The value of a mile

At some point, every frequent flyer program member looks at the balance on his monthly mileage statement, scratches his head and wonders, “What’s a frequent flyer mile worth, anyway?”

We’ll get to that shortly. But putting the cart before the horse, it’s worth considering whether and why the question is worth our time.

There’s a twofold answer. First, an understanding of what determines the value of a mile is essential in getting the best return on investment when redeeming them. And second, a realistic assessment of a mile’s worth will help avoid overpaying on the earning side.

The value of a mile = The price of a ticket

Getting back to the question at hand, part of the answer is blindingly obvious: A mile is worth whatever it can be exchanged for. As it turns out, that’s the only thing that can be said unequivocally.

Since more miles are redeemed for restricted coach-class round-trip domestic tickets than for any other type of award, one ready way to place a value on frequent flyer miles is simply to divide the price of a restricted domestic ticket by 25,000 miles, the going rate for a restricted free coach ticket.

But that just begs the question: Which restricted ticket is our price proxy?

As we go to press with this article, the spread between the lowest and highest restricted fares is enormous, a multiple of 50 or more.

At the low end, budget travel expert Tom Parsons found a $38 round-trip fare between Los Angeles and Las Vegas, and a $198 cross-country round trip. If you were to redeem 25,000 miles for the Vegas ticket you could have purchased for $38, your miles would have been worth a paltry .15¢ (that’s 15 hundredths’ of one cent). And miles redeemed for a transcontinental award ticket valued at $198 would be worth .8¢.

At the high end, a seven-day advance purchase ticket can cost as much as $2151. If you were to cash in 25,000 miles for that ticket, you’d be getting the equivalent of 8.6¢ per mile for them.

The above airfares are more hypothetical than actual. In the real world, capacity-controlled teaser fares are few and far between; and anyone paying $2151 for a restricted transcontinental ticket would be a shoo-in candidate for buyer’s remorse. But it gives you a sense of the range of award values available for 25,000 miles.

Today, in the real world, fares for a select few popular award routes, and the corresponding mileage values, are as follows:

Route	Restricted Fare [1]	Mileage Value	First-class fare	Mileage value
New York – Los Angeles	$335	1.3¢	$3788	6.3¢
Chicago – Miami	$225	0.9¢	$2324	3.9¢
New York – Honolulu	$840	2.4¢	$4392	5.5¢
New York – London	$394	0.8¢	$11,548	11.6¢

[1] 14-day advance-purchase with Saturday stay over

After free tickets, the second most common use of frequent flyer miles is upgrades.

Here, the computation is slightly more involved because the value of the miles reflects the difference between what was actually paid for the upgradeable ticket and the published price of the ticket for the upgraded class of service.

For our sample routes, miles used for a one-class upgrade?from coach to business or first, depending on the configuration of the aircraft?would have the following values:

Route	Base coach fare	Next-class fare [1]	Upgrade value [2]	Mileage value
New York – Los Angeles	$335	$3788	$3453	17.3¢
Chicago – Miami	$225	$2324	$2099	10.5¢
New York – Honolulu	$840	$4392	$3552	11.8¢
New York – London	$394	$5300	$4906	12.3¢

[1] Business class on three-class aircraft, first class on two-class aircraft
[2] Difference between base and upgraded fare

Miles for sale

Another way of gauging a mile’s worth is by considering its value on the open market. While you can’t sell your miles, you can certainly buy them, either directly from the airlines or from a third-party vendor.

Most airlines sell miles, both to consumers for their own accounts and to businesses for use as sales incentives. Members of the programs of American, Delta and United, for example, can purchase up to 15,000 miles per year for between 2.5¢ and 2.75¢ each, plus tax and processing fees. And Miles4Sale sells miles in the programs of American, Continental, America West, and Delta for 4¢ each, plus a processing fee.

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Getting your mile’s worth

Based on the preceding considerations, following are some general guidelines when redeeming frequent flyer miles.

Redeem for expensive flights

The value of an award, and therefore of the miles used to obtain it, is the ticket price, not the distance flown on the award trip. Because airfares are driven more by competition and demand than by operational considerations, longer flights may represent poor return on investment. It is not uncommon, for example, to find fares to Singapore offered for as little as $500. Or, you could redeem 60,000 miles for the same trip. In the latter case, you’d be getting the equivalent of .83¢ per mile, very much on the low end of the scale.

All that glitters…

If you were to slavishly chase after the highest value-per-mile options, you would use your miles almost exclusively for upgrades and first-class tickets. In practice, that may not be realistic. And numbers aside, the underlying assumption?that a first-class seat is worth many, many more times what a coach seat is worth?is a questionable one.

For business travelers?who use easily upgradeable tickets and have plenty of miles to cash in?upgrades are a sensible use of miles. And if the focus is more on wants than on needs?a honeymoon, or the “trip of a lifetime”?then a first-class award trip to Europe or the South Pacific may be just the thing.

But for many of us, two free trips in coach represents better value than a single free trip in first class, no matter how strongly the financial analysis might suggest that the first-class trip is the superior cents-per-mile choice.

Saver awards are rightly so called

It’s no accident that we’ve used restricted awards in our discussion and examples.

As mentioned elsewhere in The Joy of Miles series, most airlines offer two classes of awards, restricted and unrestricted, also known as saver and anytime awards. Since the latter require up to twice as many miles as the former, saver awards obviously represent significantly better value.

Don’t overpay for miles

The flip side of not cashing in your miles capriciously is not earning them blindly (i.e., don’t overpay to get them). Here’s a typical mileage-earner’s dilemma:

You participate in the mileage program of airline A. But for your next trip, you could save $100 by flying airline B, which either doesn’t offer frequent flyer miles or offers miles which don’t further your earning goals. Assuming, further, that the trip in question is 3,000 miles, and that price and miles are the only differences between the two options, you are essentially faced with the question: Should I pay $100 for 3,000 miles (i.e., is 3.3¢ per mile reasonable)?

The answer, of course, depends on how much value you expect to be able to wring out of those miles when you redeem them. If you anticipate cashing in miles for an award with a value that exceeds 3.3¢ per redeemed mile, you can justify paying extra to fly on airline A. Otherwise, save $100 and fly airline B.

The two-cent rule, revisited

The old adage that a frequent flyer mile is worth 2¢ is just that: old. It traces back to the days when the average price of a round-trip domestic coach ticket was close to $500. Which meant that a 25,000-mile award represented, on average, a per-mile value of 2¢. With the proliferation of discount airlines and the falloff in demand for travel, the average airfare has been driven down somewhat, pulling down the mile’s value with it.

Still, as rules of thumb go, it’s not a bad one when applied judiciously. If a frequent flyer award has a value of more than 2¢ a mile, it’s certainly worth a second look. If not, consider purchasing the ticket or redeeming the miles for a more expensive trip.

For all the efforts at quantifying and benchmarking, the value of a trip remains irreducibly subjective. Which suggests a two-step approach. First, do the math. Then, do what feels right.