The Economics of Airline Miles – Part IV

In the first three parts of this series on the Economics of Airline Miles I discussed: The Value of Airline Miles (Part I), The Value of Elite Status (Part II) and How to Maximize Airline Miles Earnings (Part III). In this fourth part of this ongoing series, I will go into the topic of how to effectively redeem your airline miles. Once you have earned all the miles by focussing your earnings, the eventual goal is to redeem these miles for rewards and awards from the airlines.

Remember, at the end of the day, it is not all the miles you have earned that matter, but what you are able to redeem them for.

I see too many people squander their hard earned miles. You have to have a well thought out strategy in place to get the most return out of your redemptions. If you look at your airline miles account(s) as an investment portfolio, you can the make a valuation of your miles accumulated and get the best return on your investments by choosing to redeem them wisely.

What are your goals?

Like every success book or seminar will tell you, it all begins with the goals you have for the miles you have earned. If your goal is just to fly for free on a short domestic flight, for your next visit to grandma’s, then that is your goal. It is what you should redeem your miles on, even though it is not the best return for your miles. If your goals are more aggressive, such as an international trip that will need you to redeem 160,000 or so miles, you need to plan. You most certainly should not then, redeem the miles on any short trip, unless the price you are having to pay is off the charts. I will discuss that in more detail later in this article.

Most people unfortunately, do not set any goal for their miles. Hence, they end up redeeming on the next trip, wherever and whenever it might be. I would highly suggest that you do not do that. Maximize the worth of your miles. You have earned them!

Here are my recommendations that you should consider as you redeem your miles:

Expiring Miles:

If you have miles that are expiring and you have not been able to figure out a way to keep them from expiring, then use them. Most airlines, especially US based airlines have an activity based expiration policy. That means your miles only expire if there is no activity on the account for 24 to 36 months, depending on the airline. Many other airlines, especially several Asia based airlines tend to have a ‘use it or lose it’ expiration policy. Any miles earned have a 3 year life. They expire at the end of three years, no matter what. Always redeem these miles first. My wife has some miles on All Nippon Airlines (ANA). They have a 3 year expiration policy. She needs to redeem these miles ASAP, before any other miles she has.

Dollar Value:

Have a minimum dollar value over which only will you redeem miles for a free ticket. Below a certain cost, it makes sense to pay for the ticket and earn miles on the trip. There are two factors to consider when determining this dollar threshold. One is cost per mile and the second is the ‘pain’ caused to your wallet. As I mentioned in part 1 of this series, airlines typically sell miles to travelers at 3¢/mile. So, if it takes 25,000 miles redeemed for a round trip, it is worth $750 if you buy the miles for it. So, if the flight ticket is more than $750, redemption is something you should definitely consider. If the flight cost is less than $750, then the ‘pain threshold of your wallet’ comes into play. You need to weigh that against your goal for your miles. Let me give you an example. My personal goal with my miles is to fly my family – wife and two kids – to India from the US for free, every time we go to India. That takes 240,000 miles per trip! Even with all my techniques to maximize my miles, it takes a while to accumulate those miles. I weight that against my ‘pain on the wallet’. I have done my mental math and my threshold factor is $300. I will never even consider redeeming miles for a free domestic ticket if it costs less than $300. I will pay for it and keep the miles for my goal.

How many miles?:

The question of how many miles it takes to redeem for a free ticket (burn rate) comes into play too. Some airlines charge a ridiculous amount of miles for award tickets on certain routes. This in fact, is something you should check before you even start accumulating miles on a program. I believe that Air Canada’s Aeromiles program is absolutely great. But, the miles needed for a free ticket to India (my goal, remember) is 130,000 for one economy ticket! The same ticket from United is only for 80,000 miles. This makes redeeming miles from Aeromiles on this particular route to be unreasonable. Take some time to go thru redemption tables of your airline miles program(s). Compare their burn rates. If you have miles on more than one program, this will help you determine which program to redeem miles from for which reward.

Award ticket v. Upgrade:

This is a big question that has been discussed ad infinitum on several forums and blogs. To me it is a matter of choice. What are your goals? Do you want free tickets or pay for a ticket and get upgraded for free with your miles? A factor to consider here is that you still earn miles when you use miles for an upgrade (lowering your burn rate), but you earn no miles on an award ticket. But then again, you have already paid for the ticket and now you are going to spend some miles too to get an upgrade. Your money, your miles, your comfort, you decide what matters more to you. Another factor to keep in mind here is that for several airlines, not all tickets are upgradable. You may have to first pay some money to ‘fare-up’ your ticket to an upgradable fare and then redeem miles on top of that.

I will be writing a detailed article on upgrade awards soon.

Economy reward v. Business/First reward ticket:

On a similar note, another question asked commonly is whether to redeem for an Economy ticket or for a Business/First Class ticket. Business and First class seat awards cost 1.5 to 2 times economy seat awards. If you want to travel in style and have the miles, I would certainly recommend flying in upper class seats. For someone with goals like mine, where the miles I need to fly my family are so high, I settle for the cheaper end of the bus.

Award Availability:

As I mentioned at the beginning of this article, it is not all the miles you have earned that matter, but what you are able to redeem them for. The ‘able to redeem’ becomes key here. What good is all the miles if you are never able to redeem them for the award you want, when you want it? My recommendation here goes back to choosing an airline miles program which is by an airline that is a part of an alliance. You can then redeem your miles on an award on any of the alliances members. You do not need to limit yourself to the airline you have earned miles on only. I have redeemed miles for a round trip to India that had United, Swiss Air and Lufthansa operating segments on my award ticket.

Never redeem for your own award ticket:

Last, but not the least – if you have family or a significant other who can benefit from your awards, never redeem the miles for an award ticket for yourself. I have discussed this topic at length in my article – Never Fly for Free. I will refer you to that article for more.

So, to free award tickets, award upgrades and safe journeys. I conclude this series on the Economics of Airline Miles with an article on is Accumulating Airline Miles really worth it? Or are Airline Miles just marketing hype. My next article is about the cost of redeeming miles – the fees airlines charge when you redeem miles. Those free awards aren’t really al that free!

Let’s hear your thoughts – do leave a comment.

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