Originally Posted by
spartacus
An award ticket is valued by the airlines as a full-fare ticket. That way they can write off the maximum amount from revenue for taxes. So, you are not on a free ticket. It is a ticket that has the highest cost value.
If airlines wrote redeemed awards off as full fare tickets, they would have to put the miles liability on the balance sheets in a similar way.
Airlines do not account for miles redemptions as high value tickets. Rather they argue they only need to count the incremental cost of carrying a passenger as the value of that ticket, so minimizing their miles liability.
Miles are valued on airlines sheets at roughly .4 cents each. +/- a little depending on the airline.
That makes a 25K award ticket worth $100. Less than most deep discount tickets but not free either.
Most airilnes probably count the 25K domestic redemption as costing them significanlty less than $100 because the about .4 cents/mile valuation is assuming a percentage of awards will be redeemed on partners for premium tickets, where the airline probably has to pay the partner a little more than .4 cents per mile.
Take a look at the airlines reported year end balance sheets to see how they value a mile.
Originally Posted by
spartacus
An award ticket is valued by the airlines as a full-fare ticket.
Sure, I would love for this to be true.
But,
Source???