No Frequent Flyer Seats? There Are Alternatives

Got frequent flyer miles? If you’re planning to redeem them for free flights this summer, the forecast calls for elevated levels of frustration and disappointment.

Free seats are fewer and farther between, at least partly because the airlines are flying full.

For June, Delta’s load factor—the percentage of seats occupied—was 87.7 percent overall, and 89.0 percent on Delta’s mainline domestic flights. And that’s not just the summer crush. For the first half of 2010, including the normally slack winter months, the carrier’s load factor averaged 82.4 percent.

Southwest filled 81.9 percent of its seats in June, up 2.4 points from June 2009.

US Airways filled 86.9 percent of its seats in June, just edging out American, which flew 86.8 percent full.

And Hawaiian’s load factor for the month was 85.9 percent.

Full flights mean fewer award seats for loyalty program members trying to use their miles for free trips. And the award-seat scarcity is exacerbated by the airlines’ ongoing financial distress, which creates an incentive to defer releasing seats for mileage-users until the last minute, when it’s nearly certain that award travelers won’t displace paying customers.

While that’s a deadly combination for travelers hoping to redeem their miles for free flights, it’s hardly proved fatal for the programs themselves.

Although there are signs that the airlines’ loyalty schemes have lost some of their luster in the hearts and minds of travelers, the largest programs still boast memberships in the tens of millions.

And for the airlines that operate them, the schemes are cash cows, generating a billion dollars or more annually for the largest airlines from the sale of miles to their credit card partners and hundreds of other businesses that use frequent flyer miles as marketing incentives.

In short, although less rewarding, mileage programs will remain a central fact of travel life for the foreseeable future.

Options, Options

With free trips ever harder to come by, the question naturally arises: What else can I redeem my miles for?

Most major programs allow miles to be used for magazine or newspaper subscriptions, and for airport lounge memberships. And increasingly, program members can cash in their miles for merchandise, and for free hotel nights and car rentals.

With American’s redeemAAmiles feature, for example, AAdvantage members can use their miles for car rentals (Alamo, Avis, Budget, National), exchange miles for Diners Club Rewards points (that can in turn be used for a wide range of awards) or for Hilton HHonors or Priority Club Rewards points (redeemable for free hotel nights), or directly for free nights at InterContinental family hotels (InterContinental, Holiday Inn, Crowne Plaza, Staybridge Suites, Candlewood Suites, Hotel Indigo).

So, for example, prices for hotel nights range from 12,500 miles at a Holiday Inn or Holiday Inn Express, to 50,000 miles for a night at an upscale InterContinental property.

Delta’s SkyMiles Marketplace looks a lot like an online retailer, except that the merchandise is priced in miles instead of dollars. Of the nearly 4,000 items on offer, 162 are available for less than 10,000 miles, and 979 are priced at 100,000 or more miles. Many retail categories are represented, from beauty and spa to electronics to fashion to food and wine to sports and fitness. Brand names like Baum & Mercier, Calvin Klein, Dooney & Bourke predominate. Also up for sale: hotel stays and car rentals.

And Mileage Plus Merchandise Rewards does for members of United’s program what the SkyMiles Marketplace does for Delta’s frequent flyers.

Value, Value

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Having established that there are indeed non-flight options available as loyalty program awards, the follow-up question concerns their value: How much are airline miles worth when redeemed for alternative awards?

For context, average coach domestic airfares are currently in the mid-$300 range. Redeeming 25,000 miles for a ticket worth $350 means a per-mile value of 1.4 cents. To reflect the hassle factor in booking awards encumbered by capacity controls and blackout dates, let’s say the value of a frequent flyer mile averages between 1.0 and 1.2 cents.

You might expect airport lounge memberships to be good deals, since, like award seats, it’s the airlines’ own product that’s being given away. But an annual Red Carpet lounge membership—normally priced at $425—costs 70,000 United miles. That’s 0.6 cents (six-tenths of a cent) per mile, about half the value derived from using miles for free flights.

Merchandise awards also deliver particularly poor per-mile value.

A Marantz SR4023 stereo receiver, which can be purchased from Crutchfield for $499.99, will set Mileage Plus members back 56,700 miles, which amounts to 0.88 cents per mile.

A Rachael Ray Orange Cast Iron 5.25 Quart Oval Casserole, available from Home Depot for $79.99, costs 12,200 United miles, delivering just 0.66 cents per mile.

Hotel nights provide somewhat better value.

A night at the InterContinental Century City that was priced at $249 could be booked through Delta for 25,655 miles. Nights at the downtown Los Angeles Sheraton and Marriott that cost $169 and $189 on the hotels’ websites were priced at 14,141 and 15,684 miles, respectively. So the per-mile value for those redemptions ranged between 0.97 cents and 1.2 cents.

United also offers hotel awards, but at least for the test bookings their prices were as much as 28.7 percent higher than Delta’s, at 18,200 miles for the same night at the Sheraton, 18,950 at the Marriott, and 32,000 at the InterContinental. That results in a corresponding decrease in the value of United miles thus redeemed, to between 0.78 cents and 1 cent.

Among the best award values when redeeming frequent flyer miles are subscriptions to magazines or newspapers.

Using United miles, a subscription to Time magazine costs 1,800 miles, and a year’s worth of Sports Illustrated would cost 1,400 miles. Through Magazines.com, a Time subscription costs $29.95, and Sports Illustrated costs $39.95. So the miles would be valued at 1.7 cents and 2.9 cents, respectively.

Too many miles and cents? For those who are calculator-averse, there’s a simpler, quicker way of evaluating redemption options: a rough comparison to the 25,000 miles required in most programs for a restricted domestic coach award ticket.

As an example, a tin of Mrs. Fields’ cookies can be had for 5,100 Delta miles. So five tins would price out at 25,500 miles, about the same as a free domestic coach ticket. Unless you’re a certified cookie monster, foregoing a cross-country trip in favor of five cans of cookies is likely to look like a losing proposition.

That Brinkmann Smoke ‘N Grill Double Electric Smoker and Grill would be great for summer barbecues. But at 48,600 Delta miles, is it worth as much as a round-trip domestic flight in first class?

Choices, Choices

With the exception of hotels and magazine subscriptions, the non-flight awards tend to deliver per-mile values that are inferior—and in many cases significantly inferior—than what can be obtained when using miles for award tickets.

In the end, it would seem, the airlines have given us a choice between two decidedly less-than-compelling options: suck it up and accept the challenge of scarce award seat availability; or suck it up and accept mediocre value for your miles.

Or you could get a credit card that delivers a 2 percent cash rebate. But that’s another story.