Frequent flyer miles: What they’re worth

The big airlines have been showering you with ever increasing amounts of frequent flyer miles. You get some by actually flying somewhere, but you get lots more through credit cards or other promotions. Meanwhile, as you accumulate those miles, they’re becoming harder and harder to use. Seats are scarce, and most lines have shortened the time you can keep your miles without losing them. Especially if you earn most of your miles through credit cards and promotions, you’re surely wondering just how valuable those miles are, and if you might be better off chasing some other rewards.

A reader recently asked, quite simply, for “an article on the cash value of frequent flyer miles.” The short answer is that most experts now peg the value at something around 1 cent a mile. The value to you as an individual, however, varies depending on how you prefer to use your miles and how much success you have finding seats when and where you want them. Although I’ve covered portions of this question in several earlier reports, a more comprehensive and updated version is probably in order.

Value: Two Measures

You can value miles in either of two ways:

• A few have a cash value, which clearly establishes a baseline value minimum; you should never accept a use less valuable than the cash equivalent.
• All have value toward purchase of flight “awards,” which are dependent on how you use them.

Airline Miles

Airline-sponsored programs pose the main difficulty in assigning values. In these, you can combine the miles you earn by flying with those you earn through your credit card and other promotional partners.

Most ordinary airline miles have no cash value; the fundamental program rules specify that the only value is in the awards the program offers. However, last year United revised its Mileage Plus program to provide a modest cash value as an alternative to flight awards.

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Award Trip Values

With no cash value, the airline miles are worth what they get you through the individual rewards offered in the program. So, to start, let’s figure out the value of some benchmark awards.

According to survey data, the most popular award destinations are (1) domestic and nearby Canadian and island points (let’s call it just “domestic”), (2) Hawaii, and (3) Europe. And the majority of travelers use awards for coach/economy seats, but sizable minorities use them for premium-class seats or upgrades.

Clearly, as much as possible, you should use miles for relatively expensive trips, not short hops. Accordingly, for summer travel, and based on current “list price” quotes from Expedia, I suggest these benchmarks:

• Domestic: $400 for coach, $1,300 for first class.
• Hawaii: $800 for coach, $2,500 for first class.
• Europe: $1,100 for economy, $3,000 for business class.

Obviously, these are averages. Tickets to Hawaii will be higher from the East Coast and lower from the West Coast; tickets to Europe will be lower from the East Coast and higher from the West.

That $3,000 value for a business-class ticket to Europe may look strange. After all, the nominal list price of a business-class round-trip to Europe is closer to $9,000. But I used the lower figure because discounted business-class tickets are often available at around that level, as are list-price restricted tickets on the new low-cost all-business-class airlines.