The Value of a FF Mile is on the Rise
 

The new game plan in the airlines industry is becoming quite obvious. By reducing capacity, the price of an airline ticket will go up with the continued demand. At some point in the future, the leisure traveller will be priced out of the market and travel will become a luxury again of the wealthy, the corporate flyer (flying on our dime really) and those of us with hordes of miles. A frequent flyer mile will again be worth 2 cents, maybe more depending on how high fares get.

Sure the airlines can adjust the awards charts, but will they? I don't think so as the frequent flyer programs are one of the real and constant money makers for the surviving airlines whoever they may be. Five percent to 9% of available seats will still have to be available for awards or the programs themselves will lose their value and appeal.

So today, the mileage hoarders win, and those that have been burning their miles are coming up short, as their stockpiles of future travel are diminished.

Our asset's value is on the rise.

Miles increasing in value?
 

haahahhahaaahhahaaaaaaaaaaaa <cough> haahahahahahaaaaaaaa

Funniest post of the week! FF miles value on the rise? Oh, puh-leeze. Fuel surcharges, increased miles for rewards, probably more blackout dates. All of these will lead to the quick devaluation of the award programs.

Gosh, didn't AA just a couple of days ago dramatically devalue its miles.

IMHO just an indicator of things to come.

Less competition means less need for "loyalty" generated via miles programs.

Burn, baby, burn! @:-)

You haven't been paying attention! They already have started (and the "already" is several days ago, this is was "already" at the time you posted your message). AA is adjusting the award charts on many things, except the domestic lower-48 capacity-controlled coach is staying at 25k.

So perhaps if you only think of your awards for use in the lower 48 domestic capacity-controlled coach 25k, then that may stay the same.

But even Hawaii (a perennial award favorite) is going up.

Meanwhile:

One size didn't fit all before, and one size doesn't fit all now. Redeem for a shorter flight that still costs less than $200ish (say LAX-SFO) and it's still going to be way less than 2 cents for a long time.

Redeem for a business or first class ticket across an ocean, and it's always been worth way more than 2 cents for a long time, and even with the award charts on that crreping up, continue to be.

So I don't understand this stilliness about how a mile will "again" be worth 2 cents. A miles was always worth a completely different amount depending on how you used it!!!!

And by reducting capacity, the availability of capacity-controlled (25k, etc) awards will go down, and more people will either not be able to use their awards when they want or will have to use the "anytime" version that costs double (50k, etc). That's increase of value per mile???

Of course, this again all depends on specifics. In some markets where the capacity is not reduced but business travel drops off, awards may become easier to get (but prices may also not go up as much), while in other markets where capacity is reduced but travel demand doesn't drop off proporitonately, award may become near-impossible to get (except at double the miles for "anytime" awards) even as prices go signifcantly higher in those markets.

And it may also vary a lot from airline to airline.

That man's funny, Mommy. ;) BTW, I have a bridge located conveniently near to my house to sell, longest bridge in the world, 24 miles long in fact. Nice toll collecting booths already in place, should be a real money maker for ya. And I'll give you a heck of a discount because I myself don't have time to man these booths. What do you say? :cool:

sdsearch is correct. A frequent flyer mile was and is about 2 cents ... depending on the flight. I never used miles for "cheap" flights, always went "far" (RSW-SEA, RSW-SFO etc.).

Our asset's value is dramatically decreasing.

An example:

BA MIA-LHR-CDG-LHR(stopover)-MIA = 50,000 BA Miles, which is OK. But on top of this $596.54 taxes, fees, charges and surcharges (as of 6/2/2008).
Bottom line: Book as fast as you can ... crude futures rose above $138 a barrel (source Bloomberg, 06/07/2008)
ingy:
I don't know in "what world" you are living ... and I don't want to bash you.
But it's a fact: Airlines are in a BIG TROUBLE! And they are not giving any gifts ... at least for now and the foreseeable future.

Ingy, Perhaps you are a Cassandra. Time may very well prove your point.

Great Replies
 

But here are the facts:

There have been 17 attempts to increase fares in the last 5 months. Thirteen of those increases have stuck. It would appear to me that prices have increased. Can you accept that?

http://www.bestfares.com/news-newsID579-All_Major_Airlines_Raise_Airfares_A_Whopping_$60_R oundtrip.html

But the domestic saver redemption is still 25,000 miles and that redemption is the typical and most common redemption in the industry. I'm not talking about FT'er's that usually have more savy than those redeeming for domestic tickets.

To "Joe Lunch Bucket" when he redeems a reward, he is getting more bang for his mile, and the value of his mile is increased.

Sure we will have award increases. We always have, and always will. My point being the 10K increase on a Hawaii award will be a minor increase when they are done increasing fares to where they need to be to stay in business.

In my mind, my 500K AA miles are still increasing in value.

And when I swap them into Hilton Honors points they still get me a hotel room no matter how crazy the prices in New York ($500+) and Chicago are.

So you keep burning and I'll keep earning.

Burning and earning are not mutually exclusive. I burn 'em (got a couple of biz seats to Turkey a couple of days ago--with a stop in Spain, for August, amazingly enough).

But, I also use the Citi card and fly AA on paid tickets.

I don't save my miles for a rainy day, though. Cause it is pouring. :)

By the way, I'll be in NYC soon. Is turning AA miles in Hilton Pts for a NYC hotel good value compared to internation biz or F?

wait for the European fuel surcharge on awards idea to hit the US ... burn your miles if you can! I always burn them as soon as I hit 200k

Absolutely. I've come to the conclusion that hotel points are definitely more worthwhile than airline miles. You can get four free nights in the Conrad Hong Kong for the same cost as one (saver) biz ticket to Europe or Japan. And six free nights for the cost of an F ticket.

I realize I am in the minority here, but I am going to side with Ingy. I usually don't burn miles for domestic awards, but recently faced with buying 4 tix PHL-DEN during ski season ($500 a pop) and a ticket PHL-LAS to play bridge in July ($500 if I took the red eye return) - I burned 100K miles and 25K miles and found it a good deal. OK I have 3MM miles and points "hoarded" (not really hoarding but I earn 'em faster than I can burn them).

Taking the family to the Grand Canyon next July. If I can find $250 tix I will buy. If they are $500 again, I'm gonna cash in miles and be happy to get 2 cpm.

The other thing that would support the OP's hypothesis is the speed in which the market is changing. Yes, the airlines are starting to raise the redemption levels, but for the most part, these changes are rare and not immediate.

So what happens under rapidly changing conditions - under an economy where oil can jump $10 a barrel in one day? I do think the frequent fliers will learn to accept award chart changes, but we will not accept charts that change as often as airfares do. The airlines may reset the charts to absorb $150 oil, but if they do that and then oil hits $200 weeks later, it will be hard for them to reset the levels again.

That inherent lag time between cash fare increases and award fare increases does represent an opportunity for holders of miles, and an increased value of a mile itself.

The caveat on all this is the availability of capacity controoled seats. Those can be reduced as quickly as fares increase. But, if you're able to be flexible with your plans enough to find flights with available seats, I do think that the coming months will present more opportunities to redeem your miles getting whatever benchmark "value" from them that you look for.

I agree:
-Prices have increased
-Domestic saver redemption are still 25,000 miles (with a very low fee; just paid only $10 for RSW-SFO-RSW on United)
However, some saver rewards with AA, United, USAir .... are no fun: very early or late departures and/or connections.
I believe, that the airlines are in such a mess ... they will look for revenue where ever they can get it. So, I burn the miles as soon as I am able to get the trip I want.

ingy:
Hint: Use your AA miles on AA partners ... November 2007 I used AA miles on LAN MIA-SCL-Mendoza-EZE-MIA .... AA is OK, but LAN is better.

If the price of awards don't go up, and if you can find the award seat you want, then the bang for your buck of each mile goes up when the price of tickets go up.

But both of those are big ifs in the current environment.

Take a simple 25,000 mile domestic coach award. Frequent flyer programs have been wildly profitable in a world where they could buy an airplane seat that would have otherwise gone unsold for less than $30 (price they pay the airline for marginal cost of additional passenger), redeeming miles that they might have sold for $325 (25k miles @ 1.3 cents per mile). Nice margin, huh?

But when there aren't so many seats going out empty, they are no longer truly able to buy seats at marginal cost or at least as many seats. A seat that would be otherwise sold has to either become more expensive to the frequent flyer program (since the award seat is displacing a paying passenger) or the seat just can't be available (more draconian capacity controls)... or to balance things out for all players the price in miles of those seats has to go up (more miles because the price of the seat to the program goes up).

When too many miles are chasing too few seats, either the seats are just unavailable or the price goes up.

That was my prediction based on a simple economic model back in 2003, and it's pretty clearly been borne out.

Miles become worth less over time, that much is obviously once you think of miles as a currency and the loyalty programs as the governments printing those currencys -- in a world in which there's no independent central bank charged with fighting inflation ;)