Cheaper to Fly on Points than to Buy a Ticket?
 

I was just doing some doodling with a spreadsheet (yes I checked and rechecked my figures) and figured out my cost per mile for this year so far. It works out to 4 (US) cents per mile (airline portion only) because of various special promos, elite status other bonuses etc. etc. I can get an Air New Zealand transpacific business class flight for 85000 frequent flyer miles that cost me $3400 US to earn(I did well on cheap flights). It would cost me $6185 to actually pay for that business class ticket. The way I see it is I got to fly to lots of places I wanted to go (usually at someone else's expense) and got a free ticket by spending half of what it would have cost to buy it outright. I know this doesn't make sense -- the airlines must see that they have to cut back somewhere. This insanity is good for me in the short run but I know it won't last. Get those miles and use them while you can! THE END IS NIGH! (or is it?)

What is interesting is that airline costs are around 8 cents per mile! In effect, the airlines are selling miles for less than their own operating costs. The 2-3 cents per mile they charge hotels, car rental firms, phone companies, and the like are not freebie give-aways. They only way this can be justified is because the airlines will not fill every seat. The additional cost of carrying a passenger on a less than full flight is next to nothing (probably less than 1 cent per mile, if that). The sale of miles coupled with the less than full planes suggests that airlines are most likely making money on the FF programs, not losing. Believe me, if they were losing money the program would be gone in an instant!

Don't forget about all of those miles that expire ... I'm sure that those are built into your cost calcs MileKing ...

I'm lucky -- my miles don't expire (Air Canada).

as long as you are PremEx on UA (over 50'000 miles/year) miles don't expire.

Your math on the cost of ff miles is interesting BlondeBomber and MileKing. I have not thought of breaking it down that way.

This is a more simplistic (SP?) way I use to
decide on taking a free ticket.

I only flown on free tickets twice:
an Air France flight between Paris and Berlin
in Business... and a round trip in Business
to Australia a few years ago. At the time
the tickets were high and doing my math I would be saving hundreds of dollars just going for the free tickets.

If I can get a reasonably priced coach ticket
and upgrade using miles on the LONG HAUL trips, then I will NOT go for a free ticket.
(This way I'm still earning miles for the
next upgrade/free trip!)

My other criteria is if the land and vacation
end of the trip gets too high, then I'll take
a free ticket.

You are absolutely right MileKing: if these
ff programs were costing the airlines money
They would have been gone a long time ago.
I say "Long may they fly!" CATMAN

Wait a second here.

Yes the airlines cost is about 9 cents
a mile. and they "sell miles to hotels
and such at 2 to 3 cents, but they still make a huge profit.

25000 miles sold at 2 cents per is 500 dollars, with that you can fly NYC to Las vegas for free, about 2200 miles, roundtrip 4400 miles.

Lets see 4400 times 8 cents is 352 dollars

500-352=148 profit. Add in Blackout dates,
expiring miles, capacity controls and such
and you make nice $$$$ if your an airline

Blondebomber - how would the same calculation work if you took off all those Air Canada bonus miles? - I remember your delight when the strike ended, they had huge sales & triple miles giveaways - I know that you scored really well on that, but you can't expect the pilots to strike on a regular basis... The strike must have cost them a lot, & winning their clientele back would have been expensive for them too.

Besides, BB, you seem to be great at working the Air Canada system - I'm certain that most of their ffs don't profit as much as you do...

Good point Baobab. Without bonuses, I recalculated and it worked out to about 7 US cents per status mile which is roughly what it was last year (6-8 cents US). Still I would have gotten all that flying in anyway (which I had to do mostly for business or volunteer work). That would mean that it cost only as much to earn a reward ticket to Australia as it would to buy one outright. Still it means that, in a way, you can "have your cake and eat it too". If you work it right you can fly to a variety of places for fun and get free tickets too--all for the same price as what the free business class tickets would have cost if you had to purchase them separately. Beware -- if you aren't doing this as part of your regular job, it presupposes that you have some time on your hands, enjoy travelling, and enough money to pay for the other travel costs. Not for everyone and doesn't work for discount economy tickets!

I agree with Catman. For domestic flights, that one can get a good deal on, it is not a smart idea to waste FF miles. I have flown 3X on FF tickets to Central America, once taking a companion. If a fare costs $300 to go to the midwest, I would purchase the ticket rather than use the miles. This way I can save my miles for the foriegn travel. I keep one account for free tickets, which I save the miles, and various others which when they get to the award level, I use them for domestic travel.

No to disagree with Blonde's analysis but the big issue here is how do you value a free business class ticket. My own personal "rule of thumb" is I value the B-class ticket (internationally) to be worth about 50% more than the cheapest available economy as that is how much extra I would be willing to pay "out of my pocket" to fly in business. So I value a free trip to Asia in eco to be worth around $1500 (takes 60-75K miles) and a trip in business to be worth around $2200 (takes about 100K miles). But if you truly value the b-class ticket at it's "replacement cost" value $6000-$7000 then you are doing really well per mile (around 7-odd cent/mile).

Moral of the story - if you follow Blonde's criteria alone - you should never ever claim an economy reward - as the value will always be better per mile for Business or First. But IMHO alternate criteria must also be considered. (Please do not construe this email to be in any way disrespectful to Blonde's or any other contributor. Thanks.)

I think that is a good conclusion Megamiles, i.e. business tickets are the best use of miles. I also agree that I would seldom pay for a business class ticket for "leisure" travel so you have to base your evaluation on what it is "worth" to you, not the ticket price.

I need a job like you folks, where the company will actully *pay* for business class, and I dont have to use my own precious certs and miles to get up front :o)

BTW, I did the BlondeBomber calculation - summed all my spending on airline tickets in 1998 so far and divided it by the total number of ff points earned in 1998 so far from air activities (including bonuses and promo's). My answer was US 4.1 cents/ff mile. But this year was exceptional due to several AC promo's and of course the strike bonuses that I took liberal and ample advantage of. Neglecting those (but still counting status-related bonuses just not the triple miles or promo's on certain routes) my cost per ff mile is about US 7.5 cents /ff mile.

So my numbers are exactly in line with BlondeBombers which I thought was quite interesting. I would encourage everyone (especially Rudi) to do a total amount spent / total (air-related) frequent flier points earned and see what the numbers look like.