MilesBuzz! - Why are miles-based 1st & business class tickets a relative bargain compared to ECON?

A first class flight to Europe can be easily 10-20 times the price of an econ ticket, yet in terms of miles a first class ticket is only 2-3 times as expensive as an econ ticket. I am wondering why this is?

Just say thank you and accept things as they are now.

A first class flight to Europe can be easily 10-20 times the price of an econ ticket, yet in terms of miles a first class ticket is only 2-3 times as expensive as an econ ticket. I am wondering why this is?
Because the airlines find that works for them.

The fact is that 99% of FFP members never think to redeem an award for something that doesn't cost the minimum number of miles (about 25k domestically, about 50k to Europe), and thus the "audience" for awards of any kind (even business class) at just double these lowest-miles-cost awards does not risk a "run" on business class or first class int'l seats.

Keep in mind that miles are used to get, for the most part, "excess inventory", and excess inventory in any (service) industry is priced comletely differently than "prime" inventory. The same very "non-linear" relationship exists in many hotel rewards programs, restaurant dining programs, etc, etc, in all (service) industries where inventory typically exceeds demand and pricing is mostly "what the market will bear" rather than related to any actual costs.

Another reason is because miles awards have been "simplified", as have business and first cash tickets, but economy cash tickets are priced all over the place. Your math is based on comparing the very cheapest economy fare, and you're forgetting that it carries more restrictions than the "discount" award does. So perhaps the discount award should be compared to something more like "minimal restrictions" economy ticket costs, in which case the discrepancy between economy and business and first would not be as great as your math based on "most discounted econony" produces.

Because if they start charging 600K miles for a F seat, nobody will redeem or collect, and that will truly be the end of FF programs.
Although, I can see it coming....

Because if they start charging 600K miles for a F seat, nobody will redeem or collect, and that will truly be the end of FF programs.
Although, I can see it coming....

Because if they charge 600k for a F seat, then maybe only 1 or 2 persons who enroll in SQ Krisflyer would get to that stage, where miles expire after 3 years regardless of activity.

If the seat's going empty (according to the airline's load calculations), it's better to take some miles out of circulation for the seat than not. But why not charge 10 times the miles? Ask yourself who would pay that price. Most ff-hoarding individuals (value-oriented almost by definition) would find better value in flying 10 times in Y than one time in J or F. And the businesses that buy most of the J and F fares only very rarely use miles to purchase them.

If the seat's going empty (according to the airline's load calculations), it's better to take some miles out of circulation for the seat than not. But why not charge 10 times the miles? Ask yourself who would pay that price. Most ff-hoarding individuals (value-oriented almost by definition) would find better value in flying 10 times in Y than one time in J or F. And the businesses that buy most of the J and F fares only very rarely use miles to purchase them.


Myabe I'm not understanding your question. It seems like your saying

"hey the airlines should charge many more miles for an F award ticket...but I understand nobody would pay that many miles...but the airlines should totally do it!!!"

I really don't folllow your logic.




The fact is that 99% of FFP members never think to redeem an award for something that doesn't cost the minimum number of miles


Exactly! It's amazing how many people I know burn 25,000 miles on short domestic flight that I'll see listed on the airline web site for $225 or something ridiculous.

Because if they start charging 600K miles for a F seat, nobody will redeem or collect, and that will truly be the end of FF programs.
Although, I can see it coming....

It's already there, see new QF "enhancements".

I think a more rational way to pose the question, is, when using cash money, why doesn't business class cost something like 1.5-2X the undiscounted coach fare, and 4-5X the discounted coach fare, rather than ~10X the discounted coach fare. It's my belief that, as they are priced nowadays, the VAST majority of business class and first class tickets are sold as upgrades and perks to elite status FFs, with miles, rather than on a cash basis. I don't perceive that the FF-mile price of these seats is out of line, I DO perceive that the cash price of these seats is out of line.

I think a more rational way to pose the question, is, when using cash money, why doesn't business class cost something like 1.5-2X the undiscounted coach fare, and 4-5X the discounted coach fare, rather than ~10X the discounted coach fare. .

Many European airlines (most notably SWISS) are selling discounted business cheaper (or very close) than full fare coach.

from a cents per mile CPM view: miles are traditionally considered to be worth 1 to 2 cents each.

Prices just before recent tax, fee, fuel surcharge and award mile increases (DL going from 50K to 60K TATL), forgetting minimal taxes:

25K miles for a domestic you could buy for $250 = 1 CPM
50K miles for a TATL you could buy for $1000 = 2 CPM
100K miles for a TATL WBC you could buy for $5000 to $10,000 = 5 to 10 CPM return for spending your miles.

The discussion above points out one of the little "secrets" of successful award redemption.

Many people will request a "saver"-type award, and if that is not available will grudgingly agree to pay double for an "unrestricted" economy award. The smart person, when told a "saver" award is not available, before agreeing to pay double for the "unrestricted" award will inquire as to the availability of a Business Class award over the route. Many times in my own experience a Business Class award can be found for the routing; this saves miles, and the passenger gets to fly in a more comfortable seat enjoying free drinks in the pointy end of the plane.

An example: A TATL Round Trip US-Europe costs 50K miles for a "saver" award in economy, and 100K for the "unrestricted" economy award, but only 80K for a Business Class award. Do the math.

____________________
MM => UA 98%, AA 95%

First, business class is not always ~10x coach. This summer, there were TATL tix for ~$2,000 return on CO, and somewhat more on NW & DL. For the best fare one needed to book 60 days out. These fares are often available at other times although not always as low.

Second, the strange pricing issue I run into is that on a TATL award ticket, the increment for WBC is 25,000 miles. If upgrading with miles from a paid coach ticket, the increment is 30,000 miles PLUS the $200-400 increase in upgradeable coach fare. With that difference, I typically book WBC over (so I can sleep) and coach back, hoping for an exit row on a 330.

Myabe I'm not understanding your question. It seems like your saying

"hey the airlines should charge many more miles for an F award ticket...but I understand nobody would pay that many miles...but the airlines should totally do it!!!"

I really don't folllow your logic.



The OP asked why airlines get 10x the price for cash sales but only 2x the price (or less) for awards. My point is that there are buyers for the 10x price in cash (businesses do routinely buy these seats at those prices) but not for awards (businesses rarely buy with miles, and miles-hoarders would not perceive good value at 10x the miles).

The OP asked why airlines get 10x the price for cash sales but only 2x the price (or less) for awards. My point is that there are buyers for the 10x price in cash (businesses do routinely buy these seats at those prices) but not for awards (businesses rarely buy with miles, and miles-hoarders would not perceive good value at 10x the miles).

Right, the answer to the OP's question is "supply and demand."

Still, I share the OP's general point. To me, 120K miles for something like IAD-NRT-BKK round-trip on NH/TG with a stop-over in NRT in first class is an awfully good deal. Certainly worth more to me than about five domestic round-trips, or about two of the same itinerary in economy class. Each person's preferences vary, of course, but the only thing that I ever plan on redeeming miles for is an international premium class trip.

I think a more rational way to pose the question, is, when using cash money, why doesn't business class cost something like 1.5-2X the undiscounted coach fare, and 4-5X the discounted coach fare, rather than ~10X the discounted coach fare.
For a very simple reason: Because your math is completely wrong!!!!

Look at what you wrote: It is saying that undiscounted coach fare is 2-3X the discounted coach fare. Nonsense! There's typically a 5-10X difference between the deepest discount coach fare and the undiscounted one. You presumably have simply never looked at the actual prices at too many airlines. (Maybe you mainly fly an LCC like Southwest, and don't realize that their narrower spread between cheapest and costliest coach is not reflective of those ailrines that have business class and flights across oceans? But even at Southwest, it's not hard to find at least a 5X difference between "internet sale" or "Ding" prices and nondiscounted unrestricted coach prices.)

So if you take a look at the real prices of nondiscounted coach class, you'll find that it's often very close to, even sometimes higher priced, than (slightly) discounted business class. (Tho it depends on the specific airline, specific city pair, specific time of year, specific booking window, etc.)

Thus a better question would be: Why don't the airlines have coach awards at 15 different mileage levels that change by the hour, the way they have 15 different coach fares that change by the hour??? :)

Considering the value of First Class/Business award travel on international, long-haul flights, are there any carriers in *A which have no ceiling on purchaseable miles? (Such as Mexicana in One World)?

Simple economics are at play. Premium seats would rarely sell even half way out, let alone all out, at their "list price". Therefore, the price is not representative of the market-assigned value. Many premium seats are filled via free upgrades, earned upgrades, or upgrades purchased by miles - vastly skewing the real inventory filled by customers paying full list price. The end result is that the market value (the price at which nearly all premium seats would sell out if miles/upgrades were not an option) of the seats is much more in line with two or three times the price of coach seats.

I have run into this many times and on the AA website you can clearly see it when a ticket is say, 30k but if they are unavailable you have to pay 60k miles. But then you look at their business class selections and it's also 60k, so why not, if you are going to spend extra miles anyway, just sit in business?

United had it too a few times... 25k to get from A-B but when it was getting closer to date of travel, this jumped to 45k. But in their first class, they wanted 45k so I sat in first.

I do note that in some cases, the flights are not available in the next class up unless you spend its extra miles too, but that's not always the case. In the AA site, I saw that the 30k econ seat was unavailable but the 60k econ was. Looking at the next class of seating, the 60k business was unavailable, but the 120k business was. So they can still gitcha but sometimes you will end up winning. As poster #2 said, don't let the airlines know and just say thanks :D (for now)

Simple economics are at play. Premium seats would rarely sell even half way out, let alone all out, at their "list price". Therefore, the price is not representative of the market-assigned value. Many premium seats are filled via free upgrades, earned upgrades, or upgrades purchased by miles - vastly skewing the real inventory filled by customers paying full list price. The end result is that the market value (the price at which nearly all premium seats would sell out if miles/upgrades were not an option) of the seats is much more in line with two or three times the price of coach seats.

Excellant explanation. The same applies to valuation of FF miles.

100K miles for a TATL WBC you could buy for $5000 to $10,000 = 5 to 10 CPM return for spending your miles.

its only worth what one is willing to pay.

for example, for leisure travel, i would never pay an 7k premium for 16 hours in business. so in actuality, those returns are much less than 10 cpm for me... more like 3 cpm, which the added bonus of more comfortable seating

its only worth what one is willing to pay.

for example, for leisure travel, i would never pay an 7k premium for 16 hours in business. so in actuality, those returns are much less than 10 cpm for me... more like 3 cpm, which the added bonus of more comfortable seating

Exactly. One the few times I've flown internationally on company business, my firm has a policy that lets me purchase Business Class tickets. In addition, there are wealthy individuals for whom a $10,000 ticket is not a big deal - in fact it's much cheaper than a private jet. The high price is for those two categories of passengers who have low price sensitivity.

For redeeming miles, while there are certainly differently levels of sensitivity, since we are all using the same currency, and can all earn it in the same way, the range of price sensitivity is much lower.

So for me burning 90K miles on a JFK - LHR trip (which is barely an hour more than LAX - JFK) is a total waste

Not to mention that airlines intentionally keep the price of F and C fares outrageously high just so people like you think that they are getting a good deal by redeeming 120,000 miles for an international business class ticket. From a cost perspective, the difference in cost between serving a premium passenger and a economy passenger is not nearly as large as the difference in ticket price.

Point #1.

The alternative use of the airplane space for a single long-haul J seat is ~ 2 economy seats. The alternative use of the airplane space for a single long-haul F seat is ~3 economy seats. Airlines need to earn at least ~ 2x (C) or 3x (F) the average Y fare to even be in the C/F business.

Point #2

I have always thought that airlines should align airline earn/burn rates so that available award inventory **usually** goes to people who pay for that cabin. C award costs 2x Y award, F award costs 3x Y award. C fares earn 2x Y fares, F fares earn 3x Y fares. Make it really expensive for a Y fare traveler to redeem for an F award so that F award inventory is available for F fare travelers.

Exactly! It's amazing how many people I know burn 25,000 miles on short domestic flight that I'll see listed on the airline web site for $225 or something ridiculous.

What's rational for one may not be for another...it's the utility of miles. Some have huge accumulations of miles and for them maybe 25,000 or 80,000 miles means much less than the dollar cost.

From a cost perspective, the difference in cost between serving a premium passenger and a economy passenger is not nearly as large as the difference in ticket price.Not sure about this. Look at how many passengers you can squeeze in economy on 10 square metres, and how many in business or first.

Typical seating on an A340:

Seat pitch economy: 32'' (factor 1.0)
Seat pitch business: 70'' (factor 2.2)
Seat pitch first: 85'' (factor 2.7)

Number of seats per row economy: 8 (factor 1.0)
Number of seats per row business: 6 (factor 1.3)
Number of seats per row first: 4 (factor 2)

So just looking at the space usage, business has almost a 3 times as high cost as economy, and first 5 1/2 times. (On top of that, more space is needed in premium cabins for the higher amount of FAs, and more sophisticated food preparation.)

I don't think these figures are too much out of line with the relative average fares of economy, business and first.

its only worth what one is willing to pay.

for example, for leisure travel, i would never pay an 7k premium for 16 hours in business. so in actuality, those returns are much less than 10 cpm for me... more like 3 cpm, which the added bonus of more comfortable seating
Ok, but how do you value "priceless" then?

For leisure travel (which is the only kind of travel I do internationally), I would never hardly ever pay for business fares for 16 hour flights (unless they were deep business class fare sales, perhaps, and even then only once every few years at best probably).

On the other hand, neither would I pay for economy for such flights! I simply wouldn't take the flights if I couldn't get seats in business (or at least premium economy, but across the Pacific that's only now starting to become available on more airlines).

So how do you suggest I value the price of a flight if I wouldn't take it (and would have to find another hobby besides traveling the world) if I could get into business using miles?

Ok, but how do you value "priceless" then?

For leisure travel (which is the only kind of travel I do internationally), I would never hardly ever pay for business fares for 16 hour flights (unless they were deep business class fare sales, perhaps, and even then only once every few years at best probably).

On the other hand, neither would I pay for economy for such flights! I simply wouldn't take the flights if I couldn't get seats in business (or at least premium economy, but across the Pacific that's only now starting to become available on more airlines).

So how do you suggest I value the price of a flight if I wouldn't take it (and would have to find another hobby besides traveling the world) if I could get into business using miles?

value is defined as "material or monetary worth". well since a ticket cant really be bartered, a J seat is worth whatever you are willing to pay.

for an 8 hour flight to and back, i placed it at 3cpm (or 3000$).

the other situation is when i fly international for work, and spend miles to upgrade the seats. that is a hell of a deal to me, for low cost out-of-pocket.

i dont know your economics and priorities, but i think you've already determined the worth of a J seat ("deep biz fare sales"). so its a very personal matter.


and on the refusal to fly economy thing - for me its much more about the 3 weeks at the destination than the <1 day spent on transport. now theres some value points very easily compared.