What is the formula to figure out cost of miles?
 

It seems to me there is a formula to figure out if the ff award miles you are using on a particular trip are worth it. I can't remember how to do it and what the magic number is. Can someone help?

Different people use different rules of thumb. The "retail" price of miles if you buy them from the airline (for example to "top up" your account so you have enough for a redemption ticket) is between US$0.02 and $.03 per mile, i.e. 2 - 3 cents.

Others have computed that when you add credit card annual fees, the markup credit card companies charge merchants etc., that most "invisible" miles are costing you around 1 to 1 1/2 cents per mile, although this is hard to measure.

So one easy rule of thumb to use is, am I getting at least 2 1/2 or 3 cents per mile value from the miles I'm redeeming? So for example, if an award ticket requires 25,000 miles, would the cash price of the ticket be $750 or more? If the answer is yes, then you're "making a profit" on the miles. If the value is much less, then you <i>might</i> see it as not worth spending that many miles, but saving them for flights where they would have greater value.

For example, say you use 25,000 miles for a domestic round trip that would cost $400 if you bought the ticket. That's less than 2c per mile value (actually quite a lot less, since you're also giving up the miles you'd earn on the flights as well as the miles you're redeeming.)

Compare that to 100,000 miles you'd spend on a business class round trip ticket to, say, Europe. Most of the time, you'd have to pay $3000 - $5000 for that ticket if you bought it, thus the redeemed miles have a value of 3c to 5c each. That's more than you paid for them under virtually any scenario, hence it's more profitable.

Of course this all assumes you have the cash to pay for tickets regardless of the redemption option. Many people don't, so "inefficient" mileage redemptions might be their only option. In that case, the value of the miles is irrelevant; you need to travel, you have the miles but not the cash, bingo.

For me generally 1.5 cents per mile per trip but lots of times

I pick them up for FREE when signing up for no fee credit

cards in which case my cost is Zilch so it is quite variable.

Last year picked up www.ba.com for free got 50000 miles then

put $2k on the card got another 50000 total 100000 miles

Paid for 2 europe fares then cancelled the card no charge.

Many deals like that out there not that one unfortunately.

So it is quite variable there is no one set formula.

I think loisco is asking about the value of FF miles when one is looking to buy tickets, not the cost to acquire.

She has 250k AA miles the bank, wants to fly 2 pax first class CA to east coast, and is questioning the best way - spend 50k FF miles per person round trip, buy a first class ticket outright, or some combination of $ and miles.

My general rule of thumb is about 1.25c to 1.5c/mile - which means that if I can buy a domestic coach ticket for less than about $325 or $375 I'll spend the cash and not the miles. Using my rule of thumb that would mean if I could fly first class SAN-NY, BOS-SAN for around $700 then I'd buy the tickets. Anything higher than that I'd use FF miles.

Different people will have a different threshold - it all depends on your cash situation, what your other upcoming travel plans are, and if you have any special plan for all those miles.

If the miles are precious to you, as in you've been saving them for that special trip to Europe, SA, or Asia then your threshold might be higher as gardyloo says.

I acquire a lot of ff miles through credit card programs and business travel, so hoarding miles for some undetermined future trip doesn't do me any good, and I can't take them with me...

I too jumped on last years Chase BA Visa special. 100k bonus miles, added on top of the spend $30k/yr and get an any-class 2fer coupon and it seems to be the best deal in a long while. I'm hoping to get a 2nd 2fer in early 2011 for a summer 2011 family trip to Europe.

Great explanation!...we can't go round trip as there is no non-stop AA from Boston (our last leg)..so the cost of Jet Blue getting home is an EXTRA cost. We can't handle change of planes or airports.

We also have that Chase BA voucher and plan to use it for Europe trip. Seems to me the FF route is the way to go.

<i>We can't handle change of planes or airports.</i>

Could you handle flying out of LAX instead of SAN? In that case AA has nonstops to/from both JFK and Boston.

I will check into that LAX idea. Many thanks to all of you...

I've never bothered to do the calculations. Do I have enough miles to go someplace I want to go? Yes? Great, get the tickets. Although, I do tend to save FF miles for overseas trips and purchase domestic tickets. It just seems easier to find cheap fares for domestic tickets.