Originally Posted by
Mountain Trader
If I pay tax on AA miles based on a valuation of 2.75 cents per mile, I could actually lose money (depending on the tax year), as the taxes would be greater than the value I assign to the miles.
If you are in the 35 to 50% bracket (including state tax), the cash out of pocket can be quite hurtful.
OTOH, AA miles if used wisely could easily worth 0.05 or more for us based on our need, and that is not even in biz class, but plain old coach One-Way Europe - NA off peak that we often needed. We used one last May and will use another this May. Had I purchased that one-way just to NA gateway, the cheapest out of pocket is $3600 nonstop and the cheapest option is AA., followed by Air France, Delta and Iberia which wants a mere $4000. A 10 hours flight for the non stop.
Go to 1 or 2 stop, except 2 or 3 BA flights with immediate connections (13 hrs) the others all require an overnight somewhere, and the journey becomes 20 to 30 hrs.
It is $1680 one-stop on BA. If we are willing to go for 2 stops (Agh!) it drops to $900 on Air Berlin, $1230 on Air Lingus, and $1450 on SAS. For a mere 20K - that is a big $ saving to us if using the 1-stop. I dont think I would take Air Berlin for this.
So the AA mile would worth $0.07 to $0.084 per mile - that would justify the tax paid if one wins big.
Using it for a OneWorld award, in business, one could still achieve a $0.08 per mile. We did an AA 150C OneWorld award in 2009, the itinerary can be duplicated with more restrictions on a Circle Pacific OneWorld revenue fare at $12,000. That means the 150K miles are at $0.08 per mile value.
Using it for domestic travel though, probably only achieve $0.02 to $0.05 depends on WHEN you need the award.