Alas, I think Delta and American Express have already identified the solution to the arbitage opportunity created by rising money fares and fixed mileage redemption rates. I expect we will see all major airlines implement some form of penny-a-mile redemption, and this will allow them to easily restrict fixed rate redemption availability to seats which they project would otherwise be unsold.

My feeling is that with most of the US domestic airlines cutting their fleets the price of tickets will eventually rise and the availability of free seats will decline. Therefore the free seat might become more valuable but will be tougher to obtain.

I don't think the OP is wrong. Given the dramatic out-of-pocket cost increases for purchased tickets the value of miles is definitely increasing for some carriers. It is also plummeting for others that are tacking massive fuel surcharges onto award redemptions.

I suspect that this is not a permanent state of affairs, however. We are currently in a very sweet spot for spending FF balances.

Many frequent flyer programs are basically buy 5, get 1 free programs. If the price of the tickets are going up, the redeemable rewards, and hence the value obtained is the same.

Certainly, if you banked a ton of miles, and got them for 4 cpm, and you can redeem them for 10 cpm, you'd doing very nicely indeed. This benefit will fade in time, as all the new tickets you buy are at the much higher prices.

The problem comes when they start adding fuel surcharges to the reward tickets. It's then, no longer the buy 5 get 1 free system, but more like a buy 15, get 1 free.

I know that when I head the FA on my NW flight last week say, "Use your Worldperk miles for free travel", I take them at their word. If I pay more for travel, to earn the future miles, why would I ever want to pay a surcharge that erodes the value of my FF miles?

The value in terms of flight miles is the same. The value in dollars is higher.
Your point is consistent with the idea that the cost of a new mile is higher
than the cost of an old mile, so the value of an old mile is going up.
That was the OP's point.

The buy X get one free model is useful only to the extent that you earn miles by flying. Miles earned from partner transactions do not cost more when airfares rise, but are potentially worth more when redeemed, unless redemption ratios are increased in step with money prices.

Serious? I hate to say this, but uh.. what do you think will happen when prices go up? The price to buy an award fare will go up! It used to be 20k for a ticket, now it's 25k on most airlines... how long until it's 30k or 25k for a steerage class ticket in the lower 48? Or 70-80k to Europe? Personally, as much as I love my miles, I'm thinking that "divesting" might be a fun thing to do...

The value of an old mile is going up for the airlines -- so they want to devalue the old miles.

For the consumers, couldn't the OP's argument be summarized as wishful thinking that what may be a short-lived anomaly will persist for longer than the airlines want it to last?

As they say in finance, "don't fight the Fed"[eral Reserve]. In the FFP mileage program, the airline is like the central bank that issues the funny money currency that are FFP miles. Good luck "fighting 'the Fed'", for you'll need all the luck you can get when the airline is intent on devaluing the consumers' "old miles" as much as it can get away with devaluing them ... at least without melting down their whole system.

I'd have to side with Gleff and the burn crowd. If they keep award levels the same and fares go up it looks to be worth more, but if you've got capacity cuts they can pinch the number of seats. More worrisome, though, is anything that reduces competition among the legacy carriers. That drives benefits more than anything else, and LCCs like Southwest that set the fares don't have the same impact in the FFP arena. The biggest bit of leverage left is probably fear of non-flying miles revenue drying up, but how sustainable over the long term is it to have so many unredeemed miles and a shrinking number of seats?

That's the way I see it.

One might make the argument that the 'value of a mile' has increased a bit for redemptions on certain routes that have increased in price of late. However, that shouldn't encourage hoarding, but, rather, should make burning make that much more sense.