Why are miles-based 1st & business class tickets a relative bargain compared to ECON?
 

A first class flight to Europe can be easily 10-20 times the price of an econ ticket, yet in terms of miles a first class ticket is only 2-3 times as expensive as an econ ticket. I am wondering why this is?

Just say thank you and accept things as they are now.

Because the airlines find that works for them.

The fact is that 99% of FFP members never think to redeem an award for something that doesn't cost the minimum number of miles (about 25k domestically, about 50k to Europe), and thus the "audience" for awards of any kind (even business class) at just double these lowest-miles-cost awards does not risk a "run" on business class or first class int'l seats.

Keep in mind that miles are used to get, for the most part, "excess inventory", and excess inventory in any (service) industry is priced comletely differently than "prime" inventory. The same very "non-linear" relationship exists in many hotel rewards programs, restaurant dining programs, etc, etc, in all (service) industries where inventory typically exceeds demand and pricing is mostly "what the market will bear" rather than related to any actual costs.

Another reason is because miles awards have been "simplified", as have business and first cash tickets, but economy cash tickets are priced all over the place. Your math is based on comparing the very cheapest economy fare, and you're forgetting that it carries more restrictions than the "discount" award does. So perhaps the discount award should be compared to something more like "minimal restrictions" economy ticket costs, in which case the discrepancy between economy and business and first would not be as great as your math based on "most discounted econony" produces.

Because if they start charging 600K miles for a F seat, nobody will redeem or collect, and that will truly be the end of FF programs.
Although, I can see it coming....

Because if they charge 600k for a F seat, then maybe only 1 or 2 persons who enroll in SQ Krisflyer would get to that stage, where miles expire after 3 years regardless of activity.

If the seat's going empty (according to the airline's load calculations), it's better to take some miles out of circulation for the seat than not. But why not charge 10 times the miles? Ask yourself who would pay that price. Most ff-hoarding individuals (value-oriented almost by definition) would find better value in flying 10 times in Y than one time in J or F. And the businesses that buy most of the J and F fares only very rarely use miles to purchase them.

Myabe I'm not understanding your question. It seems like your saying

"hey the airlines should charge many more miles for an F award ticket...but I understand nobody would pay that many miles...but the airlines should totally do it!!!"

I really don't folllow your logic.



Exactly! It's amazing how many people I know burn 25,000 miles on short domestic flight that I'll see listed on the airline web site for $225 or something ridiculous.

It's already there, see new QF "enhancements".

I think a more rational way to pose the question, is, when using cash money, why doesn't business class cost something like 1.5-2X the undiscounted coach fare, and 4-5X the discounted coach fare, rather than ~10X the discounted coach fare. It's my belief that, as they are priced nowadays, the VAST majority of business class and first class tickets are sold as upgrades and perks to elite status FFs, with miles, rather than on a cash basis. I don't perceive that the FF-mile price of these seats is out of line, I DO perceive that the cash price of these seats is out of line.

Many European airlines (most notably SWISS) are selling discounted business cheaper (or very close) than full fare coach.

from a cents per mile CPM view: miles are traditionally considered to be worth 1 to 2 cents each.

Prices just before recent tax, fee, fuel surcharge and award mile increases (DL going from 50K to 60K TATL), forgetting minimal taxes:

25K miles for a domestic you could buy for $250 = 1 CPM
50K miles for a TATL you could buy for $1000 = 2 CPM
100K miles for a TATL WBC you could buy for $5000 to $10,000 = 5 to 10 CPM return for spending your miles.

The discussion above points out one of the little "secrets" of successful award redemption.

Many people will request a "saver"-type award, and if that is not available will grudgingly agree to pay double for an "unrestricted" economy award. The smart person, when told a "saver" award is not available, before agreeing to pay double for the "unrestricted" award will inquire as to the availability of a Business Class award over the route. Many times in my own experience a Business Class award can be found for the routing; this saves miles, and the passenger gets to fly in a more comfortable seat enjoying free drinks in the pointy end of the plane.

An example: A TATL Round Trip US-Europe costs 50K miles for a "saver" award in economy, and 100K for the "unrestricted" economy award, but only 80K for a Business Class award. Do the math.

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MM => UA 98%, AA 95%

First, business class is not always ~10x coach. This summer, there were TATL tix for ~$2,000 return on CO, and somewhat more on NW & DL. For the best fare one needed to book 60 days out. These fares are often available at other times although not always as low.

Second, the strange pricing issue I run into is that on a TATL award ticket, the increment for WBC is 25,000 miles. If upgrading with miles from a paid coach ticket, the increment is 30,000 miles PLUS the $200-400 increase in upgradeable coach fare. With that difference, I typically book WBC over (so I can sleep) and coach back, hoping for an exit row on a 330.

The OP asked why airlines get 10x the price for cash sales but only 2x the price (or less) for awards. My point is that there are buyers for the 10x price in cash (businesses do routinely buy these seats at those prices) but not for awards (businesses rarely buy with miles, and miles-hoarders would not perceive good value at 10x the miles).

Right, the answer to the OP's question is "supply and demand."

Still, I share the OP's general point. To me, 120K miles for something like IAD-NRT-BKK round-trip on NH/TG with a stop-over in NRT in first class is an awfully good deal. Certainly worth more to me than about five domestic round-trips, or about two of the same itinerary in economy class. Each person's preferences vary, of course, but the only thing that I ever plan on redeeming miles for is an international premium class trip.