tnmlyger

At the end of the day, the value of a mile depends mostly on what you would be willing to pay for a flight. It's not about what the airline is asking but it is about what price point you would pull the trigger at.

For instance, say I am looking to book a return flight from MUC to SEA in C. The most I will ever pay for this route (or for any business class ticket to anywhere in the world) is $2,500, so this sets my price point. Say an award ticket costs me 100,000 miles and $100 in taxes.

You'd be tempted to say that - to me - in this scenario, the value per mile is $0.024 - but that is incorrect. If I were to buy a ticket, it would also net me roughly 21,200 miles. Essentially, it's not 100,000 miles covering $2,400 but 121,200 miles covering $2,400... or $0.0198 per mile.

I don't know if other people think like this as well but what you're doing wouldn't be all that helpful to me as a service for this very reason.

dkc715

Based on your initial analysis, shouldn't one cease to accumulate UA credit card miles worth around 1.6 cents and get 2 cents immediately from cash back cards? Fidelity has offered 2 cents per dollar spent for years. And now I see Citibank just this week announced a "Double Cash Card", with no annual fee. Just pay cash for all of your UA tickets (which happen to also earn miles versus none for free tickets) and stop accumulating miles (from cards). Then use your miles from flying United toward upgrades. Or use miles but only if the cost of the ticket gives you a mile value well in excess of 2 cents.

I still have a Club card for access to the lounges, but stop using it for purchases other than United air tickets.

Anything wrong with my logic?

JBord

I think this is generally good logic, in the fact that you're saying the value is relative to the individual. But there are trade offs to consider, and always exceptions. We've had similar debates about the value of GPUs. Let me provide one example of a trade off (building on your example):

Let's say I think ORD-LAX roundtrip shouldn't be priced higher than $400. So if it's $450 your theory would suggest I should use miles. However, I don't earn 7000 RDMs if I use miles, so do I subtract that value? Do I even care about earning more miles?

Then you get into the debate, on international flights, are miles more valuable as an upgrade tool? If I refuse to fly economy long haul, is it a better value to use miles for a J ticket or better to buy Y and use miles? Technically they could be valued differently for different purposes.

Long answer to say you're 100% right...the value is determined by the individual, not a mathematical formula. The many value formulas people have created over time are still very useful in making comparisons. For me, I can easily see that I would rather pay $200 than 25k miles, based on one of the simple valuation calcs. For someone who has to unexpectedly travel across the country for a funeral and doesn't have an extra $200, but has a bank of credit card miles, using RDMs could be one of the best deals ever.

SwisherTown

I spend $70,000 and get 70,000 miles. You spend the same and get $1,400.
Who will be flying in BF TPAC?

OTOH you take your $1,400 and hope there is a 100% bonus special and buy 80,000 miles.

blug

That's exactly a big problem of your analysis. Miles are generally most valuable when redeemed for long-hual first/business class. So, e.g., if you want to analyze the value of AA miles, you have to include CX F in the analysis. It will take one a long time to be able to afford CX F with a 2% cash back card, but it's much easier with an AA card.

As to specific credit cards, many people pick the UA explorer card for the sign-up bonus. The UA Club card earns 1.5 miles/$, so it's more valuable than the 2% cash back cards. The Chase ultimate reward cards are popular because of the flexibility of reward points (many people value chase points higher than 2 cents/point).

kale73

SwisherTown, you are actually underestimating the card mileage earnings. If you have the Explorer card and spend $70K (in a calendar year), you earn 80K+ miles (1 mile per $ + 10K bonus at $25K spend + double miles if when you use the card with United), + PQD waiver for Plat & lower status.

If you have the Club card and spend $70K you earn 105K+ miles (2 miles per UA$ and 1.5 miles for all other $$$) and the PQD waiver.

Your case is stronger than you stated.

gldwebs

I will point out to everyone bringing up the credit cards, the value of a mile (or anything in life) is what you can get for it not how much it costs you to get it. What you earn with a cc or for flying is more like your "salary". It's what your buying power for that salary that really gives it value. It's almost like the Consumer Price Index. Take a sample of various items you can buy with that currency and use it to create an index.

flyingnosh

I doubt that people who charge $70k/yr on a credit card are the target audience for OP's website.

jmw

But what happens if some of us value international business or first class at only $150 more than economy? No way I would ever pay $5k for first class. I know a lot of people who don't read flyertalk and consider paying for first with miles a big waste and paying for first with cash is ridiculous. I happen to agree with that viewpoint. After the devaluation, premium classes are ungodly expensive with UA currency. If I were 6 inches taller or if I had a back problem, I'm sure I'd pay for first class with miles and cash. Certain family members get put in premium class. But I'm not that tall, nor do I have a back problem. So I sit in the back. I like buying fuel dump fares too, so that means I'm doomed to almost always sit in Y.

At the end of the day, putting 1x spend on an airline card instead of a 2x (or better) cashback card is a waste. I got no problems with anyone chasing sign-up mileage bonuses. I do that too.

s0ssos

I don't think the close-in ticketing is as valid for everyone. You're right that closer to the date the tickets are more valuable. For non-elites they also have to pay significant amounts for even the ability to book that ticket.

Another question: if you are talking about comparing ticket prices to redemption awards, the biggest gain is on those short flights which nobody else services. Look at how much Rochester (RST) Minneapolis (MSP) costs. Or Rapid City (RAP) Chicago (ORD) on AA. Or what about Alaska flying out to Adak Island? Those economy-class (only one class) are the most expensive ticket per mile I can imagine (domestically, that is).
And do you talk about one-way? Because some airlines offer one way, and that is all you need. And as many know one-ways can be more expensive than round-trip.

MojaveFlyer

I like the aggregate metric for close-in tickets and it's great to have more sophisticated numerical analyses of this issue. Though as others point out, there are other sorts of trips for which this analysis may not be valid, certainly one of the reasons I like to carry a small balance of miles in various programs is to cover the "family emergency" sort of very close in ticketing that I use infrequently but for which I value my miles. OTOH, most of my trips are planned far enough in advance that I'd probably need a different model. I could specify a number of destination cities that I usually spend my miles on, and then perhaps ask what are some typical ticket costs with 2 months advance purchase vs. award seat availability.

I think it's really hard to get it right, though. As others have mentioned, secondary factors are if one carrier, e.g. UA, has higher priced seats, then that might result in a greater cpm, but that is not necessarily reflective of a better value. Another factor is whether I care about miles I would accumulate if I paid, and that in turn depends on my status as to bonus miles. The Saver award issue is another - I'm guessing you're just looking at fare buckets are available? I was just reminded of this as I'm looking for some end of year travel, and was rudely reminded of AA's recent downgrade of mileage value by increasing their award brackets. For the flights I'm looking into, AA wants 80K for a domestic ticket while UA wants 50K (no chance for Saver around those dates).

I did take a look at your web site and I do like the underlying concept, as I'm making exactly the same comparison right now for the same trip Also would be good to factor in whether pax want to consider purchasing the "better economy" seats, for which they may qualify by virtue of elite status on some carriers. The concept of dollar value for time is a good way of normalizing some of these variables.

I appreciate your effort as I've been thinking about these issues as we move on into 2015 in which, for me, the whole game changes with spend-based mileage accrual. Was thinking to get rid of my miles-back CC in favor of cash back, but then started thinking, if everyone is getting fewer miles, and the prices of awards do not change, that might make the miles-back a decent deal because the miles could be worth a tad more once the current glut of unredeemed miles gets used up and award availability increases. Of course, that analysis too could be made worthless easily, as the carriers determine how many seats to put up for award and that can change the game without notice any time.

Oh yes, another is value of possible upgrades on a paid fare, which I'm thinking about because I have one on UA for tomorrow which just came through

SwisherTown

So use the number $35,000 or $10,000 or make the spend over two or three years and the fare purchased coach.

Value means, as been seen by many of the comments in this thread, many things. Even if it meant only one thing it would have limited value. Only if I were in a situation of choosing one airline or the other it would have value to me.

Does the calculation consider availability of awards? Also does it include upgrades purchased with miles? If you can't use your miles they aren't worth much.

wharvey

How close in is close in for your research?

I know UA charges a fee for close in award redemptions... are you including that cost?

LaserSailor

Asking if a theory is flawed on FT?

Tough skin!

One cool thing you can do is trending. Regardless of what bias your study has, you can see if the legacies stay in order and how much the mileage value changes over a few months

sakaike

Who is the target audience of the OP's calculations? To answer my own question, it's apparently folks that are considering the tradeoff between a close-in ticket paid in cash versus a standard award.

How many people are there who do this? Certainly not me.

In my 20+ years of earning and redeeming miles/points, I have never used them for a close-in redemption. Granted, I've been lucky to not need to use them for a family emergency (knock on wood) and stuff like that.

I have used all of mine for family vacations, and we always plan those several months out, trying to grab saver awards early, or gambling on getting them closer in. I've got to believe that the size of the audience who uses miles/points in this manner is much greater than the pool looking at the tradeoff the OP is investigating.

If I were the OP, and was interested in providing a service using this kind of data, I would focus on the type of tradeoff that provides the greatest value to the greatest number of people. I don't this tradeoff is it.