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 things.
Remember When A Mile Was Worth Two Cents?
Miles used to be thought to be worth 2 cents. I think that conventional wisdom developed out of the idea that a cross country flight cost about $500… or 25,000 miles. 25 years ago that was generally true, and award availability wasn’t really a problem either.
That was long before:
- Airline alliances opened up huge possibilities to earn miles.
- Mileage programs increased the cost of many awards.
- Awards became tougher to get with flights full.
Plus the 2 cent number probably wasn’t ever a true value of miles to begin with, since those flights didn’t earn miles or credit towards elite status and couldn’t be upgraded, but on the other hand might be used for expensive last minute tickets.
Fast forward and the CEO of Delta talks about their miles being worth a penny. When American Airlines awards a mile for travel they book one cent of liability on their books under accounting rules adopted for 2018. Those rules required the airline to accrue the expected value of transportation to be provided in exchange for their miles.
The genius of miles is that they are worth more to consumers than they cost an airline to issue, because frequent flyer programs are the largest purchasers of airline seats. They buy distressed inventory at a huge volume discount and sell those seats to us for points.
How to Think About The Value of Frequent Flyer Miles
Here’s how to think about the value of miles and points by airline, hotel and credit card program.
It depends on how you redeem them. What value are you going to get for your points? The important thing here is not to use the retail price of a ticket you’re getting, since
- with premium cabin rewards you might not have been willing to spend that much cash.
- Frequent flyer tickets aren’t necessarily worth as much as a paid ticket. They don’t earn miles. They may not be upgradeable. And you can’t necessarily just pick whatever flight you want, you have to be flexible and worry about award availability.
It depends on when you’re going to redeem them. You don’t earn a rate of return on miles and points like you might with cash in a bank or investment account. And you need to discount to present value if you’re going to use the points later. Plus there’s substantial risk of devaluation with many points currencies.
It depends on how many you already have. The value of points at the margin is different than an overall average value. As you approach having enough points for an award, the marginal value of a few more points goes up substantially — since those extra points are what make the award possible. On the other hand, once you have more points than you’ll redeem in the near-term the value of additional points falls since you may not ever use them, or may not use them under current award charts.
The value of a mile is the amount at which you are indifferent to holding miles versus cash.
If a mile is ‘worth’ 2 cents you should be equally happy with a mile or two pennies, if you’re offered a mile at a price of 1.9 cents you would be a buyer — you’d consider yourself to be earning a 5% margin.
Put another way, when we put a charge on a credit card, that doesn’t earn any bonuses (it earns 1 mile per dollar spent), we’re effectively buying that mile for 2 cents since the opportunity cost is putting the charge on a 2% cash back card. You’re revealing a preference through your behavior that you believe the mile is worth two cents.
Here Are the Valuations
| Airlines | Value |
| Air Canada Aeroplan | 0.014 |
| Air France KLM Flying Blue | 0.012 |
| Alaska Airlines Mileage Plan | 0.016 |
| American AAdvantage | 0.013 |
| ANA Mileage Club | 0.015 |
| Avianca Lifemiles | 0.014 |
| British Airways Executive Club | 0.011 |
| Cathay Pacific Asia Miles | 0.012 |
| Delta SkyMiles | 0.010 |
| Emirates Skywards | 0.011 |
| Etihad Guest | 0.012 |
| Hawaiian Airlines HawaiianMiles | 0.010 |
| JetBlue TrueBlue | 0.013 |
| Korean Air SkyPass | 0.014 |
| Lufthansa Miles & More | 0.012 |
| Singapore Airlines KrisFlyer | 0.013 |
| Southwest Airlines Rapid Rewards | 0.012 |
| United Airlines MileagePlus | 0.013 |
| Virgin Atlantic Flying Club | 0.010 |
| Hotels | |
| Choice Privileges | 0.006 |
| Hilton Honors | 0.004 |
| IHG Rewards Club | 0.005 |
| Marriott Bonvoy | 0.006 |
| Radisson Rewards | 0.003 |
| World of Hyatt | 0.014 |
| Wyndham Rewards | 0.008 |
| Transferable Programs | |
| American Express Membership Rewards | 0.017 |
| Bilt Rewards | 0.017 |
| Brex | 0.013 |
| Capital One Miles | 0.016 |
| Chase Ultimate Rewards | 0.0165/0.0175* |
| Citi ThankYou Points | 0.016 |
The most valuable points, at the top of my currency list, are transferrable points. That American Express, Chase, Citi and Capital One (Venture/Spark Miles) points. You can transfer those into a variety of programs. Earning those gives you tremendous flexibility and optionality.
I’ve given two different values for Chase’s Ultimate Rewards which are transferable to miles and points. The higher value applies to those customers with a Sapphire Reserve or J.P. Morgan Reserve card, who can redeem their points against certain categories of charges at 1.5 cents apiece in cash (versus 1.25 cents apiece for other Ultimate Rewards cards with transferable points).
How to Use These Valuations
Since valuation here is the amount at which you are indifferent to holding miles versus cash this figure is useful for:
- Comparing when to spend miles or cash. Should I spend 50,000 miles for an award ticket or $700?
- Comparing when to spend on airline’s miles versus another for the same award. Should I spend 25,000 United miles or 35,000 Delta miles?
- Comparing the value of different credit card signup bonuses. Is an 80,000 point offer from Marriott better than a 75,000 point offer from Hilton? In fact, I view a 50,000 point offer from Chase Sapphire Preferred better than both.
- Determining which hotel chain offers the better value reward when you’re considering staying at two different hotels. Should you spend 12,000 Hyatt points or 35,000 Hilton points?
- Deciding whether to buy points when there’s a big bonus promotion.
- Figuring out how much extra you might be willing to spend to earn points through a bonus promotion, or figure out whether a hotel promotion should influence your decision about where to stay
But since the value of miles isn’t precise I won’t actually pay 1.3 cents for an American mile. I want to accumulate American miles when they’re substantially less costly than 1.3 cents apiece. And I know I am clearly not a buyer at 2.5 cents.
In practice these are fairly blunt tools that tell me “1 cent a point for American miles is a really good deal” but that I’m not going to spend 2 cents unless there’s a very specific scenario — like a few points at the margin to top off an account for an award I’ve put on hold — where it makes sense (and in that scenario, my valuation of each point is higher since they’re helping me to save with a real redemption).
How My Valuations Compare to Others
I thought it would be interesting to compare side-by-side how One Mile at a Time and how The Points Guy value miles in comparison to my valuations.
| Airlines | VFTW | OMAAT | TPG |
| Air Canada Aeroplan | 0.014 | 0.014 | 0.015 |
| Air France KLM Flying Blue | 0.012 | 0.013 | 0.012 |
| Alaska Airlines Mileage Plan | 0.016 | 0.018 | 0.018 |
| American AAdvantage | 0.013 | 0.015 | 0.014 |
| ANA Mileage Club | 0.015 | 0.014 | |
| Avianca Lifemiles | 0.014 | 0.014 | 0.017 |
| British Airways Executive Club | 0.011 | 0.013 | 0.015 |
| Cathay Pacific Asia Miles | 0.012 | 0.012 | 0.013 |
| Delta SkyMiles | 0.010 | 0.012 | 0.011 |
| Emirates Skywards | 0.011 | 0.010 | 0.012 |
| Etihad Guest | 0.012 | 0.012 | 0.014 |
| Hawaiian Airlines HawaiianMiles | 0.010 | 0.009 | |
| JetBlue TrueBlue | 0.013 | 0.013 | 0.013 |
| Korean Air SkyPass | 0.014 | 0.015 | 0.017 |
| Lufthansa Miles & More | 0.012 | 0.012 | 0.014 |
| Singapore Airlines KrisFlyer | 0.013 | 0.014 | 0.013 |
| Southwest Airlines Rapid Rewards | 0.012 | 0.012 | 0.015 |
| United Airlines MileagePlus | 0.013 | 0.014 | 0.013 |
| Virgin Atlantic Flying Club | 0.010 | 0.012 | 0.015 |
| Hotels | |||
| Choice Privileges | 0.006 | 0.006 | |
| Hilton Honors | 0.004 | 0.005 | 0.006 |
| IHG Rewards Club | 0.005 | 0.005 | 0.005 |
| Marriott Bonvoy | 0.006 | 0.007 | 0.008 |
| Radisson Rewards | 0.003 | 0.003 | 0.004 |
| World of Hyatt | 0.014 | 0.015 | 0.017 |
| Wyndham Rewards | 0.008 | 0.007 | 0.011 |
| Credit Card | |||
| American Express Membership Rewards | 0.017 | 0.017 | 0.02 |
| Bilt Rewards | 0.017 | ||
| Brex | 0.013 | 0.011 | 0.017 |
| Capital One Miles | 0.016 | 0.017 | 0.0185 |
| Chase Ultimate Rewards | 0.0165/0.0175* | 0.017 | 0.02 |
| Citi ThankYou Points | 0.016 | 0.017 | 0.017 |
I think you’ll find that I value most currencies a bit lower than others do. That’s perhaps because I’m not saying just what can you buy with the miles but I’m taking a discount for time (when will you use them? they don’t earn a rate of return like cash does), a volume discount (if you have a lot the value of the marginal mile falls, pulling down the average) and a risk discount (miles are more likely to devalue than US dollars). I have a stronger preference for holding cash than miles than others do.
Overall I’d say that Lucky’s valuations are closer to mine than the TPG team’s are. For avoidance of doubt I’ll add as well that I have never taken payment for my valuation numbers, and I’ve never felt that I need big numbers to make exaggerated claims about the value of a credit card.
How Do You See The Value Of Frequent Flyer Miles?
What is your value of miles and points by airline, hotel and credit card program?
Let me know if you think I’m off base with the value of frequent flyer miles and make your case between me, Lucky, and the Points Guy team for whose valuations are most reasonable.
In 2018, for example, how much was each American airlines point worth?
Has it changed over time?