DO NOT do option 2 unless you want to pay taxes on that amount.
I don't do that for my own business
& my father doesn't do that for our family business. We both only use our miles for personal flying b.c of the tax issues that arise with reimbursing yourself for award tickets.
Check with your accountant, and depending where you are located, if you reimburse yourself for an award ticket you will be taxed on that $$ as normal taxable income.