The Value of a Frequent Flyer Mile Revisited

Share
Copy

Delta's Pay with Miles feature allows members of Delta's SkyMiles program who also hold program-affiliated Gold, Platinum, or Reserve American Express credit cards to pay, in part or in full, for flights on Delta and Delta Connection with miles valued in most cases at 1 cent each. Using 30,000 miles for a $300 flight might not seem like the best possible return, but the deal is sweetened somewhat by the fact that the tickets being purchased are normal, retail tickets, unencumbered by the restrictions and capacity controls that affect award tickets.

With United's Miles & Money feature, Mileage Plus members can use a combination of cash and miles to book restricted round-trip coach awards on United and United Express. So, for example, a round-trip flight between San Francisco and New York could be booked for 25,000 frequent flyer miles, or, using Miles & Money, for 15,000 miles plus $120. So in effect, you are buying 10,000 miles for 1.2 cents apiece. The cash-to-miles ratio is not uniform, however. According to my own test bookings on United's website, the value of the purchased miles varies between well under 1 cent and slightly less than 2 cents.

The Cost Side

In the end, the value of frequent flyer miles is best quantified as the difference between the cost to earn them and their value when redeemed for flights or other awards.

Normally, the cost to acquire the miles is nil, inasmuch as the airline has already folded their cost, as a marketing expense, into the price of tickets.

The exception to that rule is the increasingly common practice among airlines of making their miles available for sale, typically for around 3 cents each including fees and taxes.

Given the value of miles when redeemed, it's hard to rationalize paying 3 cents each for them. But selling miles is big business for the airlines, and as with any business, there are deals to be had. Airlines routinely discount the price of the miles by 25 percent. And there are occasional sales where the purchase price falls by half, making them potentially a good buy.

Good Value Hunting

So, what do we know after three decades of earning and burning frequent flyer miles?

While travel loyalty programs can deliver solid value, even great value, they don't do so automatically. It's possible to overpay for miles, and to redeem them for less-than-stellar value.

Which leaves us with the following general guidelines for getting solid value from airline mileage programs:

Depending on the award they're redeemed for, frequent flyer miles can be worth less than a penny, or 10 cents or more. As a broad average, figure they're worth 1.2 cents each.

The cost to acquire miles, on the other hand, ranges from nothing (when earned through normal channels) to as much as 3 cents each (when purchased from the airlines).

Unless you have a plan to redeem miles for significantly more than their average value of 1.2 cents each, buying miles for 3 cents apiece amounts to financial self-flagellation.

And no matter how you acquired the miles, cashing them in for a cheap flight is wasteful.

Tim Winship is Editor at Large for SmarterTravel, as well as the editor and publisher of FrequentFlier.com, and a frequently quoted expert on frequent flyer programs. This article originally appeared on SmarterTravel.

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...