US Airways' cash-and-miles deal fails to deliver real value

Mixing cash and frequent flyer miles as payment for a ticket has always been an alluring idea, bordering on the inevitable. Both, after all, are forms of currency, and currencies ought to be combinable. In fact, to a limited extent, they have been. Northwest has allowed members of its mileage program to use cash and miles for tickets for years. Other airlines have flirted with the idea as well.

Now, according to the following news item from USA Today, US Airways will add its name to that list next month: "Beginning October 22, US Airways customers will be able redeem 10,000 miles to reduce the cost of a round-trip ticket by $50, the airline says in an e-mail to its frequent fliers. The offer will be valid on all published US Airways round-trip fares flown in January and February and requires a 14-day advance purchase."

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Having established that you can combine cash and miles for US Airways tickets, the question then becomes: Should you?

In this case, the answer is a resounding "No."

The math is straightforward. Exchanging 10,000 miles for a $50 discount amounts to realizing a value of one-half cent per mile redeemed. Tellingly, if you were to buy miles from US Airways, they would charge you 3.5 cents per mile. So by US Airways' own assessment of the value of their miles, you're either getting way too little by cashing them in for a discount, or grossly overpaying by purchasing them directly from US Airways.

In fact, both indictments are valid. According to my analysis, which puts the average value of a frequent flyer at around 1.2 cents, neither US Airways' cash-plus-miles promotion nor its ongoing miles-for-sale offer are good deals for consumers.

Getting good value for frequent flyer miles is simple. In the most basic scenario, redeem 25,000 miles for a round-trip coach ticket for travel within the continental U.S. If a comparable paid ticket would have cost $300, you'll have reaped a per-mile value of 1.2 cents (actually a bit less, when the difficulty of obtaining a capacity-controlled award seat is factored in).

That 1.2 cents figure can be used as a general guideline for the value of miles. If an airline suggests that you receive significantly less value when using your miles, or pay significantly more to buy miles, the proper response is a healthy dose of skepticism—because not all promotions are "deals."

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