American Airlines has been selling miles at a base price of 2.95 cents apiece, before taxes, fees, bonuses or discounts. They’ve raised the base price of miles to 3.5 cents, even as the value of miles is lower than it used to be.
I value American miles at 1.3 cents. And back in October American briefly sold miles at 1.36 cents apiece. That was a mistake, but since they’d recently priced miles incorrectly I wondered if the price increase might be an error as well. However American Airlines confirms that the increase is intentional,
[T]he new price before discounts is 3.5 cents per mile. Our programs and offers are subject to reviews, and changes are implemented accordingly to ensure we remain competitive in an ever changing market.
American is currently offering a discount of 35% on the purchase of miles, from this new higher price.
Under the current offer the lowest purchase price is 2.45 cents per mile, which would be insane for most people to take advantage of.
AAdvantage allows annual purchase of 150,000 miles per calendar year, exclusive of bonuses. The airline processes purchase of miles directly, so transactions generally count as airline purchases for credit cards that offer a bonus on those. There’s a 7.5% excise tax on the purchase of miles from a U.S. airline, since those are treated as domestic airfare purchases, though in theory at least if you use your miles for international travel you should be able to get the 7.5% excise tax back.
Ever since US Airways management took over at American, AAdvantage sells miles the way that US Airways used to. Regular price only seems to exist to promote discounts against. Historically they’ve runs a series of discounts (up to 45%) and bonuses (up to 75%) – and sometimes a combination of the two – nearly every month. It’s unclear how the discounts and bonuses might change with a higher base price. Their likely goal is to maximize sales, rather than margins (since they believe they’re selling at a profit even at a penny and a half per mile) so I’d expect them to test even bigger bonuses and discounts.