So far in my quest to come up with a miles valuation formula, I’ve considered objective vs. subjective value, and the concept of cents-per-mile of value. The next important consideration to take into account is award availability, and this is where the differences start to show up between programs.
Like I’ve said before, frequent flyer miles are better understood if you consider them as a form of alternate currency. But unlike the sawbuck, you can’t spend a mile anyhow you like; you have to spend it before its expiration date, and only on items (seats) the airline offers you (we aren’t considering miles for waffle irons. Just … don’t.) On top of all that, a mile’s purchasing power isn’t constant over time. As we’re all too painfully aware, sometimes that free window seat will cost you 25,000 miles, and sometimes it’ll cost you 50,000 miles – or more. Imagine saving up your hard-earned cash to buy a new family sedan, then walking into the dealership, only to be told, “Oooh, sorry, it’s Thursday. Yeah, we’re not selling any more Thursday cars. But we do have some Friday cars available tomorrow – double price.” Ouch.
The only way to know when a specific award is available at a low level is to search for it on the airline’s website. But is there any way to know, on average, just how often you can expect to find a low-level award? Thankfully, there is. The Switchfly Reward Seat Availability Survey is a regular study of, well, reward seat availability. Their most recent study, dated May 17, 2012, can be read in full at this link, but here’s the money chart (click to embiggen):
Now we have some nice cold numbers to use. How is this useful? It lets us answer the question of how many miles we’ll need to cash in for a free seat – on average. Let’s start with United Airlines. Like most domestic legacy carriers, United’s price for a low-level “Saver” domestic award ticket is 25,000 miles. We see that we can expect to find that low-level award 87.1 percent of the time. The rest of the time (i.e. 12.9 percent), we’ll have to pony up 50,000 miles, the price for a United “Standard” award. For the sake of keeping this from getting too crazy-complicated, I’m not considering the possibility that there are no award seats available at any price, although that does in fact happen.
With a little Nerdification (aka Math), we can calculate an average award price for United Airlines domestic economy seats: (87.1% of 25,000) + (12.9% of 50,000) = 28,225 miles.
Now, if we do the same thing for American Airlines, which has a much lower “Saver” availability – 45.7 percent – we get an average award price of 38,575 miles. Even if you and your Walkman were secretly jamming to your Flock of Seagulls tape back in Economics class, you see where this is going: if the price of a seat on a plane to Chicago is either 28,225 MileagePlus miles, or 38,575 AAdvantage miles, then it’s safe to conclude that the MileagePlus miles are more valuable.
And coming in last place, there’s Delta and their infamous SkyPesos. Delta, not content to settle for doubling award prices (what they label their “medium level”) has an additional “high level” award price, which can be triple price – or even higher, on some international awards. For a domestic economy ticket, Delta charges three prices: 25,000 miles, 40,000 miles, and 60,000 miles. And you’re only getting that bargain low-level ticket a paltry 27.1 percent of the time. But I couldn’t find the numbers for Delta’s breakdown of medium-level and high-level availability. So I did what all highly educated scientific type people do: I pulled a number out of my … hat. (Yeah, I was totally going to say hat. Swear.) I’ll assume that, of the Delta awards that are not redeemed at the low level, half are redeemed at Medium, and half are redeemed at High.
The resulting price that my spreadsheet regurgitates out, for an average Delta domestic economy award, is 43,225 SkyMiles. And while that doesn’t seem like a great difference from the average price for the AAdvantage award, trust me, the separation gets worse from there for Delta aficionados, especially once you start pricing out the international tickets.
In the next installment, I’ll look at the Mile Valuations for the big three airlines: United, American, and Delta.
IHG® Rewards Club Select Credit Card
- Annual Fee: $49 fee waived for the first year
- Foreign Fees: No
- Card Type: Hotel
The IHG Rewards Club Visa is often cited as one of the most underrated hotel credit cards, with good reason. The official offer is for 70,000 points after $1,000 spent within three months, with the first year’s fee waived. The card comes with an annual free night certificate that can be used at any IHG property, including Intercontinental hotels - making this certificate worth upwards of 50,000 points. This is far more generous than some other hotel cards, which limit the categories in which free night certificates can be redeemed.
Cardholders earn 5 points per dollar at IHG hotels; 2 points per dollar at gas stations, grocery stores, and restaurants; 1 point per dollar everywhere else. Moreover, you’ll get a 10% rebate on award redemptions, up to 100,000 points per year. The card also comes with Platinum status, though that doesn’t get you much with IHG. Still, this is a fantastic card to have in your wallet, with benefits that far outweigh the already low $49 annual fee.
- Earn 70,000 bonus points after you spend $1,000 in the first 3 months of account opening
- Enjoy a free night of card membership at over 4,700 hotels worldwide
- Earn 5 points for each $1 spent at our hotels
- Earn 2 points per $1 spent on purchases at gas stations, grocery stores and restaurants
- Bonus points redeemable at hotels such as Intercontinental® Hotels & Resorts, Crowne Plaza® Hotels & Resorts and Holiday Inn®
- Automatic platinum elite status, as long as you remain a cardmember
- $0 introductory annual fee the first year, then $49