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How much per mile to make an award ticket worthwhile?

How much per mile to make an award ticket worthwhile?

Old Apr 14th, 2008, 09:23 AM
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How much per mile to make an award ticket worthwhile?

Hi! Can anyone remind me the formula generally used to calculate if it makes better sense to use miles or buy a ticket? I'm looking at 250 euros vs. 40,000 miles. Thanks!!
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Old Apr 14th, 2008, 09:29 AM
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I have seen various theories on how to value FF miles, ranging from a US .01 to .025 per mile. The scenario you cite sounds like it would be an OK, not great, deal.
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Old Apr 14th, 2008, 04:56 PM
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The most common rule of thumb out there in FF land is that you've payed (buried in credit card fees etc.) around US$.01 to $0.015 per mile, so 40,000 miles would "break even" at around $600 for ticket price.

In practice most FFers would not consider using miles unless the redemptive value was $0.03 or more, i.e., 40K miles would need to buy a ticket valued at $1200+.

Remember that the real mileage "cost" for an award trip is not just the redemption miles, but also the "opportunity cost" of miles not earned on that itinerary. So for example if the €250 ticket would earn, say, 5000 additional miles, your net mileage cost for the trip is 45,000, not 40,000. (Or, if you use a mileage-earning credit card, another €250's worth of miles, say 375 at 1 mile per USD, making the "net net" mileage cost 45,375 miles.)
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Old Apr 14th, 2008, 05:16 PM
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Of course if you are redeeming the ticket for someone else who does not have the opportunity to earn very many frequent flyer miles on that particular airline, and thus won't be in a position to earn enough for a ticket, the equation could vary.
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Old Apr 15th, 2008, 12:36 AM
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Thanks everyone!

The 250-euro ticket is SIN-HKG on a low-cost, no-frills airline, so it won't earn any miles; and it will be bought using a non-mile-generating credit card. From this angle, the "real" cost will be 40,000 miles (plus $75 ticketing fee, I believe), right?

On the other hand, US$600 (the "break-even point" for 40,000 miles) converts to 380 euros today, so the 250-euro ticket is still "cheaper" than the 40,000-mile award ticket on UAL.

I guess I'll go ahead and buy the ticket. Thanks everyone for your help!!
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Old Apr 15th, 2008, 04:42 AM
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You made the right choice. I would advise against redeeming at anything less than 2 cents per mile. And I try for closer to 3. The 1 cent per mile is what you should pay, but if you don't get more than you pay, why bother to collect them at all?

And, regardless of the value per mile, I generally will not redeem for anything less than $500.
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Old Apr 15th, 2008, 07:16 AM
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I think most people who spend time trying to calculate the value of FF miles are frequent flyers, and are thus in a situation where there are multiple potential uses for their miles.

For people who fly less frequently, the miles have very little value. Its not like they are currency, or currency equivalents, with multiple potential uses. They pretty much have to be used to buy tickets, or to get discounts on tickets. They earn no interest, and you can't take them with you to another airline, or when you die. For these people, the value of the miles is what you use them for. So if you have x thousand miles, and can get $50 off on a ticket, and your alternative is to not use them, the $50 is a good use.

The airlines value outstanding FF mile obligations very low on their financial reports, possibly because they know many people will never use them, and possibly because they are free to alter the terms of usage to minimize their costs. What is the value of a million miles if the airline has such strict capacity controls that you can never get a ticket?
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Old Apr 15th, 2008, 12:15 PM
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I was going to make a very similar point to that of clevelandbrown.

I know all about the rule-of-thumb that one shouldn't redeem miles for less than 2-cents per mile, and generally that's what I try to do.

However, there are always exceptions. Two situations come to mind. F

First, in some cases I need to use up my FF miles in some program or other before they expire and I don't have time to find a really good deal.

Second, which in some ways is similar to the first, I don't believe in hoarding miles because in the long run miles get less valuable, not more. So once I get over a certain number of miles I start looking for ways to spend them. And sometimes I just can't find a way to spend them that goes where I want to go, when I want to go, and meets the 2-cents minimum criterion.

Ed
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Old Apr 15th, 2008, 01:20 PM
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I'm with the last 2 posters - cash is king and FF miles are a depreciating asset. Use them when you can, within reason of course.
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Old Apr 15th, 2008, 01:42 PM
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...FF miles are a depreciating asset...

See, we just have to disagree there.

A couple of weeks ago I used 75,000 AA miles for a business class RT ticket between Europe and South Africa (leaving next week.) The best available purchase price (using "I" fares if available) for the same itinerary would have been around US$5800, so I received a value of around 7.7 cents/mi.

Two years ago I did a similar trip (roughly same dates) and the fare then would have been $3900, but I also used 75K miles then too, for a value of around 5.2 cents/mi.

So the value of my miles has appreciated by what, 48%, in two years? As the cost of air travel continues to shoot upwards, while redemption rates stay constant or inflate more slowly, then the value of one's miles appreciates rather than depreciates. At least that's my take on it; YMMV.

Of course if the airline goes tango, or forces you into using "peak" redemption rates, then the math changes. However I'm not aware of any instances where redemption rates have increased as much as fares have (in percentage terms) over the past couple of years, at least on routes and with carriers with whom I'm familiar.
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Old Apr 15th, 2008, 08:31 PM
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Agree with Gardyloo. This may be something of a window period in which the relative value of FF miles as actually increases as cash fares rise. And with the euro socking it to the dollar, travel to the continent from the US is down enough that seats are available, sometimes even at the lower standard rates. I just scored 3 RT tix to Paris (in the front of the plane on the outbound for 75K each, which translates to about .04 per mile at the lowest currently available fares. No doubt than sooner or later carriers will have to raise redemption levels or place more restrictions on seats, but for now it seems like a good time to burn some miles.
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Old Apr 16th, 2008, 12:59 AM
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I looked around more and found a UA ticket that costs the same as the ticket on the low-cost, no-mileage airline, so I think I'll buy that.

The ticket is actually for my husband and his dates are not flexible (public holiday, long weekend), which is why we're stuck with either a more-expensive-than-normal ticket or a standard award ticket. I am staying longer so I can actually get a "saver" award ticket.

Considering a Europe (where we are) to N. America economy saver award is 50,00 miles and a Europe-Africa saver award is 60,000 miles, I find 40,000 for SIN-HKG quite expensive. The miles won't expire for more than a year and we're adding more with a trip to South Africa through Dubai in a couple days.

Thanks again for the insight!
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Old Apr 16th, 2008, 01:26 AM
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One suggestion:

You might also price the ticket out in Business class on United. I've seen some pretty cheap pricing on these sort of add-on routes. Last December, I remember a biz ticket on Emirates from HKG-BKK was only maybe $100 more than the cheapest coach ticket. Kind of a fun treat.
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Old Apr 16th, 2008, 11:14 AM
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Hello, ngodeia!

Why are you wasting so much money on a mere 3 1/2 hour flight?

Check out Jetstar airlines, based in Singapore. They can get your husband from Singapore up to Hong Kong for a lot less than 250 euros!
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Old Apr 17th, 2008, 09:19 AM
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travelgourmet & JohnAtLC - Thanks for the suggestions!! I've tried different airlines and different classes of service (JetStar was the one I found initially for 250 euros) and no luck. I think it is because the weekend I am looking at (May 16-19) is a holiday weekend in Singapore.
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Old Apr 17th, 2008, 09:52 AM
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zuji.com is showing certain CX flights SIN-HKG on your dates for S$524, which is about 250EUR. More flight choices can Jetstar.
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Old Apr 18th, 2008, 07:59 AM
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Thanks rkkwan!
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Old Apr 20th, 2008, 08:44 PM
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The relative value of a Mercedes may be higher than that of a KIA Spectra, but that doesn't alter the reality that in absolute terms, the former costs a lot more than the latter.

In other words, while I follow Gardyloo's logic, many people are not in the market for business class seats either in terms of miles or cash. For those who do not fly on business, but who accumulate miles only on the basis of flying on leisure trips or of charging personal expenses to a credit card, the full cost of ACCUMULATING miles (as opposed to spending them) is also greater than a superficial analysis suggests. To accumulate miles on a leisure basis, one must pay not just the cost of the ticket but the entire trip. If, for example, you pay an average of $2500 for each trip that accumulates miles, then this must be figured into the cost of accumulating the associated miles. So, if the leisure (as opposed to business) traveler is not careful, hoarding miles can become a case of trying to save money by spending it (kind of a losing proposition in most instances - especially if we are talking discretionary expenses, as is the case for leisure trips.)

In brief: the answer isn't just a matter of applying a formula, but of considering all of one's relevant circumstances.
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Old Apr 21st, 2008, 04:47 AM
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Sue_xx_yy makes a valid point. I value miles at 1.5 cents each and then try for a greater value than that upon redemption. Recently, I booked two coach tickets to Paris at 40K each by using the carrier's vacation package site. That's a 10K discount per ticket compared to standard, minimum level award tickets. I can't get r/t tix to Paris from my home airport at $600 each anymore and even considering the miles that I won't earn, it's still a good deal. Moreover, I don't know if I could have seen my way clear to make the trip at all for after-tax cash. In biz class, I would NEVER be willing to part with the money that it costs.

Capturing value has some "eye of the beholder" aspects to it and ultimately, the only thing you can do with those miles is USE them anyway. My own valuation is one that rests on "avoided costs" and I therefore need to look at something that I would at least be somewhat willing to buy in the first place.
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