understanding of cpp value calculation
 

Hello Folks,

Just want to have the question/discussion about the cents per point (cpp) calculation. This question/discussion is more about the point usage for flight in general, not particularly for UA. As we all know, the equation of cpp is: ($ Actual Flight Value - $ Tax & Fees) / Points * 100 = CPP

• Example: if a UA domestic economy class flight values $200, and point cost 12,500, then the cpp for this flight is worth 200 / 12500 * 100 = 1.6; if wanted more accurate (including tax & fees) => which point cost 12,500 + $5.6, then the cpp should be: (200 - 5.6) / 12500 * 100 = 1.55. And as we collected many DP and/or use other big data tech, we can conclude some airlines have average of 1.x cpp value and other airlines have average of 2.x cpp value.
• Then, when we have long-distance international business class UA flight values $4,000, and point cost 100,000 + $5.6 (in saver award), in this case, the cpp value is gonna be: (4000 - 5.6) / 100000 * 100 = 3.99; this is the time when people usually say you are redeemed in a great value of cpp.

However, all of the case above, and majority of our real-life redeemed situation is in one-way, not round-trip. Many times, especially in international flight, round-trip price is not equal to 2 * one way price.

• Example: Economy flight round-trip between EWR to HND costs $2600 in November; but one-way EWR to HND is $1600 and one-way HND to EWR is $1800 => $2600 < ($1600 + $1800). This is because of the pricing model & strategies behind the scene for different airlines.

From the one-way vs. round-trip comparison above, is the original calculation of cpp: ($ Actual Flight Value - $ Tax & Fees) / Points * 100 still valid? I understand we definitely can't say one-way price of a trip = round-trip / 2, but is there anything we need to change for the formula, or simply using original calculation would be making sense?
Second, is about the flexibility. Currently, AA/UA/DL has waived any change/cancellation fee, airlines like VS/BA charges small amount fee for change/cancellation for all award ticket flights. Revenue-based tickets are mostly non-refundable, or with a certain amount of fee. Do we also consider other factors like this for cpp calculation? If yes, how we gonna quantify them?

Thank you in advance! Please share your wisdom and ideas in this thread.

Every traveler must make his own assessment of the value associated with full refundability of award tickets (where offered). There is no "formula" for assessing that.

With many airlines, you can purchase fares that offer full cash refunds (as opposed to merely credits for future travel), but those fares tend to be very expensive.
​​​​​​

At a minimum, it should be evaluated on a half-round-trip basis unless one-way travel is what you actually need. Award flights make an excellent choice for one-way international positioning exactly because of that discrepancy.

Bloggers whose business is selling clicks on how to generate "miles" will of course torture the accounting to inflate their cpm.

Thank you, I think you have a fair point.

Here is another of my example, Let's say I want to redeem a Business Class outbound flight and an Economy Class inbound flight. To calculate the cash value of the flight:

• Case 1: if using half-round-trip basis you mentioned, then the price is going to be half-business-round-trip-price $490 ($980 in full) + half-economy-round-trip-price $210 ($420 in full) = $700
• Case 2: if using single ticket face value, then the price is going to be business-one-way-price $1100 + economy+one-way-price $360 = $1460

Which one do you think is the better case to compare?

Also need to consider the miles you'd earn on a paid fare.

Case 1. In most cases, economy fares and business fares can be combined on a half-round-trip basis, so you should do the same thing when computing value.

That said, I see very little benefit in trying to compute cpp to this degree. The overwhelming factor here is the rapid devaluation of award miles. It is much less important to stress over the last tenth of a cent of value than it is to protect against the tendency to save up miles indefinitely looking for the perfect redemption. This is definitely a place where you should not let the perfect be the enemy of the good.

Is this the main purpose of this posting because the airlines / UA are not that static. Not only is the pricing by route and demand, a given route will vary. Previous observations have shown (for UA) there is not a fixed ratio between mileage pricing and award pricing.

I would say yes and no. I definitely want to get a better sense of how the award pricing of it. But also, I want to understand people's ideas on this and how they value it.

There is also the logic that says you should value it at what you would be willing to pay, not what the ticket would have cost. This comes up typically in the C vs Y debate. If you could get Y for $500 on a paid ticket, but C would be $5000, would you value your miles at $5000 or $500 (assuming you would only pay cash for the Y amount) if you redeem for C?

As noted above, everyone has their own way of valuing miles. I generally start with a trip I want to take, then search for a revenue ticket and a mileage ticket and do whatever comparison I want at that time. Generally I have an idea of what I'm willing to pay for the flights (e.g. $350 to take the trip), and I'm comparing the mileage ticket to that. For international long-haul, I simply look for C redemptions and don't look at what the revenue ticket would cost for C, as I won't ever pay for it. I don't evaluate any of my mileage usage on a straight CPP scale.

With dynamic pricing and the ability to earn status via award travels, good luck factoring those behavior changes.

The most important thing to realize is that flight value is very often different from flight cost. Value can be a very personal thing.

Your "small" is someone else's "unreasonably large".

There are situations where using half of a round trip price to determine a one way cpp is also not the right thing to do. For example, one search I've done recently is LAX-AKL-LAX in J, departing March 12 and returning April 6. A round trip prices around $8.5k in J. LAX-AKL one way in J is $5.5k, and AKL-LAX one way in J is $2K. I got two IN awards for 100k miles each, and I would say that I am getting ~5.5 cpp.

As a counterpoint, I compare to what a similar journey would cost with the same search effort, rather than exact same flights. If I am planning my trip around award space, I compare to a good fare on the market, usually something like $2,000 r/t for the US to Europe for example.

The pitfall with comparing cash fares at the time of redemption but ignoring fare conditions can provide a false sense of "win" - e.g. some one-way cash fares can be stupidly expensive whereas the same one-way in award likely won't have all of the same parameters.