Valuation of miles
 

Hi All,

I am wondering whether to fly back to back CDG-NRT-CDG to collect around 60k FB miles. It will cost me a minimum of £120 to get to Paris and back from Edinburgh.

The question I am pondering if it's worth it. Is there any way to work out if it's worth spending the money to get the miles.

What are your thoughts on this ?

If you spend the miles on promo business class I personally value them at about 1 cents each. So in order to gain 60K miles I would not spend more than 600 euros.

Ah! Love this topic! Value of miles all depend on what you want to do with your miles. I, for example find it already worthwhile to "buy" miles at about 1.5 cents per mile. My criteria is the price of miles has to be cheaper than Z fare + tax on CDG or AMS to JFK divided by 120000 miles. The reasoning is that I would pay more if I had to buy the ticket.

For somebody else it could be 0.5 cents per miles because he would have completely other ideas.

So. What do you want to do with them and I'd be happy to give some directions.
On a preview: 60000 miles for 120 quid extra sounds like a bargain to me. But then the additional question is, how many miles would you earn if you would not pay the 120 quid extra?

Edit: Similar reasoning...but had already typed this :D

You would not spend more then 600 Euros to earn 60k miles? Am I missing something? Is there really a way to buy a ticket that will bring you 60k miles for less than 600 Euros? :(
If that's the case, I must be a complete idiot, because I roughly pay 600 Euro for travels to the west coast of the USA from Europe, and barely get 5k miles. (25%).

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.

Hi Zembla, I think that you have your monetary units wrong. I think that you mean 1.5 cents per mile.

Getting the "value" of a mile is a difficult exercise as it depends on many factors, most of them listed by cityflyer369. A big one being low award availability.
I tend to follow the same rule as Zembla. A Z fare exHKG cost some 2,300EUR before surcharge/tax , while a Biz award is 160,000 miles (and surcharges are more expensive on awards). We seldom get promo exHKG and conditions are too restrictive for me, so I only consider classic awards O. Because there is plenty of availabitity of fully-flexible Z, it is much more attractive than a O award, so rather than valuing it is 2,300/160,000 = 1.4 euro cents per mile, I value it at max 1 cent per mile.
In the OP question the additional cost of a EDI-CDG-EDI seems around 150EUR. So that seems good value for 60Km. But I find it difficult to understand how you can get 60K on a CDG-NRT-CDG, maybe some form of promotion. Also you have to factor in the loss of miles you would have earned on another airline, say BA.

Are you sure that you'd earn 60K? The Flying Blue Miles Finder on the KLM site suggests you wouldn't - 5.25k is the most that can be earned on EDI-CDG return, in the 250% earning biz classes, with the Platinum bonus. Travelling in First on CDG-NRT return, and again with the Platinum bonus, you'd earn 48,256 miles, for a grand total of 53.5k, an absolute maximum possible total. (Your profiles says you're FB Gold, and the same 250%/300% earning classes would net, with a Gold bonus, 50,114 FB miles)

You can buy up to 100,000 Flying Blue miles (i.e. without having to fly at all) - though 60k costs €1,500 and the full 100,000 costs €2,500.

We've all assumed you're talking about Award Miles here - not Level Miles.

I would not spend more than 600 euros just for the miles. For travel I would pay more of course. But if I am flying just to gain miles, I would not spend more than the miles are worth. Otherwise your'e just losing money ;)

The value of the miles greatly depends on what you use them for. If you normally buy Business or First like Zembla, the value of the miles will be considerably more than 1 cent. However if you normally don't pay over 800 euros for a TATL roundtrip, I stick to the 1 cent/mile value.

Correct! Fixed it in my post.