Travel is great and it’s even better when you can save money. Recently I booked a roundtrip ticket to Sydney, Australia using 80,000 United Airline miles.
Sometimes though, I’d rather buy an airline ticket with my trusty credit card even if I have miles available.
Why is that you ask? Because the value of each airline mile is not fixed. Paying for the ticket can be better in the long run than redeeming miles if the value per mile is relatively low.
Let’s look at a couple of examples
I recently searched United for a flight from San Diego to Chicago and the lowest fare was around $300. If I wanted to book the same ticket with miles, the lowest fare would be 25,000 miles and nearly $80 in fees.
So in this case the miles would worth less than 1 cent per mile. The fees were $80 so I would save $220 ($300 – $80 = $220) by using 25,000 miles. The value per mile works out to be .88 cents, ($220/25,000 miles = .88 cents)
How about the Sydney trip? To purchase the fare would have cost $2,000 but with miles I only spent $100 in fees, so I’m saving $1,900 ($2,000 – $100 = $1,900). Which means the miles were worth 2.375 cents per mile ($1,900/80,000 miles = 2.375 cents)
So for the Sydney trip the miles were worth nearly three times as much as using miles for a Chicago trip. (2.375/.88 = 2.7 times as much!)
That’s crazy isn’t it?
Well, not any crazier than the different airfares available depending how far in advance you purchase, first class versus coach, or paying extra for another four inches of legroom. It’s just part of the world of airline pricing.
Also, United isn’t unusual and their mileage program is comparable to other airlines. The reality of air travel is that miles and awards have different value depending on several factors such as domestic vs. international, first class/business vs. coach, or phases of the moon.
First class or coach?
Often you’ll find that when redeeming miles for tickets, the value per mile is much higher in first/business class than coach. Then you have a choice to make. Should you use more total miles for a better class of service at a higher value per mile or fly coach and save miles for another trip.
Hmmm, what is a traveler to do? If you’ve saved miles to use on a specific dream trip then why not go first class? On the other hand, if you travel a lot, want to stretch miles as far as possible, and don’t care about legroom, food, or other creature comforts, then coach might be the answer.
The decision is really just another life choice with no right or wrong answer. Factors to consider include how many miles you have, how often you travel, how fast you can earn future miles, and how much you value the experience of flying first class compared to just getting from point A to point B.
Pay attention to what your miles are worth
The important lesson here is pay attention to what your miles are worth. I usually like to get at least 2 cents per mile when I redeem them although it’s not a hard and fast rule. But if you’re using miles and the value is 1 cent or less? Not a very good deal.
Of course your situation could be different. I have a friend who travels internationally for work so she accumulates tons of airline miles. And since she travels so much for work, she isn’t that excited about taking more trips in her free time. She does book reward flights for her own vacations and gives miles to friends and family. But because she earns so many miles and uses them infrequently, she isn’t as concerned about the value of her miles.
Of course most of us aren’t in that situation.
Should you buy miles?
Most airlines allow you to purchase their miles. For example, United sells them at the not-very-low price of 3.5 cents per mile. Which means if I wanted to buy enough miles for the Chicago trip I’d have to pay $875 (25,000 x .035 = $875). Of course, it would be crazy to buy miles for 3.5 cents only to redeem them for .88 cents but it’s a good example of the widely different values for miles.
Other times, airlines allow you to purchase additional miles for a specific flight after you buy a ticket. In those situations, the cost per mile is usually very high and not worth it.
Does this mean you should never buy miles? Not necessarily. As Chris Guillebeau points out, he sometimes buys miles when airlines offer them at discount prices. He then uses those miles to redeem for high value international flights, such as buying miles that cost $1,500 and redeeming them for tickets worth $4,000.
What’s all this mean? The main point to keep in mind when dealing in airline miles is always repeat to yourself, “what’s the value per mile?”
Be careful how you acquire miles and how you use them. Often domestic flights give a low per mile redemption value while international flights are much higher. Even better values come from redeeming to a higher class of service such as business/first class compared to coach.
And buying miles from the airlines? Usually not a good deal but sometimes it can be.
It can be confusing at times so always repeat to yourself, “what’s the value per mile?”
photo credit: Corey Leopold