Deconstructing airport taxes & the games airlines play

I will use this as the last post to highlight tips to maximize the cost savings before describing our actual itinerary on this trip starting with Rio de Janeiro in the next post. This post is more relevant if you like to redeem your miles for international trips, the entire logic does not hold for domestic redemptions as both Kingfisher & Jet just charge the vanilla airport tax for redemption.

In my last post I calculated the cost saving/mile from frequent flyer miles as:

(Cost of flight – taxes)/miles required to redeem

Once the destination has been finalized, the variables that can be played around with are the miles required (if you have multiple FF programs with adequate miles) and one would obviously choose by the program with lesser number of miles required to redeem the award ticket. The other variable which can lead to substantial cost savings is Airport tax.

The magic password to this savings is something called YQ. I will not get into details or technical explanations of the components of airport tax but at a very high level the airlines follow 2 policies of defining airport taxes:

1) Considering fuel surcharge (YQ) as a part of airport tax: Technically while buying the ticket you would see 2 components, the fare + airport taxes & other surcharges. Remember all those campaigns about fare specials to London on British Airways for Rs 19,990 + tax which never ended up being available for an all inclusive fare of less than Rs 30k. Well approx Rs 11k was the airport tax+fuel surcharge. They then increased the fuel surcharge and reduced fare such that the airport taxes were coming to in excess of Rs 19k and the base fare dropped to about Rs 10k. So while the overall cost of the cheapest ticket remained approx Rs 30k British Airways went to town claiming never before heard fare of Rs 9990 return from Delhi to London.

2) Fuel surcharge is considered to be a part of the fare and the airport taxes are the vanilla airport taxes: These would still vary by destination but as a ballpark Europe/US/Australia airport taxes would not be in excess of Rs 7k (except for good old Heathrow in London in which case it will be closer to Rs 10k) and the rest of the world (SE Asia, Africa, South America) should not exceed Rs 5k.

Both Kingfisher & Jet Airways fall in bracket 1 and club fuel surcharge as part of tax for their international operations. This makes redeeming Kingclub/Jetprivilege miles on international sectors like Bangkok/London not great value. However the positive thing about Jetprivilege & Kingclub is that they have multiple partners that have extensive routes of their own which typically gives one a chance to find a partner that falls in bucket 2 and does not consider YQ to be a part of taxes.

No airline would redeem a partner flight on a sector that they themselves fly on. So forget about redeeming a ticket to London or Bangkok using a partner that flies that route. The trick is to find an alternate destination that would anyway fall on your itinerary but is not serviced Jet/Kingfisher. So if you are planning a vacation in London/Scotland explore starting your trip from Edinburgh/Manchester and fly either Emirates or Etihad (both these airlines fall in bracket 2) using your Jet miles.

To add to the complication airlines can fall into both categories. For example South African airways charges fuel surcharge as airport tax if you redeem miles on their own frequent flyer program but the nature of their partner agreement with Jet Airways is such that they don’t charge the fuel surcharge as part of taxes. I flew on South African airways a few times during my previous project in Johannesburg and had I collected my miles in South African airways and used those to redeem a ticket from Johannesburg to Sao Paolo I would have had to pay 58200 miles + approx Rs 15k in taxes but the nature of their agreement with Jet Airways is such that for 24500 miles + Rs 1850 I got the same return ticket.

Another example of such an airline is Qatar Airways which charges fuel surcharge for reward booking on its own frequent flyer program but don’t charge YQ if the ticket is booked using Kingmiles.

Most customer facing agents at the Kingclub/Jetprivilege call centers are also ignorant about these rules so ask them to check from the international partner redemption desk about these rules. When I start planning a trip I first figure out the entire list of cities on my itinerary that are serviced by the airlines whose frequent flyer miles I plan to use and all their partners. Usually there are multiple airlines that can be used especially if you are flying to Europe/USA. I place a partner request and specifically ask the agent to find out from the international partner redemption desk about the partner airlines that are on my shortlist but DON’T charge YQ as part of tax. Once I know the airlines I want to use, I work backwards to see the destinations I can fly to on my itinerary using those airlines and start checking for dates with award availability.

While using Kingclub & Jetprivilege miles the following airlines don’t charge YQ: Emirates, Etihad Airways, Qatar Airways, South African Airways, Delta (for international flights from US, not sure about US domestic), Gulf Air, Kenya Airways. This is not the full list and these agreements keep on changing so check with the customer care with the most updated situation when you start planning your trip.

Nett nett you need to invest time behind figuring out the YQ equation for your trip but if you invest that time and are flexible with where you start and end your trip on a multi destination itinerary, for most destinations you would be able to figure out a airline that doesn’t charge YQ and save you a reasonable amount on airport taxes.. that are not taxes in the first place :)

PS: There are a lot more tips regarding usage of frequent flyer miles that i can write about, specifically the tools that will help you find award seats to redeem, selecting the right frequent flyer program and other award rdemption bargains. If you would like me to blog about those topics let me know, otherwsie i will start with the detailed travel itinerary covering Rio, Torres del Paine National Park, Easter Island, Buenos Aires, & Iguazu Falls.

PPS: Any comments regarding feedback on the blog and the usefulness of the tips will be much appreciated :) 

Maximize value from your frequent flyer miles

In my last post I gave a small frequent flyer tip on reducing the cost to fly to South America using Jetprivilege miles. A lot of people might ignore that tip as being of little relevance to them thinking that they don’t fly too much on Jet Airways domestically or internationally. But hang on for a minute, over the course of this post and couple of subsequent ones I will try and bust the myth that you need to be a frequent flyer to earn miles for free domestic & international trip.

A assumption that I have made for this and subsequent posts looking at frequent flyer programs is that for most people the number of miles that they collect is finite as compared to the travel they want to do using them. In simple language the places that you want to fly to in a year would require more miles than you can collect through flying and other means which makes selecting the right trip to use frequent flyer miles an important objective.

Before I get into the details let me first try and define the value and cost of frequent flyer miles. So if you have 25000 miles in your account, how much is it really worth in monetary terms? The answer to that is that “It depends!!” (Hey I am a consultant after all). It depends on what you want to do with those miles, so we will pick up a few representative flight that you can redeem and the cost saving/mile for these flights to establish a base figure. These figures are all approx and assume that typically the flights are booked well in advance (1.5-2 months) for the cheapest fares on any airlines (if paying personally we would typically go for the cheapest flight right?) and the redemption figure is for Jet Airways:

Sector, Miles required, Market price, Tax Amount, Cost Savings, Cost Savings / Mile
Mumbai-Goa, 10000, 7500, 1000, 6500, 0.65
Delhi-Mumbai, 21000, 7000, 1000, 6000, 0.29
Del/Mum - London, 54000, 34000, 18000, 16000, 0.30
Del/Mum – Bangkok, 40000, 18000, 11000, 7000, 0.18
Del/Mum – New York, 94000, 50000, 20000, 30000, 0.32

There is a fairly big variance of Rs 0.18/mile to Rs 0.65/mile in terms of value (see I said it depends!!) but on an average Rs 0.3/mile is a fair representation of the value that you can get for your miles. What this table also tells you is that if you redeemed 80000 of your miles to fly to Bangkok on Jet for the last vacation with your better half, the miles could have been utilized better and resulted in a saving of approx Rs 8,800 {(0.29-0.18)*80000} by visiting the family in Mumbai/Delhi/Kolkata over 2 years and paying for the Bangkok tickets in cash rather than the other way round (well most of us only have a finite number of miles except those lucky few who regularly fly trans indian, pacific, atlantic etc etc on business & first class..)

Tip #1 for using FF miles is to do a rough calculation of the Cost Saving/mile and comparing it against the benchmark of Rs 0.3/mile to figure out the attractiveness of redeeming or saving the miles for a later trip.

What is also visible from this example is that short haul flights (<700 km) offer the best value for redeeming miles with the highest cost saving/mile. The high cost saving/mile gets further amplified if you take these flights on Kingfisher Red which has some fantastic mileage bargains.

Tip #2 is to redeem miles for domestic mileage bargains such Mumbai-Goa, Mumbai-Aurangabad, Delhi-Shimla, Delhi-Manali, Delhi-Amritsar, Delhi-Leh, Delhi-Srinagar (8000 miles return or 4000 miles OW) which in most cases work out to a cost saving/mile in excess of Rs 0.6. If you have been collecting Kingclub miles this value can go up to higher than Rs 1.25/mile for redemption on Kingfisher red (Mumbai-Goa, Del-Shimla etc for 5600 miles return). Yes that’s over 4 times the value of using your miles for a Delhi-Mumbai trip.

Will dedicate the next blog post on ways to maximize the cost saving/mile before solving the mystery to earning enough frequent flyer miles for the deam vacation without taking a flight in the subsequent post. Cheers till then.

New Year Resolutions, South America and the World Cup

Three seemingly unrelated topics that come together to form my first post this year. Having initiated this blog with much enthusiasm during the last South America trip, i had hoped to share our experiences to help others plan their trips to a region where information on the internet or in guide books is rather sketchy and more often than not outdated for travellers. Unfortunately i realised in the middle of the trip that blogging during the holiday typically means choosing between blogging and sleep. While blogging won over sleep initially, over the longer period of the holiday it was a no contest.

Given that learning, this time as part of my new year resolutions i plan to blog about the trip to South America along with my experience of attending the cricket world cup watching India in different venues across the country this year. Hopefully this is not a resolution that will fizzle out like new year resolutions typically do.

Coming back to South America, i fell in love with the continent during the previous 3 week trip that included Santiago, Atacama Desert, Bolivia, Lake Titicaca & of course Machu Picchu. While talking to other travellers I realised that Easter Island & Patagonia were 2 destinations that I HAD TO visit in Chile again, and i wasnt disappointed. Some of the amazing experiences of the trip were:

1) Watching Sachin score his 50th Test ton (yes that happened in South Africa and had nothing to do with South America but you will get the connection by the end of the post)

2) Getting to hold a crocodile in Sun City (South Africa again!!) that according to its handler was old enough to bite our hands off

3) Escadaria de Selaron (Selaron's stairs) in Rio de Janeiro, a continuously updated work of art that contains tiles from over 180 countries
4) Christ the reddemer statue and view of Rio from Sugarloaf mountain

5) Everything about the 23 km hike over 3 days in Torres de Paine National Park

6) The sound of ice cracking at Perito Moreno glacier in Argentinian patagonia, one of only 3 advacing glaciers in the world.

7) Photographing the Easter Island Moai's at sunrise & sunset

8) Watching 80 year olds Tango gracefully at a Tango bar in Buenos Aires
9) The sight of the "Devil's throat" at Iguazu Falls

While the quintessential South America travel experience should include as much of bus travel, given the shortish time we flew across the continent(as per the map on the left). One of the major road blocks for visiting South America is the high cost of flights to South America (cheapest prices i could find were Rs 85k on Emirates) and the decision to take local flights in South America added significantly to our costs. Unfortunately the level of competition among airlines in South America is rather low and given the absence of viable low cost carriers on most routes, flying internally within South America is quite an expense.

The trick to bring down those costs substantially is to use your Jet Privilege miles and fly via South Africa to either Sao Paolo or Buenos Aires. Here is how this routing helps you kill 2 birds with a single stone known as South African airways:

1) Use Jet Privilege miles to book a return award ticket on partner airlines South African airways from Johannesburg to Sao Paolo or Buenos Aires. This will cost you 24500 miles per person and Rs 1800 as tax. You can even do an open jaw ticket and fly into Sao Paolo and depart via Buenos Aires or vice a versa. Yes thats right, you can use 15% more miles than those required to redeem a Delhi-Mumbai return award (21000 miles) to book a return 10 hour flight from Joburg. So if you have 24500 miles in your Jetprivilege account you can bring down the cost of flying to South America from Rs 85000 to approx Rs 35-40k (return ticket from Del/Mumbai to Joburg plus the tax amount for the award flight). Thats a straight saving of approx Rs 50k per person.

2) Flying into South America on South African Airways make you eligible for the Lan South America Pass which enables you to purchase tickets on Lan for a fixed sector price which varies by route but is still 20%-50% cheaper than normal market prices for most routes. Just as an example the Lan Pass would enable you to buy a Santiago-Easter Island return fare for approx USD 600 for a market price ranging between USD 900 - USD 1500. Similar savings on other routes mean that flying within South America is not as prohibitive.

Given the savings, visiting South Africa for Sachin's 50th century was just the icing on the cake!!! :)

More South America travel tips to follow in subsequent posts!!