The depreciation of Airline Miles

The Economics of Airline Miles – Part 6

Continuing in my series on the Economics of Airline Miles, I bring to you an article on the depreciation or loss of value of Airline Miles.

Just like money, airline miles depreciate. Depreciation can occur due to multiple factors. This article goes into multiple factors that cause this depreciation and their impact on us, the travelers.

Issue more miles:

When the US Federal Reserve prints more money and puts it in the market, it reduces the value of all the dollars that are already in use. (This is true for all Central banks, I am not picking on Mr. Bernanke.) Similarly, when airlines issue more miles, they lower the value of all the miles outstanding in our mileage accounts .

Airlines can issue more miles in many ways:

Running double mile promotions or triple, quadruple miles
Adding mileage partners – whats next , miles for walking your dog?
Ridiculous credit card initiation bonuses – 100,000 British Airways miles for getting their Chase credit card!?

All of these depreciate the miles we have already earned.

Raising burn rates:

Airlines can just make awards or upgrades cost more miles. Reduces the value of miles. As I have said before, miles all only worth what they can be redeemed for.

Reducing earn rates:

Airlines can reduce the miles earned on a trip. They can award less than 1 mile for each mile flown or award less than the minimum 500 miles that they used to award to everyone on every trip. British Airways recently reversed its policy of awarding less than a mile for each mile flown on cheap fares. US Airways was one of the first airlines to stop the minimum 500 mile awards on short flights.

Lesson to take away:

When left alone – or left with the airline in your frequent flier account, Airline Miles lose value. They depreciate as airlines change their policies. Use the miles. Don’t let them pile up. There is no value in hoarding miles.

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