The Value of a Frequent Flyer Mile Revisited
March 21, 2011 — -- After three decades of earning and burning frequent flyer miles, what do we know about their value?
On the eve of the mile's 30th birthday -- American launched the first mileage-based program in May 1981 -- there's no single answer to that question. But what we do have are more ways than ever of assessing a mile's value. For better or worse, depending on your point of view, the only consistency among those values is their variability.
Since the great majority of airline miles are used for domestic coach award tickets, priced at 25,000 miles in most programs, a rule-of-thumb baseline for the value of a frequent flyer mile is the average price of a paid coach ticket (around $350 currently) divided by the required miles, giving us a nominal value of 1.4 cents each.
To account for the inconvenience and difficulty -- sometimes impossibility -- of finding award seats at all, I deduct 0.2 cents from the nominal value, giving us an average per-mile value of 1.2 cents.
In most programs, it's possible to get more or less value, depending on the market price of a comparable paid ticket.
Cashing in 25,000 miles for a ticket that could be purchased for $100 yields just .4 cents (four tenths of a cent).
On the other hand, redeeming 100,000 miles for a business-class ticket to Europe priced at almost $11,000 yields a nominal per-mile value of 11 cents, slightly less with the hassle factor adjustment.
Merchandise has been featured in the airlines' awards catalogs on and off for years. Although it's an attractive option in theory, in practice such redemptions typically deliver poor value.
Some random examples:
A Nikon 14.2 Megapixel Digital SLR camera, available from BestBuy for $588, costs 91,000 United miles, yielding about .6 cents for each mile redeemed.
An Amazon Kindle 3G + WiFi Bundle, selling for $189 at Amazon, costs 83,400 miles in Delta's program, or about .2 cents per mile.
