Are Frequent Flyer Miles a Gift Worth Giving?

In recent years, as [[Frequent Flyer Programs | travel loyalty programs]] have completed their evolution from frequent flyer to frequent buyer programs, consumers have been treated to the same ebb and flow of seasonal offers from their mileage programs that they see from traditional retailers.

That’s partly because the programs now have a retail component, in the form of their mileage malls—extensive networks of online merchants that award airline miles or hotel points.

In addition to promoting their retail partners in the run-up to Christmas shopping, the airlines have begun promoting the sale of their miles and points as gifts for others’ frequent flyer accounts.

Christmas. Back to school. Valentine’s Day. All have become occasions to offer bonus miles for retail purchases, or discounts on the purchase of miles and points.

Normally, buying miles isn’t a very good deal—they’re just too expensive. But when the prices are discounted—in this case, for Christmas shopping—it’s worth a second look to see whether the value proposition is significantly improved.

Here are three current deals:

• American is offering members of its AAdvantage program a bonus of 10 percent of the miles purchased as a gift for another member by the end of the year. So, buy 10,000 miles for someone else, receive 1,000 miles for yourself.

  Depending on the number of miles purchased, the regular price of miles is between 2.5 cents and 2.75 cents each, plus a $30 processing fee, plus taxes. With the bonus, the effective price is still around 2.5 cents a mile, well above the 1.2 cents I use as a rule-of-thumb estimate for the average [[The Average Value of a Frequent Flyer Mile | value of a frequent flyer mile]].

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  From a slightly different perspective, if you were to purchase 25,000 AAdvantage miles, it would cost $655, plus tax. That’s enough to redeem for a capacity-controlled domestic coach ticket. But for $655—and probably much less—you could buy a revenue ticket, with none of the infuriating capacity limits associated with an award ticket. And pocketing the 2,500 bonus miles wouldn’t change the fundamentals.

• Also through December 31, Delta SkyMiles members will receive 30 percent more miles when buying up to 50,000 miles as a gift for another SkyMiles member. In this case, the bonus goes to the recipient, rather than to the gift-giver.

  Delta normally sells miles for 2.75 cents apiece, plus a 7.5 percent Federal Excise Tax. The special offer brings the effective price down to about 2.3 cents.

• Northwest is offering a 25 percent bonus for any miles purchased as gifts through December 29. So for the price of 1,000 miles, you’ll be giving 1,250; pay for 40,000 and you’ll be giving 50,000 miles; and so on.

  Northwest charges a flat 2.7 cents per mile purchased, plus a $25 processing fee, plus taxes.

  Even with the bonus, the final price of the miles is well above the 1.2-cent hurdle.

To resurrect a recent pronouncement from the political sphere, these bonuses are like lipstick on a pig.

Even with the incentives, a paid ticket would be cheaper for the gift-giver, and easier to use for the gift-receiver. No lipstick required.