iahphx

Since the introduction of frequent flyer programs in the '80s, the widely-held shorthand valuation of a frequent flyer mile has been a penny. Sure, fares used to be cheaper, but awards used to require fewer miles, too. And, over the years, the airlines piled up more restrictions on using the miles (particularly capacity controls), so you couldn't honestly say the miles were worth more than the comparable price of a rock-bottom paid ticket.

So a 25,000 mile domestic coach award was worth $250. A 35,000 mile Caribbean award was worth $350. A 40,000 mile award to Hawaii was worth $400. A 60,000 mile award to Europe was worth $600. Etc. (Valuing a ff mile based on first class award levels is a pointless exercise because few people would actually pay their own money for such fares).

But even if you buy the deepest discount ticket, you're probably not going to be able to fly domestically for only $250 (except for limited short haul markets). You're not going to get to the Caribbean for $350. You can't fly to Europe for $600. Sure there are occasional wacky exceptions, but on a regular basis, no way.

So I think we have to adjust the "mental value" of a mile. I think they're now worth about 1.5 cents each. Sure, miles on some airlines are worth more (Star Alliance) and some are worth less (Delta), but on a shorthand basis, a penny-and-a-half seems about right.

I think this matters to Flyertalkers. It matters when I mentally determine the real cost of a trip: if I'm going to get a good transcon fare for $300 and get double miles for being a high elite, the "real cost" of this ticket is no longer $200 (the 10,000 frequent flyer miles are now worth $150), but $150. When deciding whether to redeem miles or "just buy the ticket," I need to use a 1.5 cent multiplier. And when deciding which credit card to use or what a good price is to "buy" frequent flyer miles at, I need to use the 1.5 cent figure.

Now lets hope the airlines don't raise award levels to bump the value back to a penny.

bsegreto

I value my miles around 2c each.

However, the number of flights I take has plummeted recently so I have been pretty selective with redemption opportunities. A $500 domestic flight with low level redemption opportunities is not that rare anymore.

A couple things I'd keep in mind though...

First, Continental just auctioned off a $600 iPad for over 350,000 miles...I did not see the final price, but with time left the top bid was 351,000 miles. Even at 1 cent per mile, someone decided to "pay" $3500 in miles for a $600 iPad. Silly, probably, for anyone who is on this board. I'll get you a couple iPads if you want to "give" me 350,000 miles. But there had to be several people who bid the price up that high indicating there are still a lot of people who value their miles at a much lower level than we do.

Second, some airlines already let you pay at a rate of 1c per mile for flights and I doubt many FT'ers are using that but some flyers are.

I agree the value is much more than 1c per mile, I'm just not sure everyone realizes it.

clacko

in the beginning [1981], for me, it was ~ $500 rt to either coast & rt awards were 25k, so 2cpm....people on the coasts had a better deal on transcon....

no eqm, status was awarded by some unknown person for an unknown reason...

people who fly paid j or f, get a much better return than a cent or 2 on an award now & did back then....

seems like things have changed! 2 cents now was probably .2 cents or so then....

uszkanni

I like to use my miles for F class TPAC/TATL travel. My valuation is about 10 cpm*. And that's not counting some pretty generous transfer bonuses.


*assuming one would ever pay full fare for such a ticket.

jonman21

I agree with your assessment, uszkanni - 10c is about how much I value per mile (when you redeem for TPAC/TATL F award travel, assuming I'd ever pay full fare for the ticket).

rajuabju

I think most people who are on this forum value their miles much higher than 1 cent... I value mine at 5 cents or higher. I'd never (except maybe some extreme circumstance) redeem for lower value then that.

But of course, that wasnt always the case... 4 years ago, i was a total novice and wasted miles (or failed to even get them) so frequently I'm now almost embarrassed about it. But, I realize, the majority of the population is like that. People who are knowledgeable about FF programs, like the members on this forum, are a tiny minority. Heck, most travelers dont even sign up for FF programs.

About the ipad auction.. WOW. Thats crazy, but also so smart for CO.

jrmcrm

I use my miles for Int. F. If I didn't have miles, I would buy Int. J.

A J ticket would cost me $3000 all in and I would earn 20,000 CSA miles which is 1/4 of a similar J-class ticket (80,000 miles) using CSA miles. So a net cost of $2,250.

So a mile is worth $.02815 a mile to me + the indescribable value of flying F on LH/LX vs. J on DL.

BTW, I have priced out some of my Int. F tickets and I normally get around $.15 a mile worth of "value"

roknroll

I think a *true* value when redeeming for first or business class travel would be looking at what you would be willing to pay for that ticket. Round trip business to Europe might be $4,000, but I'd never pay that. Let's say coach is $900 round trip and it would be 50k miles (1.8 cpm value). If business class for a transpac or trans atlantic was $1,500 or even $2k per person for round trip, there's a good chance I would pay that.

So if round trip is 100k miles in business, and I would be willing to pay $2k for that ticket then the miles are worth about 2cpm.

virtuo0

Absolutely right. Value is not what someone is offering it at, but what someone is willing to pay for it. (real estate market is the best example)

iahphx

Yeah, that's why I said you can't really "value" a frequent flyer mile based on a FC award since the published fare massively exceeds what most people would be willing to pay out of their own pocket.

For years, CO basically charged twice the miles for FC over coach. I always thought that was a realistic assessment of value -- even though, I personally, would rarely find it worth twice the price to sit up front. That said, I know many people would happily pay 3x the price. That's why FC travel is very hard to value.

Regarding coach travel, I think the massive increases in ticket prices the past 2 years has finally brought the value of a ff mile to 1.5 cents, even with all the nonsense that is associated with actually redeeming the miles.

obkacey

I agree with the OP's valuation of miles at about 1.5 cpm. You can not value the miles based on TPAC Fs that you would never purchase. I take the posted fare of an econ ticket, subtract the fees for an award ticket, then take the amount of miles and add the potential miles lost if I flew a revenue ticket instead, then divide the money by the miles.

I try to always use my miles for international awards at the lowest level in economy and almost always the mileage value comes in around 1.5cpm or slightly higher. I have calculated domestic and it seems to turn out more like 1.25cpm

AlohaDaveKennedy

My valuation:

To buy miles

Delta at $11 per k

To redeem miles

Delta at $24 per k

rbAA

Actually, no. "Ticket brokers" have been pretty consistent at about 2.2 cents per mile over the past two decades in the "gray" market, so I don't think you can say that the 1 cent valuation was "widely held." And 25k domestic awards generally are only done last minute, with much higher fares or to gain some flexibility in date/time changes, so much higher values are seen there.

kazfu

So if you truly value your miles at more than 1.5 cmp, wouldn't you jump at the chance to maximize the number of miles you can get from Delta's 100% transfer bonus program (ends 9/30) in which you can accumulate up to 150k miles at 1.1 cpm?

abcx

No, because the earn and burn rate would be out of whack then. Miles eventually get devalued and accrual opportunities get cheaper, maintaining the value for savvy FTers who don't generate the majority of them by flying. But you don't want to be stuck with high-priced miles post devaluation. Basically, to put it in economic terms, the discount rate on the future value of miles is huge.