The Value of a Mile
 

The Value of a Mile

by Tim Winship

With Air Canada and United still in bankruptcy, US Airways likely headed back for a second round of Chapter 11 protection, and Delta's most recent SEC filing alluding to the possibility of a bankruptcy filing if pilot salary concessions are not forthcoming, consumer concern at the prospect of a major airline failure has never been more acute or widespread.

Particularly worrisome to many business travelers is the question of their reward miles' fate.

http://frequentflyer.oag.com/stories...y_revised2.asp

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1. Cash Out

2. Convert

3. Wait and See (and Hope)

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Thoughts? :)

Very interesting.

What are FTers' thoughts on potential bankruptcies and what one should be doing with UA and US miles? I only have about 40K and 33K on them respectively since they aren't what I tend to accrue on (NW and AA). Should I be looking to use up or convert these miles ASAP? Should I not bother spending the time, money, and effort to go for the free RTW in Bid'ness class on UA for my flights out of DC this year?

How serious are these threats to our miles and if they are, what do you think the timeframe is for getting the hell outta Dodge with all the miles I can carry?

Thanks!

peace,
~Ben~

FWIW, I'm personally, and quite earnestly looking for opportunities to burn miles these days.

Why? Well among other things:

...Gordon Bethune, the CEO of Continental Airlines and one of the executives testifying on Thursday, will describe the industry's financial condition as "perilous, and the skies are only getting darker," according to prepared testimony obtained by The Associated Press. "All-time high oil prices and the ever-increasing burden of government taxes and fees are killing the industry."

http://biz.yahoo.com/ap/040602/airlines_outlook_1.html

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Not to mention all the other "stuff" that makes it increasingly hard to keep the business plan flying!

I hope I'm wrong, but seemingly, with the increasing deflation in the real value of miles, and the increasing difficulties in utilizing them, why not get as much as possible now?

-Mark

Real Value
 

I estimate it is about 1.2 cents/mile. But if it becomes very difficult to get standard or (25k domestic or 50k Europe) award tickets, then it drops to about 0.6 cents/mile. At that level it no longer makes sense to get the credit cards or fly just for miles when you have a choice on personal travel. On international travel I dont look for miles, just convenience and dates.

Airlines might tell you otherwise, they estimate at 2 cents/mile.

First of all, thanks for the link, doc!

I like your idea to burn, but I also like to renew my status! And if you like to play within your FFPs rule, these two goals can be contrary…

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Understood! I agree! :)

FWIW, I was somewhat surprised to find that still, many broker sites such as corpflyer will apparently pay between 1.2 and 1.8 cents per mile.

I have never personally used any of these sites, nor bought or sold miles period, BTW!

Since the old thread concerning the real "value" of a mile is now seemingly lost in the ubb to vb migration morass, I wonder what the current valuation is for folks.

It almost seems as if the once popular FT expression, "just my 0.02" might now more accurately be "just my 0.01!" ;)

-Mark

The target I shoot for in accruing my miles is to have around 60,000 for a RT to Asia from DC since its the ticket I'd be purchasing in any event. For where I want to go in Asia, it'll run me about $800 - $1200 in Y to get there if I buy the ticket outright. I just do the math.. $1000/60k = 1.67 cents per mile. Just my basis for starting. For one, in buying my ticket at that price, I have a lot more flexibility in terms of availability / dates / etc. On the other hand, the intrinsic value of whatever I'm consuming that earns me miles needs to be taken into account as well (like Kellogg's cereal that I'm eating for breakfast).

All said, if I could outright buy miles, I'd spend a maximum of 1.2 or 1.3 cents per mile if it were on a program a prefer.

peace,
~Ben~

Let me start that I differ between "price" and "value". I define “price” what I have to pay for this service and "value" what the service its worth to me. Let me come up with an example:

Assume, the price for FRA-LAX vv is € 8.146--/€ 2.310,--/€ 590,-- (F/J/Y) and I have the option the redeem 140/105/70K M&M miles (F/J/Y) for these flights (5,8/2,2/0,8 cents/M&M miles). As I do not like to sit in cattle on a long haul flight and the difference between a first and business class award is “only” 35K M&M miles, I go for a First Class Award. Assume ”my” flight LAX-FRA is overbook an the check in agent offers me € 3.000,-- in cash for releasing my F class seat in exchange for a business class seat. I think this way: someone gives me the choice of either travelling in F or sitting in J with € 3.000,-- in my pocket, how much cash would he need to offer me to take the cash? IMO the key question is: Where would be the limit for me? Once I figure that limit out I know "my value".

If I have the option to choose between a paid and a reward ticket, I look at the current fare I have to pay and miles I will earn. Let me come up with another example:

If I have to travel VIE-FRA vv and my options are buying a cattle class ticket for € 269,-- and earning 2.500 M&M miles or redeeming an award for 18K M&M miles (1,5 cents/M&M miles), I take the award.

So to make a long story short: I redeem for a price of 1,5 cents/M&M mile.


I am not surprised, because this group is not a supporter of "fair play"!

There are an increasing number of people like firstflyer_com, hansbabel or cheapbuy1975 who are selling premium class award tickets or upgrade certificates to the general public. These “brokers” are successful because they are able to buy miles at a lower price than they sell award tickets in first & business class for international travel (article was published in March, 1995 in the Los Angeles Times, comments in red published here):
Mileage Enabler
Free air travel
Flying round world as free as a bird
Free Market in First Class – How to trade air miles (OP published in Forbes on August 12th 2003)
Milespy (discussion about a business Matthew Clement & Steve Belkin opened in 2001)

It's been years since I've valued a mile at 2 cents. My current valuation for miles is about 1.35 cents each. I don't "buy" miles any more unless I can get them for less than 1.0 cent each, and preferably less than 0.8 cents each. This pretty much eliminates mileage runs for me, and in fact I haven't taken a mileage run in about 2.5 years. I don't have anywhere near the statuses I used to carry, but so be it.....first class simply isn't what it used to be even 5 years ago.

Although international business and first class awards appear to offer more bang for the mile, I can't see myself increasing my mileage valuation for those as I simply do not and would not pay those fares. My yardstick for travel is coach fares with a small to moderate premium for business/first that is roughly equivalent to what it would cost to purchase domestic upgrades.

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Thanks for the links, Patron. You certainly raise a good point(s)! :)

And so does MileKing, and I'm inclined to agree.

Yet, FWIW, I still personally think that using 'em for UG's whenever possible is a best value! :)

And as I recall, one of the major impediments to the IRS plan to tax our miles was the extreemly wide range of airfares on any given airline(s) particular flight, and an inability to agree upon what, if any, price would be assigned for tax purposes to any ticket obtained utilizing award miles?

To each his/her own! :)

-Mark

Though I can come up with examples of cases where miles are "worth" much more than 1 cent, for me that's what they are worth.

I just hope the current "value" holds (or perhaps even rises! ;) ) at this level, rather than falls any further!

Thanks! :)

-Mark

lets hope the valur goes up just as we hope gas prices go down, I dont understand why people would by miles for more than 1 cent unless you really needed it to fill up a ticket award desperatly

Its really not that hard to see why someone would pay more than 1 cent/mile - not just to top off their accounts . Say you only earn 200K without buying miles but need 5 tickets to Africa for your family of 5 to vacation. consolidator econ. tickets would cost $2000+ each (typical for many destinations) or (75K AA for example) miles each. An astute traveller would gladly pay 1.5 each for the 175K miles needed to get all five award tickets. $2,625 for the enough miles for all five tickets or two miles tickets and 3 paid tickets for $6000?

Obviously many travellers have travell patterns never requiring expensive tickets. They should still understand why others value miles more than they do.

I will never pay for a business class seat; but I understand why others do.

FWIW,

What the heck is the value of our miles and points right now?

I could hit you with a brilliantly reasoned strategic treatise on the state of frequent-travel programs in general, but I think we'd all be better served by thinking tactically. So here are four items of immediate miles-and-points importance. You'd be well-advised to take appropriate notes and act accordingly during the next few weeks.

http://www.usatoday.com/travel/colum...ncatelli_x.htm

Randy responds to the question:

"Help me sell my worthless miles"

http://www.usatoday.com/travel/fligh...askrandy_x.htm

For those wishing to know how to do the math to compute the value of a mile based on how you will use it, I have a write-up on the subject on my website below. Click on Value of Miles in the left column.

This thread is right on point on what I am trying to figure out - maybe someone here can tell me if my reasoning is right:

Wife and I planning to fly to Japan. Could use 90K/each for a business tik (on UA) OR buy two coach tiks for about $1,600 each and then upgrade to business for 30K/each (need to spend money for the higher class to upgrade).

Hate to spend $3,200 out of pocket but we would then earn miles, which would keep our status up for next year (brings up the question of the value of status, but that is for another thread); save 120,000 miles for use another time; and the miles we would earn, combined with the various promotions at UA, would get us halfway to our upgrade. SO, the way I see it, if you value the 120,000 miles we would save at 1.2 cents or thereabouts, it comes out to almost the cost of one ticket. In effect we would be "spending" $1,600 for two business tiks to Japan. Is this reasoning warped or should I just fork over the 180K miles??? :confused:

You have to manually add the link now that signatures are turned off.

I just returned from vacation. Why did they turn off the signatures?

My website is at www.freefrequentflyermiles.com.

Gary, I tried to work out the example I posted (two posts above) using the calculations on your website. I think (know) that I am making this too complicated - am I supposed to use the cost that a business class ticket would cost me or just the coach ticket for the upgrade (I think coach). More importantly, how do the 30K miles I would have to spend to upgrade work into the equation? In any case, I think that it works out that it would be a wash or that it may be worth to purchase the ticket, save the miles and earn miles but PLEASE HELP! Need to make a decision soon. Thanks.

Nice thanks

I understand you to say that your tickets will cost $3200 plus 60K miles, or $0 and 180K miles. I am going to guestimate that you would get about about 11,000 miles round trip each ticket if you purchase the tickets with dollars, which seems in the ballpark for the 10hr 40min flight from San Francisco. So your choice is

1. Spend $3200 + (60K - 22K = 38K miles), or
2. Spend 180K miles.

180K miles less 38K miles = 148K miles net difference in your accounts after the flights. So the question is, are the 148,000 miles worth $3200? That's 2.16 cents a mile. Would you pay that amount, given how you use your miles? (I wouldn't.)

Some things I don't know about this:

1. Would the taxes and fees be higher if you spend the 180K miles?
2. Do you have to pay extra taxes and fees on an upgrade?
3. Are you guaranteed the upgrade with miles when you buy the cattle class ticket? (I would really like an lesson from experts on this one. I have never done an upgrade with miles, mainly because I have always had more miles than I need, and so refuse to pay for a business class ticket.)
4. When you upgrade with miles, do you get the miles for the flight? If so, do you get miles for cattle class or business class (1.5x)?

Also, did you price a business class ticket through a consolidator? Maybe their prices are so low, you might not want to use miles at all to get the ticket.

Sound advice in general, IMHO! :)

As noted previously, I prefer to use miles to UG while paying for an inexpensive fare and obtaining more miles!

It depends on how much status matters for you personally I suppose! :)

-Mark

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It seems that it may just be temporary, FWIW...

http://www.flyertalk.com/forum/showt...=334114&page=1

In time , we will see! :)

-Mark

US Airways is making readers nervous

http://www.usatoday.com/travel/fligh...askrandy_x.htm

My best "bang for the buck"
 

I recently took a trip to South America, A $653 fare yielded 16,221 OnePass miles including elite and online booking bonus. (cost per mile 4¢)

15,000 OnePass miles transfered to Amtrak Guest Rewards = 15,000 points.

15,000 GR points were redeemed for an Amtrak one zone standard sleeper reward for 2 that priced at $888. (yield per mile 5.92¢) :)

And lose out to Discount Carriers???
 

Many airline executives understand the overwhelming factor price has on the business and leisure consumer. It has been shown that a few dollars can be the difference in what airline a customer chooses. This represent that facts that airline seats have no true added value amongst each other in coach class. Customers see a seat not by the name on the outside, but instead as a commodity. Major airlines still have an upside agains the discount carriers and that is their extended route networks, alliances, and frequent flier programs that can put both to use. I would never expect United to cut its frequent flyer program as it is core to its marketing efforts to maintain loyalty amongst its customers. Without the frequent flyer program no one would think twice to take a ticket that is $20 cheaper on another airline rather then accure the miles on United. The only way this program is going to disappear is if United disappers and I find it hard to believe that will happen. Most likely changes will continue to be made and look to see that airlines will begin to offer deeper discounts by turning in your miles.

Interesting thoughts. I don't see airlines eliminating FF programs completely. I do fear that they will continue to tighten-up and probably overdue things, so much so that frequent flyers will conclude the programs are no longer worth the effort. The tightening will occur (is occurring?) in multiple ways so that it will not appear to be too terrible to most flyers. However, the cumulative effect of the changes will be devestating. Tightening will include fewer award seats at "saver" levels, more miles needed for awards, and perhaps fewer miles awarded for flights/purchases/etc.

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Yes, while it is very sad to say, for sure, I would absolutely agree with you! :(

-Mark

I hate to say it, but frequent flier programs are based on a faulty assumption...an assumption that leads to people who read forums such as this. The assumption is that people who fly the most miles, are worth the most to the airline. But that is not the case. The airlines will eventually give up on this whole mile thing, and start rewarding people based on how much money they spend, not how many miles they fly, and start rewarding the passengers who are truly worth the most to an airline. Although the flyertalk members would not be too happy. (Or would they be better off?)

I know that there may be tax consequences to this, but it seems to be the best way for an airline to attract loyal customers. The people who pay for a first class seat will be richly rewarded...much more so than the person who pays the rock bottom fare in coach. Right now both get the same miles, but the airline would probably want to award the first class passenger more.

And then this ends all this "how much is a mile worth?" question. If it was say 5% of your ticket. You spend $200, you get $10 towards a ticket. You spend $2000, you get $100 towards a ticket. And it even helps the in-frequent traveler. Because now they have a $10 coupon they can use on thier next flight, and they will stick with that airline.

Does anyone else have any ideas on the pros and cons to moving to a "dollar" based award system?

-locker1776

i think that a & based program would tend to make liesure travelers [like me], go for the low bidder, rather than spending a bit more for their preferred carrier to get the bennies....after all, many seats are occupied by people who want an inexpensive fare & support the frequent skeds that business travelers want.

...To find out what deals are out there, we looked at mileage runs in North America that offer travelers a good mileage return for their fare, factoring in airline promotions to estimate mileage totals for the flights. We found several options where 6,000 miles or more could be earned for an itinerary costing less than $230...

http://www.usatoday.com/travel/deals/fare/compare.htm

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So it seems then that 0.01 is about right these days! ;)

-Mark

I, and I'm sure there are a number of people that fly this way, help fill up seats that were going to be empty by jumping on the planes at the last minute when a nice sale comes up. Once I got started with that, I stuck with the airline and started making more leisure travel specifically on that airline because that's where I had the status. Now I buy tickets for what I need and when I need to go, though I do go look for a decent deal.

If I hadn't been able to get status on some of the cheap tickets I started out buying, I doubt I'd have continued buying tickets and spending more as I do now. The hotels are a lot harder for me to hit status, and in general I don't have any loyalty to a hotel chain. I don't think I'd fly as often or stick to particular airlines if I hadn't earned and maintained status, since I do it as a voluntary leisure activity and not for business.

I can see the advantage to an airline having a dollar-based system, but I think the bonuses many of the airlines have implemented for more expensive classes of tickets address that issue pretty well.

cash instead of miles, not good for airlines.
 

this soluion would create a real problem for the airlines. Almost all of the awards would be redeemed, even if just $10 at a time. With Miles you have to hit a threshold first. Even if only 25K miles, hell that may be years before a casual traveler can get a free ticket (even assuming no blackouts). If they give me a $10 cert, I will just use it on the next flight.

I know I have "wasted" miles in the past in small quantities and I think the airlines count on this. If everyone was able to redeem every mile they had the airlines would be even more bankrupt than they are now.

Every mile/point has a different value according to the user. The other week, a friend of mine had to go to SLC. Tickets were around eleven hundred bucks. He spent 50k miles + $80. I know some people who blow 25k for less than $200. Go figure, but I like a 50k international award because you are allowed a stopover which would increase the price dramatically.

One penny/mile for friends/relatives I like. 2+ cents/miles for everybody else.
 

I value mileage at a penny/mile when a friend/relative I like needs an award ticket. Two cents/mile for everybody else. I usually use the award miles myself and I value it between a penny to 2 cents/mile. Depends on the award I'm seeking.

That's absolutely right. Stopever rules vary among airlines airlines of course. Delta in Europe is wonderful, where the stopover doesn't even have to be enroute! I've done TUL-HVR-IST-TUL where getting to Hanover required a round trip to Paris. This was a $1400 ticket, so that's 2.8 cents per mile.

Just last month we redeemed 25K intra-Europe Delta awards for LHR-MOW-PRG-LHR and MOW-PRG-ZRH-MOW and a 50K award for TUL-PRG-ZRH-TUL. It was a great multi-country overlapping vacation for the 3 of us.

The season of the redemption also changes the value of miles. To Europe, AA is 40K in the winter and 60K in the summer, while Delta is a flat 50K all year. For years my strategy was use Delta to earn miles in the winter and cash them in the summer on multi-city trips.

My redemption rule is generally 2 cents a mile, with a purchase rule of under a penny. However these are lowering now that I'm accuring 250K miles a year.

Another considerration that increases the value of reward tickets is that the dates can often be changed without penalty. This can be worth $150 or more a ticket. We changed the dates on all three of the Delta tickets mentioned above. Even if the dates don't change, but might, there's a value just like insurance has a value.

And don't forget that award miles can be reinstated if not used, which is much better than non-refundable.

The Value of a Mile

...In fact, we used to routinely recommend that program members use 2¢ a mile as a rule-of-thumb target value for their frequent-flier miles, based on the fact that the average domestic ticket price was in the neighborhood of $500 (2¢ = $500/25,000 miles).

Unfortunately, that advice is outdated. In the current environment—with today's combination of sluggish demand and intense downward pricing pressure exerted by the low-cost carriers—the average price of a domestic ticket has fallen below $400. That alone depresses the theoretical value of a mile to less than 1.6¢....

http://frequentflyer.oag.com/stories..._of_a_Mile.asp

If you compare apples to apples, I think the average domestic ticket price with the same restrictions as a frequent flyer miles award is about $200 - $230. If you are paying more, you are getting more flexibility and/or a last minute ticket.