Tag Archives for valuation.
IdeaWorks’ latest survey on U.S. airline award availability uncovers a widespread devaluation of airline miles since 2019, except for American Airlines, which has seen an increase in mile value, highlighting changes in award travel costs and the influence of credit card partnerships on mileage accrual and redemption.
The Points Guy has published new “data-driven” valuations for U.S. airline miles and for credit card points, but they don’t… show you much about the data, and the methodology they offer makes very little sense. It’s nonsense built on stilts. They’ve picked out some flights to compare prices in cash and in miles, and then declared the value you’re getting for your miles on those flights is the value of miles. And that’s just wrong. This treats points as being worth the same as cash used towards an airline ticket. But points are not worth as much as cash, because cash can do more than buy airline tickets. You can spend cash on anything you want, not just on what an airline says you can, and you can invest cash to earn a return. You…
In 2017 Air Canada violated the ‘three hour tarmac delay rule’ by not allowing passengers to get off the aircraft, and the Department of Transportation has issued a $100,000 fine. But they’re learning that miles given to customers give airlines a 60% discount on DOT fines.
There are a lot of sites that purport to tell you how much a mile or point is worth.
The range quality and rigor offered by various sites to value points is significant, I think. But what I stumbled across is that one company that puts these out cannot even agree with itself.
Richard Kerr, formerly of The Points Guy and the Award Travel 101 Facebook group who is now with Bilt Rewards, offered a couple of provocative questions in his Instagram feed.
He asks why some people value clearly less valuable currencies more than a Bilt point. He may be asking about individual program members, but I’m going to ask it of those people who are supposed to know – travel bloggers who publish valuations of different mileage currencies. Much of the work those bloggers are doing fails to hold together.
How much airfare a mile buys is different than ‘how much a mile is worth’. You can’t spend miles on nearly as many things as cash (and get lower value for things other than travel when you redeem that way). You don’t earn interest on your miles. There’s more devaluation risk with miles.
Here’s a stab at quantifying the discounts that you should consider taking when converting ‘how much airfare do miles buy’ into ‘how much are miles worth’?
If they simply presented “here’s how much airfare your miles can buy right now” this would be an interesting exercise, enlightening even. However it purports to prove more than it does, and in doing so may lead readers astray overvaluing their miles in comparison to money.
The value of frequent flyer miles is something I’ve been calculating for years. I think what makes my approach different is I lay out the theory behind my valuations, I explain a lot of the moving pieces, and I present a comparison between my valuations and the valuations others are giving. I first laid this out the value of frequent flyer miles in 2014 and then updated values in 2016, 2017 and 2019. I skipped 2020 due to the pandemic but a tremendous amount has changed. Air Canada launched a new program with the same name (raising redemption prices but eliminating fuel surcharges), Delta and United devalued partner awards more than once, Capital One launched transferrable points mostly at 1:1, and new program Bilt entered the transferable points space – to name just a few…
As part of raising funds on the private market and from the U.S. government, the airline had its unencumbered assets appraised. Parker reported that the value of these assets came back at $10 billion “excluding the AAdvantage program.”
During the airline’s earnings call Parker was pressed on what appraisals found the AAdvantage program to be worth.
These are the broad factors need to be taken into account when estimating the change in value of a mileage currency, and they’re likely to apply differently to each program based on, among other things, the tendency to print miles and the financial stability of the program in uncertain times.
We need to be thinking about how much we value miles – and how much they need to change – recognizing that there are forces pushing the value both up and down at the same time.
Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel -- a topic he has covered since 2002.
Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »
