open up award availability to members of your own Frequent Flyer Program (FFP) and to the programs of your partner airlines. This is a nice solution because it doesn’t devalue the remaining seats so business travellers aren’t getting an undue “discount” close in and you get to sell seats, albeit at a steep discount, to your partner airlines.

This is exactly what Singapore and Alaska’s other partners do.

How to FFP Agreements Work?

There are some unique aspects to every partnership but for the most part, FFP partnerships work the same. The airline that is offering the distressed inventory/award seat, determines how many seats to make available. They do this dynamically and are able to control their inventory through their Global Distribution Systems (GDS) like Sabre or Amadeus. Some airlines are most sophisticated than others when it comes to making award inventory available. Generally, you will notice the very sophisticated airlines updating inventory on a daily or even hourly basis, while other less sophisticated airlines use very simplistic rules to control inventory. Airlines often use complex software that uses judges multiple factors to determine expected demand. This software is overseen by analysts in Pricing and Revenue Management (PRM).

So now that we understand how inventory works, how does pricing work?

Well, that’s pretty simple on its face as well. Let’s use Alaska Airlines and their partnership with Singapore as an example. Let’s call Alaska – Airline A, and make Singapore – Airline B just to keep it simple.

I want to also establish that while the relationship could work differently than what I have seen first hand with other FFPs, I believe that what I am about to explain is very likely how the relationship works between Alaska and Singapore.

Once Airline A and Airline B agree to become FFP partners, they negotiate a rate at which they will reimburse each other for award flights. While not a rule, the common understanding is that if you want access to your partner’s fancy class inventory (Business and First Class), you should be willing to give access to yours.

Each class of service will typically have a different settlement rate. For example, an Economy Class redemption might cost the airline 10¢ per mile, whereas Business Class might be 20¢ per mile, and First Class being 30¢ per mile. It’s pretty standard to see Business Class settlement costs at 2x of Economy and First at 3x, which is why you often see award charts laid out in a similar fashion.

Let’s take for example award space on Airline A’s route of LAX-JFK, which is 2,475 miles.

Typically, there are a few ways to “settle” the revenue that each airline owes the other for award flights. In my experience, all settlement happens in USD so the calculations below are in USD.

Distance Flown x Settlement Rate – If Airline A provides access for Airline B’s customers to fly on their award inventory, the total distance flown is calculated, and the appropriate settlement is provided based on the Class of Service (COS) flown.

In the example above, Airline B would owe Airline A the following (depending on COS):

Economy = 2,475 miles x 10¢ per mile = $247.50
Business = 2,475 miles x 20¢ per mile = $495.00
First = 2,475 miles x 30¢ per mile = $742.50

Tiered Distance Flown x Settlement Rate – Airlines may provide different rates based on distance flown in a tiered table. It is very similar to the above but provides different pricing based on where the total number of miles flown falls into a table.

Based on the table above and the same award flight of LAX-JFK (2,475 miles), the settlement would be as follows:

Economy = 2,475 miles x 8¢ per mile = $198.00
Business = 2,475 miles x 16¢ per mile = $396.00
First = 2,475 miles x 24¢ per mile = $594.00

Tiered Table Fixed Price – same as the example above but instead of doing a calculation, the price is settled based on the amount corresponding to the range in which the correct distance is flown.

Based on the table above and the same award flight of LAX-JFK (2,475 miles), the settlement would be as follows:

Economy @ 2,475 miles = $250.00
Business @ 2,475 miles = $500.00
First @ 2,475 miles = $750.00

The most common redemption settlement scheme that I have seen is the Tiered Distance Flown x Settlement Rate.

Now, every airline has an internal calculation for what their miles are worth. This isn’t just a gut feel, it’s something that is very important because it is the basis of their outstanding liabilities as an airline. Airlines shape their redemptions based on what they value their own miles at.

So What Happened with Alaska and Singapore?

Now that we have established the basic economics of airline award redemptions, let’s explore what likely happened between Alaska and Singapore.

When Alaska launched the SQ redemption chart, they were very likely watching blogs, FlyerTalk and other forums that discuss these matters. They also very likely watched their redemptions on SQ quite closely to see what people were doing and if there were any loopholes they hadn’t thought of.

They likely saw a whole lot of chatter around the SE Asia to SE Asia with a stopover redemption and then crunched the numbers.

Let’s say they looked at my earlier example of HKG-SIN-CAN in Business Class for 25,000 Alaska Miles. and presume we are using the Tiered Distance Flown x Settlement Rate method. Because this is over 2,000 miles flown and in Business Class, the settlement rate is 16 cents per mile flown.

Revenue Generated (based on 2 cents per mile)
25,000 x $0.02 = $500

Settlement Cost (based on cost of 10 cents per mile back to SQ)
3,226 miles x $0.16 = $516.16

Total Revenue Lost or Earned
Revenue – Cost
$500.00 – $516.16 = ($16.16)

It may not seem like a loss of $16.16 is very much but take into consideration the number of people that could potentially take advantage of this opportunity that are based in China or SE Asia. The potential loss becomes significant enough that senior management would start to ask questions as to how the frequent flyer program started making losses instead of gains.

Singapore’s Issue

The other important aspect of this is that Singapore Airlines likely intervened as well, asking Alaska to fix this issue. While Singapore would be made whole no matter what because of the way the settlement works (pay per use), reputationally, they would want to stop anything that would make their own KrisFlyer program look to be less valuable than another partner’s program.

This was always something that we had to consider when partnering with an FFP. Would frequent flyers see more value in joining and earning within our partner’s program than they would with our own? It was always a fine line we had to try and walk.

In essence, you wanted to be generous with your partners but not more generous than you were with your own members.

Conclusion

The issue of Singapore Airlines’ awards using Alaska Miles is an interesting one with many factors that come into play. I am 99% sure that the reason the awards were changed (ie. devalued) was because of the potential losses that Alaska Airlines might realize if too many people took advantage of the loophole, so rather than have a potential area of revenue loss, they unilaterally changed the program rules without notice, as is their right.

While Singapore Airlines likely did not have a leg to stand on if Alaska wanted to keep the chart as it was, Alaska likely wanted to work in partnership with Singapore so they changed the award chart and the ability to have a stopover on an intra-Asia award.

Booking Alaska Partner Awards – Singapore Airlines

By

Jayce

-

October 14, 2019

2

This entry is part 11 of 12 in the series Booking Alaska Partner Awards

On Wednesday I wrote about Alaska Airlines finally publishing its award chart for Singapore Airlines and releasing award inventory. Today I’m jumping into the nitty-gritty to understand if booking Singapore Airlines (SQ) flights using Alaska Miles is a good idea or not.

This is a continuation of my Alaska Partner Award Series that looks at all the major partners of Alaska Airlines and how to find and book awards with these airlines. Alaska seems to add a partner or two every year but they are often quite slow to release award inventory until a year or two after. For Singapore Airlines we had to wait for 2+ years before awards were made available to Mileage Plan members.

Unfortunately for most situations, the price of a Singapore Airlines award flight is much too expensive to really consider unless you are hellbent on flying their new Suites Class … which I kinda am.

There are a few sweet spots for redemptions using Alaska’s chart but, to be honest, it’s a little hard to justify given Cathay Pacific’s excellent Business and First Class award pricing, its world-class product, and fairly reliable award availability. You can read all about that in my previous post on Cathay Pacific as it relates to Booking Partner Awards.

Quick Recap

For those of you that aren’t very familiar with how Alaska awards work, the routing rules are pretty simple. You are allowed to fly with Alaska plus a partner which means that you cannot combine Alaska’s other partners. For example, you cannot fly with American Airlines and then connect onto a Singapore Airlines flight even though both are Alaska’s partners. You can only fly Alaska PLUS American OR Singapore OR any other partner.

Essentially the equation is A + B = Award where A is equal to Alaska Airlines and B is equal to any other Alaska partner.

Singapore Airlines does not fly directly into Canada, so this means if you want to fly on Singapore airlines from North American, you will fly from Calgary (YYC), Edmonton (YEG), Kelowna (YLW), Victoria (YYJ) or Vancouver (YVR) to Seattle on Alaska Airlines then onwards to a hub city within the United States where Singapore airline operates.

Singapore Airlines currently operates out of Seattle (SEA), Los Angeles (LAX), San Francisco (SFO), Houston (IAH), both New York airports (JFK, EWR).

Also remember, on an Alaska Award, you are allowed a free stopover in the hub city of the operating airlines. For Singapore Airlines, that’s at Changi International (SIN).

There is currently an oversight in the Alaska Award chart that shows that Canadian cities cannot be used as the origin to fly on Singapore Airlines but that’s not true. Awards definitely do price out using the Alaska Airlines booking engine.

Award Chart

Alaska, as it does with other partners, provides pricing depending on the region you are starting from and where you end up. For the most part, I would focus on departures from North America but for SQ, I decided to take a more holist approach, mostly because the sweet spots don’t really come from North American origins or destinations.

Because Alaska doesn’t have a nicely laid out award chart for any of their partners, I built one.

The chart should be pretty easy to understand. Choose an Origin from the Y-axis (vertical), and look across on the X-axis (horizontal) for your Destination. The chart shows 3 prices. From top to bottom, they represent Economy (Y), Business (J), and First (F) Class.

Award Prices are High

If we consider Singapore Airlines award pricing to a couple of Alaska’s other partners, Cathay Pacific (CX) and Japan Airlines (JL), we can quickly see that SQ’s pricing is quite expensive across all cabins.

Cathay Pacific award pricing from Canada

Let’s take a look at what the Economy, Business and First Class awards would cost using Alaska miles across Singapore, Cathay and JAL from Canada to Singapore. Singapore is considered SE Asia in all cases.

	Economy	Business	First
Cathay Pacific (CX)	30,000	50,000	70,000
Japan Airlines (JL)	40,000	65,000	75,000
Singapore Airlines (SQ)	47,500	100,000	130,000

As you can see, SQ pricing is way out of whack in comparison to two other world-class airlines with similar hard and soft products. From where I sit, it’s very hard to justify the cost simply to fly on Singapore Airlines.

Should I Even Bother?

Easy there Tonto. You can always find value if you are in the right frame of mind.

I know I told you earlier but I’m going to remind you again. With Singapore Airlines redemptios using Alaska Miles, you are allowed to stop in Singapore (SIN) for free on a one-way redemption.

Now I want you to picture in your mind, how you might be able to leverage this knowledge to get the most flying time possible in SQ’s Business or First Class products.

Sweet Spots

The real gem in the SQ award chart is from SE Asia and specifically SE Asia to SE Asia. There’s another gem which is not quite as good but definitely something to keep in mind and that’s North America to North Asia.

SE Asia to SE Asia

I should probably define what SE Asia is according to Singapore Airlines. Basically it is anything in Asia that isn’t Japan or Korea, which is pretty interesting. The problem with lumping an award chart into geographical areas is that there’s always going to be a sweet spot if you look hard enough.

Japan and Korea are considered North Asia but China is considered SE Asia, even though Beijing is actually further north than Korea and all but one city in Japan, Sapporo (CTS) but it is cheaper than flying to North Asia.

Unfortunately, the SQ award chart does not allow North Asia to North Asia but we can still play around with SE Asia to SE Asia.

Let’s take a look at what that would look like. Let’s say you managed to get yourself to Beijing (PEK) on a revenue ticket or some other award and you wanted to go to Taipei (TPE) but also wanted to stopover in Singapore (SIN). Well, you could do so for 35K Alaska Miles in First Class!!!

Here’s what award availability looks like.

Notice in the above image that there’s a 7-day layover with this award. That’s because of the free stopover rule with Alaska Mileage Plan. That’s quite a nice perk.

The PEK-SIN flight is 6.5 hours and the SIN-TPE flight is 4.5 hours. This means combined, you would get 11 hours in Singapore’s First Class product for 35K Alaska Miles. Oh … and by the way, that’s almost exactly what you get for signing up for a credit card with an out of pocket cost of $39! Bonkers!

This little trick could work for any destination in SE Asia. Let your mind run wild and see what crazy combinations you can come up with.

North America to North Asia

North Asia is defined as Korea and Japan, two of Asia’s most popular destinations. The interesting thing about the award pricing for this redemption is that it is cheaper than the North America to SE Asia redemption. This is important to remember because with Alaska awards, you are allowed a free stopover on a one-way award and that stopover is in the hub city of the partner airline.

This is greate because Singapore is in SE Asia so if you wanted to go to Singapore and Japan/Korea, it would be cheaper than if you just wanted to go to Singapore.

It would look something like YYC-SEA-LAX on Alaska then LAX-SIN on Singapore Airlines. You would then stop in Singapore for free, then you would fly SIN-HND/NRT. This would cost you 80K in Business and 110K in First. That would be cheaper than if you just flew YYC-SEA-LAX-SIN.

Amazing Award Availability

Finding award availability is actually pretty easy and in fact … it’s sometimes better than what Singapore Airlines Krisflyer Members have access to. When doing a quick search for LAX-SIN in Business Class, I was able to find 2 seats available for Alaska Mileage Plan redemption whereas Singapore Airlines shows no Saver Class availability and only a chance to redeem for the award on their waitlist.

The LAX flight is a weird flight that lands in Tokyo’s Narita airport before going onward to Singapore.

Singapore Airlines award availability using Alaska Mileage Plan – LAX-SIN

And here is the availability for Singapore’s own members. The first thing you notice is that there’s no Saver award availability, only the ability to waitlist. If you want to pay for the Advantage level (more awards made available at a higher price), the seats are up for grabs.

*Singapore Airlines award availability using Singapore KrisFlyer Miles – LAX-SIN*

How to Book

Alaska Airlines booking engine is actually quite good at helping you find and book award travel on many of their partner airlines. Singapore is no exception. Here are a few tricks to get you started.

Begin with the Alaska seach engine on www.alaskaair.com but make sure you check off the criteria highlighted in the image below and click Find Flights.

You do this because you are looking for award space (Using miles), you are only booking a one-way because that’s how Alaska prices its awards (One-way), and you want to make it easy on yourself so you want to search a month at a time (Award Calendar).

You will now see the calendar of award availability. I like to filter by Business Class or First Class availability. When you do that, you will see the lowest priced award. Now because Alaska has a few partners that can ultimately get you to Singapore, you have to refer back to the award chart I gave you at the beginning to try and narrow down your search date. We know from the chart that the Business Class award from North America to SE Asia is 100K for Singapore Airlines, so we start at any of the dates that show that amount.

Once you have clicked on one of the dates, hopefully you will see Singapore Airlines award availability right away. You can tell if there are any flights availabile if Singapore Airlines shows up as a filter. I leave both Alaska and Singapore Airlines on as a filter in case the system is trying to route me to another airport in the US in order to secure Singapore award availability.

How to Earn Alaska Miles

I’ve written about this a ton but ultimately the fastest way to earn Alaska Miles is to churn the MBNA Alaska credit card. The annual fee is $99 but if you sign up through Great Canadian Rebates, you earn $60 cashback so your total cost is $39 for 30,000 miles.

Oh … and you can churn this card about 4x a year so you would have 120,000 miles for $156 or 0.13¢ per mile. That’s just ridiculous.

Conclusion

The Singapore Airlines redemption via Alaska Miles is a bit of a hard sell but there are certain situations where the value proposition is quite strong, especially the SE Asia to SE Asia redemption.

Regardless of whether or not you redeem for Singapore Airlines awards, Alaska Airlines once again proves that their currency is amongst the strongest in the world because of all the options you have with all their partners.