I wrote a pretty comprehensive approach to valuing miles on the Australian FF forum last year. Well, not many people appreciated it, probably because it is a bit complex. ;-) But who knows, maybe it is helpful here.
So here is my approach:
1. Think about what you would like to do with your miles (origin, destination, cabin class, etc). [When thinking about this, be realistic. It does not make sense to dream of a 400,000 miles award if you are never going to collect these 400,000 miles in the first instance.]
2. Figure out what you would be willing to pay for this flight if it were offered to you for cash, at the earliest point of time you could book your flight.
3. Find out what this flight would cost if you actually bought it for cash (at the earliest point of time you could book your flight).
4. Use the minimum of 2. and 3. and subtract the taxes & fees that apply to award bookings of the same flight. Call this number (in EUR, for example) the "base value". [If you have several ideas of what you might wish to do with your miles, use a weighted average of the corresponding "base values" and proceed with this weighted average as the new "base value".]
5. Figure out how many miles you would need when buying your flight(s) with miles. [Again, use a weighted average, if necessary. Also, take into account that you actualy need award availability for the flight(s) and the number of miles you are having in mind.] Call this number "miles burnt".
6. Figure out how many miles you would reasonably earn if you could buy the flight(s) for the price of (base value + taxes & fees for awards). [This bit might involve some speculation if the number you got in 2. is way lower than the number you got in 3., so try to be realistic. Do not forget to include the cabin of service bonus and your status bonus.] Call this number "miles earned".
7. Calculate EPP (= euro per point):
EPP = base value / (miles earned + miles burnt)
EPP tells you how much value you should give to 1 mile.
8. Double-check your calculation: if you are a rational person (and have no liquidity constraints with respect to your award travel plans), you should, in principle, be willing to buy miles at the rate of EPP euro per mile (up to the amount of "points burnt") and book your award flight - because this is what you would consider a fair price. (Otherwise you might wish to adapt the numbers in 2. and/or in 6., and/or reconsider your award plans.)
The EPP can be used for answering at least five types of questions:
- for comparing the implicit price of different award flights,
- for calculating the real price (= net price) of a paid ticket,
- for deciding on whether (and to which extent) to make use of a miles + cash option (not relevant for Flying Blue),
- for comparing different FFPs (by taking into account the net price of a paid ticket), and
- for deciding on whether it makes sense to buy miles (by paying a credit card surcharge, for example).
Hope this make sense. I am interested in your comments.