What "rule of thumb" do most folks use when calculating the value of their miles. For example, when you're comparing whether to buy a ticket or use miles?

There will be serious dissension regarding your question but I still use $.02 per mile as a guideline. Subtract a percentage if you will for the reduction in amenities in both FC and Coach,
I use most of my miles for Int'l BE fares so if the fare is over $1,600 RT...knowing I can use a PMU for an upgrade...I'd go with the 80,000 miles and choose an award certificate.
Most Int'l B/E fares are considerably higher than $1,600 so if you can score an award seat for "only" 80,000 miles, I'd say go for it. I'll actually burn miles for an award certificate at around a fare of $1,000.You didn't indicate what class of service you were looking for or how many miles you were willing to spend.
I've fortunately got more miles than I can use in two lifetimes so I'm not as sensitive to the actual value of miles.

Another way to look at the value of miles is when considering bump (DL Travel) vouchers. Today they "reward" you with $200.00 to give up your seat.

If you consider that it takes 25,000 miles for a free coach roundtrip in the US is 0.02 * 25,000 = $500.00

Therefore, if you just want to fly a cheapy coach roundtrip between say, Fort Walton Beach and Atlanta (< $200.00), you could accept the bump, use the voucher, and still have a few bucks left over. Alot of people will also tell you they feel better about burning FF miles only when taking longer DL mainline jet trips, so you are getting more bang for the buck. Short haul commuter flights are really a waste to burn miles on if you can help it.

Also note, that when travelling on an award ticket (attained via cashing in miles), you don't get skymiles for the trip - whereas the voucher does earn miles.

According to Delta Air Lines, miles are officially worth 2.75 cents per mile.

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Miles cost $0.0275 cents per mile plus 7.5% tax and a $25 processing fee.

I believe that may be a typo at Delta�s Internet web site. The miles are either officially worth $0.0275 per SkyMile or 2.75 cents per SkyMile.

Then again, considering the devaluation of the SkyMiles program, maybe SkyMiles are currently really only worth almost three-hundredths of one cent per SkyMile...

[This message has been edited by Canarsie (edited 07-27-2003).]

Care to point out where Skymiles REDEMPTION has been devalued? All I see in the last couple years is addition of new partners (eg. Virgin) and new award options (eg. Skyteam awards).

That's what DL sells them for. It would be interesting to know how they value them for accounting purposes. I would suspect it's a number somewhat less than $.0275/mile.
The value to FF's varies depending on how many they have and on what routes they use them, obviously. Where I might feel that the only good use is an Int'l B/E ticket, others might find the ideal use is for a family of four to MCO to offset part of their vacation cost.

Hi hunkyleebo, and welcome to the DL board. Your question truly belongs on the MilesBuzz board. Although several board members are giving you DL related answers, the question does not pertain to DL. If you were to do a search on the MilesBuzz board, you will discover that this is a question that has been discussed numerous times including this six page thread that really covers the topic.

Therefore I am moving this thread to MilesBuzz.

Rssrsvp - Moderator

Hi

Ref the value of miles, my own figure is closer to 1 cent per mile. While this happens to be on the lower end of the scale, let me try and justify my value.

Lets take the utility approach, ie, what is the "utility" of the miles. Mind you, it is not the price of the ticket, but the price you are willing to pay for a "similar" ticket.

Let me illustrate the 2 points.
a. For example, while the walk up economy class fare might be USD 1000, one could get a 2 week advance purchase for say USD 300. Now, since most award requests would have some sort of a early purchase requirement, you should compare a similar fare.

b. Would you pay USD 4000 for a business class ticket in cash ? If you're a poor soul like me, most likely not. You'd pay USD 1000 for a coach ticket, and maybe USD 1500 for a biz ticket. So the utility value of a biz class ticket is only USD 1500.


A second point is that of the mileage earning opportunity cost of using the miles as a award. That is, if I were to take a paid ticket, then I would get miles and bonuses and special bonuses. By using the award, I don't get those. (In addition, I miss out on earning status, but let us ignore this for now).

Third, an award ticket is not really free free. You do pay taxes. So you need to subtract that from the calculation of the miles.

I did a basic formulation (based on the point of indifference) and the following equation comes up. Seriously, it makes sense!!

v <= (p - t) / (x + y)
where
v: value of miles
p: price (utility value) of the ticket
t: taxes
x: miles needed
y: miles earned (base+bonus)

Example::
Suppose a tix is available: 400
Taxes to be paid on an award ticket: 40
Miles needed: 25000
Miles earned: 5000

Value of miles: (400-40)*100/(25000+5000)=1.2 cents

This is a fairly realistic scenario. So, the value of the mile is approx 1 cent.

QED.


IaLTO

The value of your miles is the equivalent out of pocket cost of comparable travel YOU wish to use them on. Therefore what an airline sells them for at retail although possibly interesting, is really irrelevant.

However if you want to know what airlines sell their mileage for at "wholesale," you can "back into" the number by considering the so called excise taxes some partners [Alamo, Sprint, etc.] will assess you on their accrual. The last time I went through the computation it turned out the partners were representing their actual cost totaled about $0.013/mile.

Therefore wholesale cost appears to be about $0.013/mile, whereas retail cost is about $0.0275 or more/mile.

Does this mean your equivalent miles are worth somewhere in between these two numbers? No. Again, the value is what it would otherwise cost YOU for comparable travel and that cost varies from person to person.

Thus if you can purchase a coast to coast advance purchase restricted round trip economy seat that itself accrues close to 6K of frequent flyer miles for $250 or less; you assume the 6K of frequent flyer miles are worth their wholesale cost [$78]; and to secure the same ticket using frequent flyer mileage would cost you 25K miles plus $20 in taxes; your 25K of frequent flyer miles are really worth about $150 or less, or roughly $0.006/mile.

On the other hand if you use 80K of your frequent flyer miles on a low season European round trip business class ticket that costs $7K, your miles are being valued at nearly $0.09/mile.

Would you rather use your miles for travel worth less than half a cent/mile or travel worth 18 times that amount?

If you don't have the luxury of waiting to use your frequent flyer miles for travel worth $0.09/mile then what I use for a "rule of thumb" is $0.0125/mile. Simply stated if my travel costs less than comparable frequent flyer mileage redeemed at $0.0125/mile I generally purchase it. If it costs more I then CONSIDER [on a case-by-case basis] whether or not to use my mileage instead. Once my cost of travel hits about $0.015/mile and given a choice, I almost always will use mileage instead of cash.

Hope this helps you in answering your inquiry!

This is from an MCI offer for miles on BA:

"BA miles earned are subject to a Federal Excise Tax surcharge not to exceed $0.0013 per mile."

Apparently the wholesale cost of miles is even less than we thought! I'd sure like to buy a bunch of miles at that rate.

That's the tax per mile not the price per mile.

Hi!


If you look at the equation below, you'll see that the value of a mile dimishes as the bonuses etc increase. So, it follows that the value of the mile is lower for a Elite than for a non-elite.

Also, airlines that run mileage promotions, would indirectly, lower the value of a award in that period, as it is actually more attractive to buy the tix than use an award.


Maybe the best value of miles can be achieved when say a PE 'gifts' them to non-elites. This is a clear arbitrage opportunity. )

Lets look at an example (same as earlier)
Suppose a tix is available: 400
Taxes to be paid on an award ticket: 40
Miles needed: 25000
Miles earned: 5000

Value of miles: (400-40)*100/(25000+5000)=1.2 cents

But for the PE, the miles earned is say 10000 (100% bonus).

PE value of miles: (400-40)*100/(25000+10000)= 1.03

So, if trading were allowed, a PE could sell the miles for 1.1 and both parties would be happy.

IaLTO

You apparently posted this in the Delta area but didn't mention Delta in your message, so I can't tell whether you're asking specifically about Delta miles or about miles in general.

I know nothing about Delta miles. But in general: Miles get you different things at different airlines, in terms of award AVAILABILITY, award ticket flexility, etc. And you may or may not have use of those.

I can give you a British Airways example: Buying the cheapest ticket over the holidays from Los Angeles to Brussels was a bit over $1000 there and a bit under $1000 at the cheapest alternative. But I may need to change the dates or destination later or maybe even cancel, and all these discount flights cannot be changed! If I wanted to buy a ticket that let me do THE SLIGHTEST changes, the lowest price was about $4000 on BA and $3000 at the cheapest alternative.

But regular BA awards allow you to make changes for a small fee. And because of availability problems (6 months out!), I couldn't get a 40000 mile award straight through, only a 40000 mile award to London and then a separate 20000 mile award to Brussels.

So in this case 60000 miles can equal $4000 (or at least $3000).

But had I had no need of the flexibility, those same 60000 miles would have equaled only about $1000.

Now, $1000 divided by 60000 is 1.67 cents a mile, but $3000 divided by 60000 is 5 cents a mile, and $4000 (if I specifically only wanted to fly BA but had to pay for it with flexibility) is 6.67 cents a mile.

And if I had wanted to go other than over the holidays, I would have needed only 40000 miles for the same award (back before July 1; 50000 now). And if I'd been able to use a no-changes/no-refund discount economy ticket, other than over the holidays it might be well under $1000. But if I need a changeable/refundable ticket, that's the same high cost any day of the year. $4000 goes into 40000 miles giving a whopping 10 cents per mile.

But as you can see it depends ENTIRELY on how you're going to use it. If you don't need the refundability that you're getting with a BA award ticket, the exact same miles are worth a fraction of what they would be worth if you did need the refundability.

And that's just for one airline for one specific city pair in one specific week. So you perhaps can begin to see how extremely difficult it would be to provide you a general answer to your question without risking being off by a factor of 5 or 10!

Some interesting comments on an old question. My thoughts:

1. If Delta thinks miles are worth 2.75 cents each, I hope they'll offer to buy my miles at that price.

2. I agree that the value of miles depends on how they will be used by the holder, meaning the amount he/she would have paid for the same travel. In most cases, this can not be measured mathematically, since there is no true comparable for sale by the airlines.

For example, a free Int'l Bus class ticket can't be measured by the "rack rate" price of a Bus ticket for sale because if you spend all that money to buy a ticket, you can fly when you want and change your travel after it starts easily. The award means booking months in advance and changing dates is tough or impossible.

Another example: Int'l Bus using an award to upgrade purchased coach. We all know the pice of lowest upgradable fares have risen dramatically over the past few years. This reduces the value of the upgrade award since you have to pay more to use it, but the increase doesn't lend itself to easy measurement.

At this point I use 1 cent per mile as the value to me.

the absolute best use of miles is getting the bw [beautiful wife] into c,j on over the pond flights[ either pond]. saves a lot on divorce costs.

for us , international ug's are the most desirable ...sometimes 6-8 cents/mi. when comparing disc coach to full c,j. 2nd is relatives domestic last minute gift tickets.

i just returned from a caribbean trip where i opted for 30k mi's instead of $900 [$825 after paying tax] [$775 after paying $50 to make the computer go to extra work to do it in less than 21 days]