Value of Award tickets
 

This post has appeared elsewhere, but I'm reposting it so that we can get some others opinions

The Official Frequent Flyer Guidebook, 7 ed.

Randy, great publication. My favorite part is the Comparison at-a-glance section, especially the Elite-level comparison, upgrade and threshold bonus charts. Very handy for quick reference. Worth the money.

I would however like to bring up a point of discussion.

It's concerning The Taxation of Frequent Flyer Miles section, under the section Valuation (page 90).

I agree with the statement:
"Clearly, an award has less value than a full-fare coach ticket."

I do however disagree with the statement that immediately follows it.
"In fact, even the lowest discount fares exceed the fair market value of award travel."

I have redeemed awards on several airlines over the years and I always place a higher value on an award ticket then a LOWEST DISCOUNT fare. That's because an award ticket is changeable, within the same award level, in terms of dates, times, flights, etc;

My plans are as steady as the wind http://www.flyertalk.com/forum/smile.gif
When I book a lowest discounted fare, I'm often (very often) toasted. I can't tell you how many 100$ "fines" I've paid, for changing ticket times/dates. (That's the price you pay when you pay your own travel expenses and can't always justify a J class fare)

However, an award level ticket is constantly changeable (for up to a year usually) and I find the convenience worth it's wait in gold. As an example, because of unsteady commitments, I once carried a YUL-DTW award for three months constantly changing the dates form one week to the next.

Personally, I value airline miles/points at 0.02 (even though I usually receive values of 0.033). So, while a 500$ flight is equivalent to 25K miles, [benefits equaling the costs (25,000 x 0.02)], I would still view the 25K as more valuable.

As an example: Let's say I wanted to eventually visit Friend A who lives in a city where the airfare to get there costs a fixed 500$ (non-refundable) or 25K miles but that I had no FF miles in any account. Let's also say that a bonus offer came up where I could fly to a totally different city (City X) for 500$ AND earn 25K in FF miles. I would fly to City X for 500$, earn the 25K, and then use the 25K to visit Friend A. Why? Because now, that airplane ticket to visit Friend A is flexible and changeable (and even a re-deposit of points would cost 50$ rather than the 100$ charge for changing discounted tickets). So, if either Friend A or I, for whatever reason, decide that next week would be better . . . no problem if I'm holding an award ticket.

Maybe the original statement "even the lowest discount fares exceed the fair market value of award travel," which I disagree with had a purpose which came from a different angle, and I have misunderstood. In that case I'd be interested in others points and opinions.

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Got points ? Got smiles !

A few points:

- if the best domestic discount fare that you can find is $500, then you are doing something terribly wrong. That's why 2 cents is too high of a value.

- While I know that Southwest awards are infinitely changeable, but I've received resistance from UA and AA when changing tickets, which ofter requires a trip to a CTO (UA) or mailing tickets back (AA).

- Many more discount seats are available than award seats at the 25,000 level.

[This message has been edited by Tino (edited 05-01-2001).]

A $ 0.02 per mile valuation has always seemed high to me.

For me, an earning opportunity is normally measured against a $0.01 valuation. If it beats it, fine, otherwise I let go. More often than not I tend to beat the benchmark.



[This message has been edited by Bourne (edited 06-17-2001).]

Please also see:
http://www.flyertalk.com/forum/Forum1/HTML/003114.html

Tino,

Stay with me here. Of course, most domestic discount tickets are priced at below 500$ but not all. There are many routes where travel is very often at the 500$ level and more. Even for two hour flights.

Also, while Southwest has a very liberal refund/exchange policy (I still have Southwest credit myself) I was basically referring to award reservations per se and not the hassle of returning ticketed journeys. I haven't used a paper ticket for a domestic journey in ages and especially not for award travel. Therefore an e-ticket is easily changed through a telephone call.

As for the availability of seats, of course there are more discount seats. But again it depends on the routes one flies. I have never been denied an award ticket request on domestic routes.

[edited for grammar]

[This message has been edited by Stephen loves Starwood (edited 05-01-2001).]

TINO: Try buying a ticket w/o a Saturday night stay in a non southwest market and the value of your miles skyrockets.

Twice in the last two years I've been able to get last minute reward tickets for friends needing transportation for family emergencies. The lowest published fare in each case was around $2000. Thats pretty good value for 20,000 miles.

My two cents (or 1 FF mile?), based on my AA, UA, and US experience:

- I have never found a situation where the 25K award was available AND low fares were NOT available. If I price out tickets for a domestic routing and find anything higher than about $400, I know good and well that 25K awards are long gone. Perhaps that's because AA and UA are stingier than everyone else and I've been living in the dark for too long. I would love to hear more about the 20K-for-$2000 ticket scenario (routing, airline, etc.).

- I've had slightly better luck getting domestic biz/first-class awards (capacity-controlled, 40K) on somewhat full flights. I've also had good luck using TW short-haul awards, but that's a unique case as far as I know.

- The FF award that is most valuable to me is the 40K "AAnytime" coach award. I have used a couple of these over the past 2 years when I *really* needed to travel, and all airfares - even on circuitous routings or to secondary airports - were $800-1000. Redeem the 40K award, pick your favorite flights, and you've just earned a REAL two to three cents per mile, along with the subjective benefits of flying your preferred route, carrier, times, local airports, etc.

- I also like the relative flexibility when changing an award. Compared to the draconian rules surrounding discounted coach, it's refreshing.

So far, all of the discussion has been about domestic travel. Think int'l premium travel and the value skyrockets. That's the ONLY way I'll spend my miles...

I agree that the best use for miles (for me at least) has been on last minute emergency travel. In general, it seems like many of the majors become a lot more flexible in redemption rules when it's REALLY near flight time. In fact, in my experience, that's where the airlines really shine. Some examples for me have been:

1. Next day trip on Delta from SFO/SJC->Lima, Peru when my girlfriend got sick in Cuzco (would have been about a $2-3K ticket for a walk up fare, cost 35K miles)

2. Same day travel SFO->JFK when (the same) girlfriend's father was diagnosed with a heart problem requiring next-day surgery. (cost for medical emergency fare $800, cost 25K miles)

3. same-day travel SFO->PIT when (the same) girlfriend's sister went into labor and she wanted to be there with her (didn't even bother to price that one, but cost us 25K miles).

4. next-day travel Fresno->IAD when an aunt's sister went into a coma (travel was for the aunt). (best fare we found was $800, cost us 25K miles)

Also, for emergency travel, the flexibility to change the return dates is pretty nice (while you do get that on a medical emergency fare, you don't with a advance purchase one, as was mentioned earlier.)

So, I've generally done better than $0.02/mile in my redemption. (And that's without factoring in the girlfriend gratitude factor, which is probably worth even more than $0.02/mile)

Dan

I agree that international usually gives the best value. Would I pay $2,000 to fly SEA-FCO first class for summer travel or to Carnaval in NE Brasil first class? (100,000 miles = $.02/mile) YOU BET!

I consider the tax savings on an award to be of greater value than the accrual of miles if you paid for the ticket. ie a $2000 ticket would require ~$3000 of income and would earn with bonus miles ~40,000 miles or $800 in value.

Of course the best is a cheap ticket and a free upgrade certificate. http://www.flyertalk.com/forum/wink.gif

Best frequent flyer award ticket deal I had domestically was last year as a medallion member redeeming 25K old DL miles for an award from the old medallion award chart. HNL-JFK-LAS-HNL on DL, first class, no-blackout dates, for 25K (25K x $.02 = $500). The itinerary priced out at around $4,800.

On AA, you can add stopover segments on your routing which makes your award ticket even more "valuable". Try doing that on a discount ticket. I've done it on both Plan Ahead and Anytime tickets. This is why I value the AAdvantage program over Mileage Plus.

More bang for you mile.

I would never conceive using 25K points for ANY USA ticket to be honest. For 25K points on UA we can all upgrade a SYD-NYC type flight from low coach fare to Business and First Class, all the way. Difference in price between coach and pointy end on same route? Try about $US8,000 - $9,000.

Work that one out at pennies per point. http://www.flyertalk.com/forum/smile.gif

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~ Glen ~

Yes, I have to agree with ozstamps. Not living in the US means not having good chances for upgrades, from Singapore every flight is international. Then upgrading with miles makes them much better spent. US$ 1000 flies you economy to Europe or US from here. 60 000 miles upgrades you both ways. Those Business class tickets cost US$ 4000 and above. 60 000/3000 is 0.20 cents per mile.
I am not claiming that this is the true value of a mile, but it does amount to better spent miles for me. On top of that, upgrade tickets still count on your milage ticker (WP gives me 30 000 for an intercont trip) reducing the cost to 30 000 for the upgrade)

I think most of us were discussing domestic coach redemptions because that's the only way to nail down a true value for most of us in the US. I also try to make all of my transatlantic flights in C/J using a mileage upgrade or a systemwide. But there's no way to place a value on those miles because I'd never buy a $6000 ticket to begin with.

I understand that those of you in Aus/Asia don't use the same types of awards that I would. I would probably always use the cheap coach ticket + upgrade approach, thus renewing the miles as you fly (most of the time) in biz.

The two times I redeemed my Skymiles for awards were for tickets to Hawaii from the East Coast. First time was for a ticket on United for 35k (flight times worked out better), second time on Delta for 30k miles. Both flights had a stopover in San Francisco, and priced out close to $1000.

That brings up an interesting point. Maybe the 'value' of FF miles should be what we would have been willing to pay for a purchased ticket, not necessarily what the ticket actually cost. It's doubtful I would have paid $900-$1000 for those tickets (nor would I pay $2k-$6k for an international first class ticket).

Jeff

I've recently (while vacationing in Paris on upgrades to business class on AA) thought about this thread and I have totally re-thought the value of miles. I realizd that AA (as that's where most of my miles are, I will restrict my analysis to AA) provided anytime awards that have no restrictions - thus they represent miles' true value as they can be exchanged for tickets as if they were money.
I assume (if my assumptions are off, please let me know where I'm off) that business class flights to Europe cost about $5,000. Since an anytime business class ticket requires 160,000 miles (since my flights are for leisure travel, I assume the 2 ticket special reduced mileage awards), that works out to about 3 cents/mile. The restricted planahead ticket for 1/2 the miles shouldn't value miles at a higher cost per mile, because the tickets are capacity controlled. I assume that AA would value the planahead miles at the same 3 cents with a value for a business class ticket of $2,500. Thus, an 80,000 mile business classticket (plan ahead) would cost about $2500, while an upgrade would go for 50,000 miles ($1,500) plus the cost of the coach ticket ($1,000 in the summer, less in the winter - that's when the airlines discount (at least coach tickets) to Europe)(total $2,500).
On a related note, I try to buy as cheap a coach ticket as I can and upgrade, as I don't know how to buy a discounted business ticket any other way and the AA miles don't cost me 3 cents - they are basically free (if earned from flying, and maybe the 1+ cent/mile I could get as cash back from a Discover card. But, I can't get a business class ticket to Europe for the $800 in cash back or $500 in cash back on top of a coach fare.

Another issue is how many miles you have. If you have basically unlimited miles (you earn more than you could want to use in a reasonable time), you probably always travel for free. If you don't think you have an unlimited amount of miles, you pay the cheapest coach fare and upgrade (unless you can't afford coach, and then you use miles for coach).

What does everyone think?

.02 is a good benchmark, but only if deciding whether or not to use miles for a domestic coach ticket. Everyone is right in that with premium travel, using miles works out much better per cent wise.

I generally view both options and then make my decision. I have found it easier to book business travel using miles than trying to upgrade on a paid fare with miles. Greater flexibility as well as you have more options for routing as long as city pairs don't change. As for the stopovers allowed on AA, this is fantastic. CO charges something like an extra 15k to stopover en route.

Plus with the alliances, I get the opportunity to fly airlines I normally would not fly on, ie. Cathay Pacific fares to earn AA miles are expensive but mileage awards are even discounted sometimes.

Fares fluctuate so often, the idea of value is perceived by the beholder. If you feel you got a good deal, then you should not be dismayed when the passenger on the plane tells you he got his ticket for $100 or used less miles with reduced mileage award. http://www.flyertalk.com/forum/cool.gif

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"Fly me to the moon and let me earn alot of miles."

As to the value of miles I think it all depends on the individual. I think the argument about whether it is better to use miles for free coach tickets depends on two factors:

1. Amount of miles you have and can earn - if you earn enough miles through business travel or whatever that you will not run out, then why not go first class? If you do not or intend on having a free flight and not having to pay for coach to get a free upgrade, then the coach rewards are better. For me, I have to accrue double the miles (through business travel, credit cards, etc) as my wife does not usually earn miles - many of her trips have been free from my miles.

2. I think one should only value first class tickets at the price the airlines sell them at if that person would be willing to pay that price for them. Often they are over 5 times the price of coach. FC tix are priced as such simply because of supply and demand - there are business and wealthy travellers who will fly only FC and therefore the price is driven up. I highly doubt it costs the airline that much more to fly a passenger FC. It is the simple philosophy of the airlines to extract as much money as they think they can get from a passenger in whatever situation.

Some rewards I did that were good value:

- CO had a special 25K from N.America-S.America. I got a EWR-SCL flight for 25K. I had to purchase the other one and got it for $780 (published fare was $1200). There were flights with some other airlines that were about $100 cheaper, but they required connections or were out of JFK which I did not want.

- Since we were going to Easter Island, I got the SCL-IPC flights for 35K AA miles. That flight is usually priced at $900-$1000 and discounts are rare.

- I think if you take the off peak coach flights for 20K they can be a decent value. Any flight at least $400 would give you the standard .02 per mile. I booked some EWR-TUS flights because the ones with the flight schedules that were what I wanted were all about $600.

I will say that it is more difficult to schedule trips using miles than buying the tickets because the airlines have limitations on the number of reward seats on each flight. Something that was really difficult to schedule was the last one I did- use 20K CO miles and 20K NW miles to get two tix EWR-TUS for two people and have the seats together on the same flight. Even though both airlines can schedule and reward each others' flights, they often have differing numbers of reward seats available on each flight. I had to call back and forth for about 2 hours to get it worked out - it was a pain. Usually this is not the case if you are using miles from one airline only for a trip. Still, it is worth it considering I can plan a better vacation for the same money if the flights are free.

Here is something to ponder: I have to wonder if airlines are expanding the number of reward seats on the flights simply because they are rewarding more miles than ever before. Estimates say that over half of miles rewarded are not earned from flying. That means that many reward flights were earned from miles that were purchased from the airlines which means the airlines are not actually giving away the rewards in all cases. Depending on the partner and the agreement, I believe that they usually pay the airline between .01-.025 per mile. That means that your 25K flight, if the miles were not earned from flying that airline, would actually have costed the partners $250-$625.

If you have some time flexibility, wouldn't using Priceline lessen the ticket cost for domestic travel?

Just my 2 cents (not per mile...) http://www.flyertalk.com/forum/wink.gif

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WooHoo!