Emirates: Why We Devalue Miles, Impose Fuel Surcharges On Award Travel
Emirates finally offers an explanation for why they keep raising the price of awards while also adding $1,600 co-pays when you spend your miles. And the answer is, basically, because once you acquire their miles you’re stuck and they can.
According to Dr. Nejib Ben-Khedher, Divisional Senior Vice President of Emirates Skywards, there are 32 million Skywards members (note: this is not ‘active’ members, just names on their file) and this is how they spend their miles:
- 35% of Emirates miles are redeemed for award tickets
- 28% were redeemed as partial payment against tickets (cash and miles)
- 18% were used for upgrades
- With the remaining 19% used “on the ground, in one way or another.”
Only 35% of miles are used for free seats! That’s insanely low. Yet it’s free travel in premium cabins that he says drives “stickiness in the program.”
The aspirational rewards – the ones where we see a good engagement from members – are the upgrades and the classic rewards. If you want to gain that loyalty and have that stickiness in the program, these are the things that people are looking at. Especially upgrades and classic rewards on Business and First Class.
Yet revenue management at Emirates has been unwilling to make award inventory available, even though the Skywards program is the biggest single buyer of seats at the airline and they sell their miles to banks at home and abroad, including as part of points transfer relationships with all the major U.S. currencies.
- Only 38% of flights have availability for “classic rewards”
- And that’s not “saver” reward seats, that’s saver and flex awards (the extra miles seats that some programs make available on all flights)
- And it’s much more flex than saver. Why?
We have to make that equation work for us internally as well, as we kind of buy these seats from our revenue optimisation (team).
However he does think award availability will get better in “another year or two, where we get back to where we were before and can cater totally to our membership (with) these aspirational (rewards).”
And about those fuel surcharges?
One way business class from LA to Dubai runs 132,500 miles… plus $838.
Roundtrip business class LA to Bangkok via Dubai?
Emirates charges a very large number of miles for award travel (first class is even more outrageous, but rarely ever available) and also adds fuel surcharges to redemptions, equal to the surcharges on comparable paid tickets. And those are high. So what’s up there?
[I]t is aligned with what we do on the commercial side of things. And second, truly, it’s about the cost that we’re incurring as well – and the costs have gone up. We’re trying to find the right balance between the cash portion that you’re paying in terms of these fees, and then the number of miles.
He says costs are up, but fares aren’t nearly up as much as redemption pricing. He does say that since they’ve recently devalued they want to hold “the main number of miles as stable as possible.” That’s not a promise not to devalue again!
Ben-Khedher argues that sure they’re expensive – but worth it (“keeping in mind the product that we’re offering as well, there is a premium”) except Emirates has a great first class but their business class product is actually inferior to most competitors without true lie flat direct aisle access even on much of their fleet.