Choosing your loyalty, then maximising your miles

Happy Valentines Day!

As we all know, not all airlines are the same. But how about mileage programmes? In short, no. Not at all. They vary almost as much as the airlines themselves. Choosing where to place your loyalty can be tough, but there are 3 main factors to consider.

1) the airline itself – hard product, soft product, price, schedule, does it or its partners service your local airport?

2) How quickly can you accumulate miles, and reach elite status etc?

3) How much ‘value’ can I squeeze out of those miles?

Today we are addressing the third factor – using miles. We’re going to look at a straight comparison between two airlines that have different structures when it comes to redeeming miles. My cousin Jonny lives in Hong Kong and has the good fortune of flying regularly with Cathay Pacific around the Asia-Pacific region. His question was:

“How would you suggest I most efficiently redeem [my miles]. I am doing a few long haul trips, HK to London. In addition, we now have multiple holiday destinations a short haul flight over here in APAC.

Should I go long haul, with a poss upgrade to Premium Economy for comfort? A few intra APAC holidays? How would you suggest I get the max value from Cathay and retain the max amount of coffers in my pocket? Is there even a material difference in the long run?”

Great questions. So where to begin?

Different types of award charts

First, let’s review the two main types of award charts. Most are region based, meaning the number of miles it costs to book an award are based simply on the region (often simply continent) of the two airports. For example, under a region based programme, flying from Hong Kong to Taipei (501 miles) would normally cost the same number of miles as flying from Hong Kong to Singapore (1587 miles) because – that’s right – it’s the same region.

map

The second type of award chart is distance based. British Airways is a well known example of such a programme. But for my cousin in HK’s sake, let’s look specifically at Cathay Pacific’s award chart.

AsiaMiles Chart

Under Cathay Pacific’s distance based award chart, HKG-TPE comes in at 10k miles one way (OW) or 15k round trip (RT), whereas HKG-SIN costs exactly twice that much – 20k OW or 30k RT. See the difference? It’s worth noting, as you can see, that Cathay’s chart gives you a better value when booking a round trip versus two one-ways. That is very uncommon on award charts, and worth taking into account.

So, our goal is to get the highest value possible from our miles. In order to gauge the value as such, it is worth comparing to other programmes. As a comparison, we’re going to use one of Cathay Pacific’s best known One World Alliance partners – American Airlines. American uses a region based award chart.

Under AA’s award chart, Hong Kong, Taiwan and Singapore are all part of the ‘Asia 2’ region. OW awards within the region come in at 15k miles, regardless of the actual distance.

So purely on the numbers here, you can see that if you were to take a very short flight, <600 miles, you would be better off redeeming Asia Miles with Cathay Pacific rather than AA miles. However, since we’ve mentioned British Airways, it’s worth noting that they are about the best airline out there for ‘short hops’. Even after the upcoming changes to the Avios programme on April 28th 2015, you will still be able to fly up to 600 miles for only 4,500 Avios:

BA Chart

It is a general trend that the distance based award charts start at a lower figure when it comes to redeeming miles. For example, when redeeming miles with AA the cheapest possible award, regardless of distance, is 12,500 miles. However does this mean that the distance based charts are better value? As Jonny mentioned, he may want to fly back to London at some point (he is in fact British, that’s how we know each other). So let’s bump up the distances somewhat and take a look.

HKG-LHR

Hong Kong to London is just shy of a 6,000 mile trip. On Cathay’s chart, that lies in zone D, meaning 40k OW or 60k RT in economy. Compare that with American Airlines, where the same award will cost you 35k one way, and you’ll see they come out very similar (with Cathay slightly ahead in ‘value’ if booking a round trip). British Airways actually weighs in the best, at just 30k, so matching Cathay’s 60k for a round trip.

Let’s go a little farther and look at Hong Kong to New York, a distance of just over 8,000 miles. On Cathay’s chart we’re now in zone E, so paying 55k OW or 90k RT. Compare that to AA and now the region based chart comes out ahead at just 35k OW. British Airways is now highest of all at a sizeable 50k each way in economy.

HKG-JFK

So what have we learned? There is a general trend that distance based charts work out well for short haul, but region based charts come out ahead for long haul.

So hold that thought, and now let’s get back to the question at hand: how can you make sure you’re getting some real value for your miles?

Getting the maximum ‘value’ from each mile

The answer is to some extent open to opinion, but here are a few factors that can help establish when it’s worth using miles versus when you’re better off just saving the miles and paying money instead.

1) What is the $$$ cost of the ticket?

2) How highly do you value the ‘experience’ of flying in a premium cabin?

3) How badly do you want to save money?

4) How quickly/easily are you accumulating miles?

So this is where it can get more subjective. Some people have enough miles to choke a horse so they will want to redeem them at every opportunity. Others don’t have that luxury. And some have no great desire to fly first class, so are only interested in comparing the value of an economy ticket when working out if redeeming miles is worth it.

Since this is a travel blog, let’s talk about getting the biggest ‘bang for your buck’.

Jonny could use 15k Asia Miles with Cathay and go to Taipei for the weekend in economy. Based on a quick look on Cathay’s website, that ticket is worth around $1,320 HKD, or ~£110. So, dividing one by the other, we can say that Jonny is getting something like 0.7p per mile.

How about HKG-LHR? Now we’re looking at 60k miles for a ticket that is around $7,920HKG, or ~£660. Do the maths, and you’re now getting 1.1p per mile. Over 50% more ‘value’.

But here’s where the true value of this whole mileage game shows itself. Look at First Class. That same ticket from HKG-LHR now costs $78,670 HKD, or ~£6,590. That’s roughly 10x the cost of an economy ticket. Many would agree that’s tough to justify paying. But let’s go to the award chart – that same First Class ticket costs 180k Asia Miles. Only 3x the cost of an economy award. And check this out – do the maths and you’re now getting 3.7p per mile. That’s squeezing over 500% more ‘value’ out of each mile than taking the pond skipper from Hong Kong to Taiwan.

So generally speaking, if you want real ‘value’ from your miles, then use them for tickets that would be at the top or beyond what you would otherwise be paying for your travel. The more expensive the ticket, the better the value of using miles instead. And Cathay is a great option, their hard and soft product on the fleet of 777-300ERs and new 787 is second to none.

CX FCL 02
International First Class in Cathay’s 777-300ER

Should I use miles for upgrades?

Miles can be used to upgrade a paid-for ticket up to the next class of service. For example, you could buy an economy ticket from HKG-LHR then use 30,000 miles to upgrade that ticket to Premium Economy. Is this worth it? On face value, no. Definitely not. Often there are additional fees involved, and even without that it is a terrible ‘value’ – those miles are far better off going towards a reward flight in any class from economy to first.

Is Premium Economy worth the premium?

In my opinion, no. Only because if you are someone who has enough points + miles to even consider it, you should be able to structure your flying to qualify for an elite status level to where you can automatically book those seats at no additional cost. Flying 25k miles in one year and crediting that to American will earn you One World Ruby status and should allow you to snag the best econ/econ+ seats when you book. The difference in hard product is marginal at best. Better to hold onto those miles and use them to either save money, or book something significantly better – business or first.

Picture1
Cathay Pacific Premium Economy

Award Taxes/Surcharges

The final hurdles to making bookings are finding availability and then keeping fuel surcharges down. It is at this final stage that American Airlines definitely comes out ahead in the choice of One World carriers. On a flight from HKG-LHR on Cathay in business class, you will be paying $4,224 HKD / ~ £450:

CX Fuel Surcharges

AA, however, does not impose fuel surcharges on it’s own reward tickets, nor on partner airlines (with the exception of BA, Finnair and Iberia). So that same ticket would cost 105,000 AAdvantage miles plus just peanuts in taxes.

American also comes out ahead on gaining elite status, whereby you’ll receive a bonus on miles flown and start accruing miles even more quickly. Here are Cathay’s elite status qualifications:

CX Tiers

And American’s:

AA tiers

Unless you are taking a huge number of very short flights, you will almost always qualify first through miles flown. American comes out ahead on each tier.

Thoughts on Landing

So if you are looking to maximise your miles, here are a few guidelines:

1) The more expensive the ticket would have been in $$$, the more ‘value’ you are probably getting from using your miles for it. It usually makes sense to pay cash for trips you can easily afford and were going to take anyway. Save those miles up for something special –  a first class trip that you wouldn’t otherwise have been able to afford.

2) Use your miles for reward tickets and nothing else. ALL other ways that the airline can relieve you of your hard earned miles (upgrades, elite status, teddy bears) are always a great deal for them, and bad deal for you.

3) For frequent fliers, before redeeming miles, set a goal for what level of elite status you are shooting for and make sure you fly enough paid-for miles to reach that status. Status will help you accrue further miles more quickly, and also allow you to access perks like premium economy at no cost.

4) Choose your programme wisely. For someone living in Hong Kong and travelling on Cathay, with the exception of very short-haul redemptions, you are better off crediting all your miles to an American Airlines account. You can still use those miles on Cathay, and you will get better value for long haul trips and you will avoid paying the fuel surcharges/taxes.

Let me know what you think – what do you value most when it comes to redeeming miles?

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