How American Express have leapfrogged the competition – Part 1, oneworld redemptions

Over the last few months, a series of improvements have taken place to American Express Membership Rewards which have fundamentally changed the landscape for those primarily earning their points through credit card spend.

Previously, I’d consider Virgin or Qantas direct earn cards, or Amex Membership Rewards, about equal when making a recommendation to somone about which they should keep in their wallet. It would depend on personal preferences and travel habits, and you could effectively pick one or two of the best cards in any of those categories and not go too far wrong when earning points through credit card spend.

Now Amex, along with a useful change at KrisFlyer, have managed to significantly increase the value of Membership Rewards points, and effectively made MR the go-to program in Australia for savvy points earners.

I’ll be considering these changes in this post –

• The change in transfer rate for Asia Miles to 1 Membership Reward = 1 Asia Mile
• The change in transfer rate for Starwood Preferred Guest to 1 Membership Reward point = 0.5 SPG points

There’s also the following changes which have an impact for the non-Qantas / oneworld flyer –

• The addition of Etihad to Membership Rewards at a 1:1 transfer rate
• Singapore Airlines opening up KrisFlyer award space at the lowest saver level on 777 and A380 operated routes

These have all meant that the value of Amex Membership Rewards points have increased significantly relative to the competition, and have definitely changed the way I am choosing to accrue points.

Over the course of a couple of posts, I hope to show you why collecting Qantas Frequent Flyer points from credit card spend is most definitely the worst way to leverage any spend on your cards into points.

I’m making the following assumptions – of course there are always exceptions and personal circumstances to consider, but just take these at face value for now.

1. Spend on an American Express Membership Reward credit card is your primary way of earning points
2. You want to redeem your points for travel in Business or First Class cabins, for medium to long haul routes
3. You’re not looking to capitalise on Qantas Any Seat Awards, where you can earn status credits to prop up your hunt for Qantas elite status
4. A preference for flying oneworld airlines – yep, this isn’t a given, and I’ll analyse the non-oneworld outcome in the next post – but for this one, I’m looking at travel on BA, Qantas or Cathay Pacific
5. Generally, it’s possible to earn Membership Rewards points at a similar rate as Qantas points – yep, Qantas has a range of Mastercard & Visa branded partner cards which you can pump more spend through than an American Express, but generally a higher earn rate through Membership Rewards can offset this. And don’t forget, Membership Rewards often offer bonus transfer rates to partners which can wipe out any advantage of earning through a Visa or Mastercard.

Given all that, I looked at a handful of routes and their cost to redeem Membership Rewards points, across British Airways, Qantas and Cathay Pacific, and summarised them in the table below. Jump below for my notes on how these are calculated.

It’s clear Qantas don’t come out on top for any of these examples. In fact, even on domestic business class, in pure points terms, Qantas points are only the best value for the shortest routes, such as Sydney-Melbourne.

It would be remiss not to mention taxes and surcharges in this analysis too. Both Qantas and AsiaMiles pass on taxes and surcharges on points bookings, so broadly dollar fees when booking should be comparable from route to route.

This is why AsiaMiles ends up being so competitive –

• First Class redemptions are not 50% more than Business class (unlike Qantas)
• Return redemptions are not 2x the cost of a one way with AsiaMiles (unlike Qantas)
• oneworld partner redemptions are the same price as ‘home’ airline (Cathay Pacific) redemptions (unlike Qantas, who add a surcharge)

There are a couple of disadvantages –

• Anecdotally, dealing with (or even getting hold of) the AsiaMiles call centre by phone can be tricky
• AsiaMiles has more expensive award cancellation fees than Qantas – it’s 120 USD or 12,000 points, compared to Qantas 5,000 points.

Conclusion

Here’s the clincher – for all of these routes, AsiaMiles or AAdvantage redemptions are (now) significantly cheaper than the exact same flight than redeemed through Qantas Frequent Flyer, assuming you choose to earn Membership Rewards instead of directly into Qantas.

In many cases AsiaMiles is 20-40% cheaper for all but the longest-haul destinations, and then for routes like Sydney – London or Sydney – New York, redeeming through AAdvantage can yield really big savings over the equivalent redemption through Qantas.

For me, this means that when focusing on these kind of redemption opportunities, I should…

• Look at transferring Membership Rewards over to AsiaMiles for most oneworld long haul routes
• Look at transferring Membership Rewards over to AAdvantage for the longest oneworld long haul routes
• Use any Qantas points I accrue from elsewhere for short haul domestic redemptions, and not earn any Qantas points from my credit card spend
• Generally, accrue and hold Membership Rewards points rather than banking them with Qantas directly.

Obviously for these purposes I’m ignoring Virgin Australia, Singapore Airlines, Etihad and a range of other options out there. I’ll dig into the detail of these programs vs Qantas in the next post, as well as a round up of what these actually means for the range of cards you might consider keeping in your wallet for everyday spend.

Your comments, as always, are welcome. I haven’t yet made a successful AsiaMiles redemption, so if you have any, please share your experiences on the process of actually doing so. I’d also love to hear if anyone disagrees with this thought process!

UPDATE – I meant to also include the following point in this article, but stupidly forgot. One of the main things to consider with the Qantas Frequent Flyer program is their aggressive expansion into the loyalty market with partner offers with Woolworths, Optus and in other sectors. The volume of points in the market, and sheer the number of people looking to redeem those points, can only have dramatically increased demand for Qantas Award seats.

On the flip side, Qantas has then been contracting their network, at the same reducing their supply of Award seats – if not in direct number, then definitely in terms of choice of destinations.

I think in the last year or so, this has probably reached tipping point whereby acquiring Qantas seats for the dates, travel class and routes you want is becoming increasingly tough and the average punter needs to be exceedingly flexible about how they use their Qantas points.

This devaluation to Qantas points, or at least how you use them, needs to be carefully considered in the grand scheme of how you choose to accrue points through credit card spend. Why bother acquiring points if you can’t spend them?

Useful Links

• The Asia Miles program terms, award chart, and award finder.
• The AAdvantage ‘All Partner’ chart

Notes

For AsiaMiles, the calculation is pretty simple – 1 MR = 1 AsiaMile so the numbers in the AsiaMiles award chart are directly comparable to Membership Rewards.

For American Airlines AAdvantage Miles, the most economical way to get Membership Rewards points over to AAdvantage is via Starwood. Membership Rewards transfers over to SPG at 1 MR to 0.5 SPG. 1 SPG then transfers to 1 AAdvantage mile. So, at face value 2 MR = 1 AAdvantage mile. However… SPG kicks in 5,000 SPG points for any transfer of 20,000 points out of SPG to a partner, meaning 40,000 MR = 25,000 AA. I’ve factored these bonuses into the table.

For Qantas, I know that all but the Amex Platinum Charge card don’t offer Membership Rewards transfers to Qantas. However, the point of this exercise is to consider that you have a choice to primarily either earn Qantas points directly with a Qantas credit card, or to American Express with Membership Rewards. Yes, there are other comparisons too, but for the purposes of this exercise, this is the one I’m making.