The Disturbing Case of the Shrinking Mile

“A mile sure isn’t what it used to be.”

Standing at the LAX departure gate recently, in line for my flight, I overheard that snippet of dialogue between two road-weary businessmen. And while I wasn’t part of the conversation, I found myself nodding my head in agreement.

What, you say? The mile is getting shorter? Holy space-time continuum!

Actually, this isn’t a case for Chief Inspector Einstein. Because it isn’t the length of a physical mile that’s decreasing, it’s the value of a frequent flyer program mile.

Since the early days of frequent flyer programs, there has been a vocal minority of naysayers who warned that, mileage-wise, the end was near. These cranks, gadflies, and sensationalists argued that since you don’t get something for nothing—as we Americans know all too well—loyalty programs must be rotten to the core, essentially high-flying Ponzi schemes. And in the end, the great majority of Ponzi scheme participants get burned by their own greed.

So far the airlines have proven them wrong. But if truth is relative, the skeptics are more right today than they’ve ever been. And while there’s no imminent danger of the programs disappearing outright, it’s worth considering the undeniable dilution in their value.

The new mileage math

The old math, which pegged the value of a frequent flyer mile at two cents apiece, was based on a tapestry of interwoven assumptions: that 25,000-mile award seats were readily available; that the average price of a domestic round-trip ticket was in the neighborhood of $500; that “free tickets” were genuinely free; that the programs (and their airline owners) were stable enterprises that would be in business long enough to deliver on the promise implicit in mileage programs; and so on.

But one by one, those tenets have been eroded or overturned.

Award seats? What award seats?

It’s a staple of cocktail party chit-chat among frequent flyers: the horror story about Ms. X, whose earnest efforts to secure an award ticket with her hard-earned miles prove epically, comically unsuccessful. The stories are typically nothing less than Kafka-esque, depicting the deserving individuals being run around and ground down by a monster bureaucracy whose overriding mission is to confound frequent flyers’ efforts to redeem their miles.

Get the award seat you want: Five ways to improve your odds

Since there’s no independent body tracking consumers’ experience with mileage programs, it’s difficult to quantify the award-availability problem and chart its ebb and flow over time. But as someone who follows the industry from a consumer-advocacy perspective, I can testify that I’ve seen a steady increase in negative reports over the past two years.

And a recent survey of very-frequent flyers by e-Rewards, an online rewards program, supports the anecdotal evidence.

Among the survey’s findings: Almost 30 percent found it much more difficult or virtually impossible to redeem their miles for free tickets to destinations like Hawaii or Europe than it was two or three years ago. And more than 25 percent reported that it was much more difficult or virtually impossible to redeem miles for free tickets to cities in the continental U.S. than it was two or three years ago.

What’s going on here?

In the past two years, the major airlines have reduced the number of flights and seats—including seats available for frequent flyer awards—by approximately 20 percent. At the same time, they have been aggressively adding new partners to their programs, creating new opportunities for consumers to earn miles.

More miles and fewer awards: It doesn’t take a rocket scientist to recognize a sure-fire formula for disaster.

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Lower prices, less value

The value-of-a-mile calculation ultimately depends on the value of an award ticket, which in turn depends on the value of a comparable revenue ticket. As such low-fare carriers as Southwest, JetBlue, and AirTran have increased their share of the travel market, the average price of a revenue ticket has been forced lower and lower.

The end result is that award tickets, and miles, are simply worth less than they used to be.

More nickels & dimes & miles

The relatively fee-free program is a thing of the past. And award levels are on the rise.

Most programs, for example, have increased fees for “rush” tickets and have revised their advance-booking requirements to ensure that a substantial number of awards now fall under that “rush” category.

Airline program changes: Continental and Alaska increase costs of award travel, upgrades

And to cite just one recent example of a disturbing trend toward charging more for awards, Continental just announced that OnePass members will have to part with twice as many miles for selected upgrades, while other upgrades will cost $200 each way, in addition to the required miles. Meanwhile, Air Canada, which is operating under Canada’s version of bankruptcy protection, now assesses members of its Aeroplan program a CDN $25 fee each time they redeem an award ticket.

Cloudy skies

If the current spate of program changes were not sufficiently onerous by themselves, program members must now contend with the prospect of their airlines going out of business altogether, leaving them with nothing to show for their past loyalty but a worthless plastic membership card. That’s exactly what happened to members of the National Comps program, who lost their points when National shut down in November 2002. Some industry-watchers expect other airlines to disappear before the current travel-industry crisis abates.

The sky isn’t falling (but run for cover)

Considering all the above factors, the current mileage situation is simply this: It costs more to obtain them, and once obtained, they’re worth less. And because that trend shows every sign of continuing, it follows that the prudent course of action is to redeem miles sooner rather than later.

That’s easier said than done, of course, in large part because the hoarding instinct tends to keep us single-mindedly in acquisition mode.

But while that instinct may serve consumers well when applied to saving money for retirement, it’s irrational in the mileage arena, so long as the current devaluation continues.

Tell us what you think: Are miles losing their value? E-mail [email protected]

So, I’m not only advocating that others cash in their miles, I’m taking my own advice and doing it myself. Over the summer, for instance, I used 25,000 miles for a free ticket for a combination business and personal trip from Los Angeles to New York. It’s a trip I make regularly, and one that I normally use as a mileage-earning opportunity. The combination of significant mileage (almost 5,000 round-trip, not including bonuses) and low fares makes the trip a particularly solid value, mileage-wise. But this time, I ponied up the miles and flew for free.

No, I’m not in any particular rush to burn every mile I’ve ever earned. After all, it’s not as though the miles are in danger of slipping into a black hole where they’d be lost forever. But as far out as I’m comfortable predicting, the future looks to be a slow but inexorable fall-off in value. So while I fully expect my miles to have some value next week, next month, next year, my best chance of squeezing optimum value from them comes from redeeming miles today rather than tomorrow, this week rather than next week.

And I’d wager my beloved high school physics text—and an award seat to Hawaii over Christmas—that the same will prove true for you, too.