There's an editorial in today's "Economist" that gives some facts supporting our worst fear -- that the value of FF miles is heading for a fall. Here's an excerpt from the article:

"Miles outstanding have risen by an average of 20% a year since 1995—two-and-a-half times as fast as the supply of dollars. Central bankers would suffer sleepless nights at such reckless monetary expansion were it not for the fact that they are usually up in first class collecting double or triple miles. The plain truth is that airlines have been printing too much of their currency. They are issuing more miles than they can ever supply in free seats. (Only a small fraction of miles are used to buy other goods and services.) As any first-year economics student knows, excessive monetary growth can lead to hyperinflation and devaluation."

Here's another article on the same topic that isn't password protected:

http://economist.com/printedition/di...ory_ID=1112721

Isn't this already happening? For example, CO and NW are eliminating their off-peak (discounted) awards. Yet, with NW's current FFF2 promotion, it just seems like they are "printing" even more miles. Isn't it already extremely difficult to get free seats to choice destinations, even months in advance?

Does anyone out there think that we are entering a "beginning of an end" of sorts? I.e., will airlines make redemptions more expensive, or will they issue less miles and reward true frequent [B]fliers[B]? Or, less likely, will they make more free seats available? Another option is that airlines might encourage members to exchange miles for other goods, or even discounts. Who knows in which direction we are headed... Any thoughts?

Its funny that this comes out now as I was just saying to someone that I have two retirement plans

1. my pension and 401K at work and
2. My frequent flier accounts where I hoard all my miles where hopefully someday (like maybe retirement) I'll be able to use them when I have all kinds of free time

However unlike my 401K/pension which in theory is supposed to grow with each year of service and each year of contributions and market gains I will have enough money to retire on.. my ff accounts do not gain any interest and actually are in a state of deflation (barring certain promotions) where by the time I retire a free economy ticket may cost 50 to 100K.. Luckily I have 20 plus years to keep on racking up the miles and hopefully bonus'.

anyone else ever think about using all your miles at retirement yet are afraid that they will be worth significantly less when the time comes?

Yes and no. The end is already here for many of us, since the awards are nearly impossible to redeem on many routes.

Miles are still great to the extent you can use them for upgrades, but I don't have status so I don't have that option. On expensive flights, I have concluded that it is so difficult to get an award seat that the value of any award (considering the gymanstics one must endure in order to redeem) place the true value at less than a penny per mile. For this reason, I'm switching to cash rebate credit cards.

But I'm still collecting miles from MCI, Goldpoints, etc.

Another reason for considering using rather than "hoarding" miles.

Just a note about saving miles for retirement. Note that in most cases you will cease being an elite level in airlines when your using miles rather than money. This loss, further depreciates your miles and the experience that you will have when you cash them in. Been there, avoided most of that. AS miles, while a good value, are just not the same when your are no longer elite.

I doubt they'll implement something where they up the miles that you need for various awards. My guess is that they'll just limit availability, and then, you know what?

That's actually better for the airline. Folks have to cough up money, rather than miles, to get where they want to go. But, they do not suffer from the bad PR of changing the miles requirements.

What you have stated has crossed my mind as well referencing the hoarding and loss of elite status. I am hoping that I would fly enough to become the low or hopefully the mid tier elite. Then use the miles for u/grades by having a flexible travel schedule and the rest of my retirement travel each year would hopefully be award tix either up front or in Y.

Haven't read the article, but the quote is enough to get the wheels turning. First, I don't think comparing issuance of miles with printing of money is a valid comparison. The airlines issue miles for flights and sell miles to others (hotels, car rental firms, etc.). So, at least a portion of the miles generate revenue (perhaps 40% of all miles, if I remember Randy's statistics elsewhere on these boards). The government doesn't get revenue in return for issuing money. Getting revenue for selling miles basically amounts to offering prepaid seats. In fact, AA has long cited AAdvantage as a profit center.

Second, it's true that a larger supply of miles will likely mean more demand for awards. The airlines have numerous means to control the number of awards given away. They can raise award levels, offer fewer miles, restrict travel dates/times, reduce the number of award seats, charge more for miles they sell, etc. All of these will not win over their customers.

I believe the airlines with FF programs face a much larger problem than getting people angry over the inability to redeem awards. Namely, the value of the miles themselves. Used to be everyone valued miles at about 2 cents each. Randy ran an article some time ago that basically said miles were worth closer to 1.5 cents each now. (I value mine at about 1.4 cents each.) As the perceived value of miles drops, whether due to higher award redemption values or tighter capacity controls, FFs will put less of a premium on flying their favorite airline and more of a premium on ticket price. The result is less brand loyalty and more focus on ticket price.

Another example: there are a number of credit cards on the market that offer cash back as opposed to miles. If the airlines raise award redemption levels and ticket prices hold fairly constant (effectively lowering the value of a mile), many people would likely move from a mileage earning credit card to a cash back card. Reason being that real cash, at least in my view, is better than a similarly valued mile. As more people move off of mileage earning cards, the airlines sell less miles cutting into the revenue they generate from their FF program. My bet is that they would further constrict award seat availability.

We haven't yet reached the point where miles are of less value than cash back, but it sure seems we are headed that way. Another increase in redemption levels, say from 25K to 30K for a coach seat, would be a huge step in the wrong direction. At some point the airlines will push redemption levels too high. At that point, I'll be moving my business to SW and JetBlue...anyone who offers discounted fares regardless of FF program.

mdtony - some are raising "prices".

NW raised miles needed for awards by 25% this year. For example, domestic coach award went from 20K to 25K. "Rule Buster" US to Europe Coach seat now 100K.

Huh? Although I can't recall specific numbers, we did a case on this in a macro class I took from Paul Romer and the upshot was that the printing of currency and t-bills is an extremely lucrative business for the US government.

[This message has been edited by moondog (edited 05-02-2002).]

Wow, and the title of the Economist article matched my signature.

Now with the Gold Points fiasco, I am getting worried, should we go out and get award certificates printed out and then hide them under our mattresses!

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

Seems to me that doing away with mileage expiration (effectively) was a short-sighted move. It probably helped revenue temporarily but is now contributing to building up "mileage debt" in an uncontrollable way. Long-term it may prove disastrous to the airlines if they can't live up to the expectations they have created.

All the more reason to use the miles now rather than hoard them for later. After all, I don't hoard bread or milk for my retirement, either.

Own things that appreciate.

Lease things that depreciate.

Spend today that which is valuable now but could be worthless tomorrow.