How Much Should You Value Miles?

Yesterday I wrote a post entitled “Comparing American AAdvantage And US Airways Dividend Miles.”

In that post I mentioned that personally I think US Airways miles are slightly more valuable than American miles at present, and that I value them at 1.7 and 1.6 cents, respectively.

I previously valued American miles at 1.8 cents each, so I received a few emails from readers asking how my valuation of American miles only went down by 10% when they eliminated both oneworld distance based Explorer awards and stopovers at the North America gateways on international awards.

And that’s a great question.

Let me start by posing a question which probably doesn’t have a correct answer — if tomorrow every airline devalues their award redemption rates by 50%, does the value of all those mileage currencies also decrease by 50%?

In January I wrote a post entitled “Is The Value Of Miles Absolute Or Relative?” . It was posed specifically in the context of earning miles vs. cash back for your credit card spend. But I think it’s interesting to revisit this in a slightly different context, given the industry changes we have seen in the past three months.

So let me try to explain where I’m coming from:

You can’t value points at more than the “cost” to purchase them

For example, it’s possible to indirectly and consistently purchase IHG Rewards Club points for 0.7 cents each. So even if I wanted to, I couldn’t really value those points at more than that.

I wouldn’t quite take such a hard stance with US Airways, though. A couple of times a year they seem to offer a 100% bonus on shared miles, which is essentially an opportunity to generate them for 1.1 cents each.

Still, there are so many limitations to that (like the need to have miles to begin with, the transfer limits, the limited dates, etc.) that I have no problem valuing those miles at more than 1.1 cents each.

Premium air travel is of differing value to everyone

Different people value premium cabin travel completely differently. You have everything from people that wouldn’t pay a 50% mileage premium for first class because they’d rather take an extra trip, to people that simply wouldn’t travel in economy.

I’m somewhere in the middle.

I’ve gotten used to flying first class, and actually haven’t flown economy class on a longhaul flight in over 10 years. The reason for that is because I’ve economically been able to earn miles in a way that I can redeem for premium cabins at a reasonable cost.

Would I ever pay the cost of a full fare international first or business class ticket?

No way.

But I’ve been able to fly first class for pennies on the dollar, at rates that make it totally justifiable to me.

But as awards become more expensive and award availability becomes tougher to come by, where’s the “cracking” point where it’s no longer a no-brainer?

In other words, say I’m accruing enough miles for a first class ticket to Asia for ~$1,400 (like generating 120,000 US Airways miles through a share miles promotion for 1.1 cents each).

That ticket would probably cost $20,000 if paying cash.

Cathay Pacific First Class

I would never pay that, though I’ll gladly pay 7% of the retail cost (120,000 miles vs. $20,000) for the ticket.

But what about 8%? 9%? 10%?

If programs devalue further, what about 15%?

There’s no right or wrong answer, of course.

I think the value of miles is relative

I don’t think the value of miles is exclusively based on the value you directly get out of them. Instead I think it’s also based on how many alternatives there are for getting that same product.

For example, has the value of Avianca LifeMiles changed since United devalued their award chart and US Airways left the Star Alliance?

Even though the things that you can do with LifeMiles haven’t changed and their award chart remains the same, I would argue yes, the value of LifeMiles has increased.

Why? Because the LifeMiles program has gone from being one of three ways to redeem for a certain type of award, to in many cases being the only economical way to redeem miles for a given flight.

So previously I didn’t have to value the miles higher since there were so many easy ways to accrue Star Alliance miles.

Tying this back in with American miles…

So, getting back to American miles.

Why did my valuation of American miles “only” go down by about 10%?

Because there are still lots of aspirational first class products available through American miles that I enjoy flying — Cathay Pacific, Etihad, Japan Airlines, etc. And without American (or US Airways) miles there simply isn’t an economical way to redeem for them.

Bottom line

Are you valuing miles based on the absolute maximum cost you’d be willing to pay for the premium cabin products you’re using miles for, or lowering that valuation a bit based on the number of options you have to redeem for that product?

I certainly fall in the latter category, and it’s why if we were to see a 50% devaluation of all mileage currencies, I’d still probably not decrease my valuation of miles quite by 50%.

Am I off base?


  1. I think it all comes down to what you, realistically, will use the miles for. Continuing your example of American, I balance out my love of EXP status and my love of Business Class by using miles for upgrades from coach (after I’ve used up my SWUs). I get the EQM from paying for coach (I keep EXP) and I fly in Business. As devaluations haven’t altered the cost of upgrading (yet!) my valuation of Aadvantage miles hasn’t changed.

  2. 10% deduction on the recent changes sounds about right. However, the anticipation that they might pull another unannounced devaluation makes it worth less to me.

  3. If I can redeem for more than 2.5 c per mile I’m pretty happy to use miles. I even redeem for standard (double miles) economy awards if I can get more than 2.5 cents per mile value. I know you supposedly get better value for intl business awards, but the way I see it, I value the freedom to go where and when I want. And I only get so many opportunities.

  4. – You value what you redeem for not what a blogger thinks they are worth.
    – You value things by implicit values or implied. Do we believe a 18 hour first class seat is worth $16K or is that only stated price?

    For example. 200,000 Chase US miles have gotten me a return first class round trip to Asia from east coast AND in another year it has gotten me a week at the Hyatt in Paris. Is 32 hours of flying more worth than a week in central paris at a top hotel?

    If I value them by the published prices. The air ticket was $16000, so every mile valued at 8 cents a mile. Hyatt had a published rate of $1000 a night, so I got $7000 worth of benefit, so 3.5 cents a mile.

    To a lot of my friends the Hyatt deal seems more bang for a buck because they will never pay 16K for that air ticket, any way.

    Intellectual honesty in blogging needs to be pressed harder.

  5. – One values what you redeem for not what a blogger thinks they are worth.
    – We value things by implicit values or implied. Do we believe a 18 hour first class seat is worth $16K or is that only stated price?

    For ex:. 200,000 Chase US miles have gotten me a return first class round trip to Asia from east coast AND in another year it has gotten me a week at the Hyatt in Paris. Is 32 hours of flying more worth than a week in central paris at a top hotel?

    If I value them by the published prices. The air ticket was $16000, so every mile valued at 8 cents a mile. Hyatt had a published rate of $1000 a night, so I got $7000 worth of benefit, so 3.5 cents a mile.

    To a lot of my friends the Hyatt deal seems more bang for a buck because they will never pay 16K for that air ticket, any way.

    Intellectual honesty in blogging needs to be pressed harder.

  6. As I’ve written before, the value of the mile is the price at which you’re indifferent between holding miles and holding cash.

  7. Whenever miles/points are valued, I don’t think I’ve ever seen one blogger incorporate the fact that you earn miles/points when paying cash but do NOT earn miles/points when paying with miles/points.

    This can easily make a 10-20% difference in the valuation.

  8. I don’t value miles the same way because I don’t collect many of them. I buy them when I have a need. I’d argue there are other ways than American to get premium longhaul – last year I bought AA miles for CX F to HKG and this year it made more sense to buy Alaska miles since I could get a stopover AND go to India for the same price.

  9. The other point about valuing miles, is that you can’t just say “I used 25k miles for a flight which would have been $750 so my miles are worth 3 cents each”.

    There will almost always be a cheaper and/or more convenient itinerary available for cash.

    You have to compare your 25k miles used to the cash option. This further devalues miles.

  10. We only use miles for international first class or business class travel. I wouldn’t fly internationally any other way so in my opinion if a round-trip first class ticket costs 120,000 miles or $12,000 the miles are worth $.10 each to me.

    My opinion is that calling the miles worth $.018 each is silly. To me miles are worth what you can buy with them, just like bit-coins, dollars or any currency.

  11. Redemptions often require some flexibility, on routes, dates, convenience, hotel choice or location, and so on. When thinking about a redemptions value I assume I’d be just as flexible when paying cash. For me the apple to apple redemption value makes no sense. The least expensive option that meets my travel needs equally well is the only comp that makes sense to me.

  12. I have a good real world example from a trip I’m now on. Male-LAX roundtrip on Cathay is at least 130k miles as best as I can tell (correct me if I am wrong). More on Cathay I think. That’s ASSUMING YOU CAN GET A SEAT.

    I am buying the ticket one way for $1875, getting 12000+ PQM’s on US as I understand it (please correct if wrong), a stopover, and for another $1500 could buy the return which is changeable up to a year for 35 USD.

    This is an easy choice because the seats aren’t available for an award, but it’s even a close choice because of the stopover, PQM’s, and ability to fly Cathay (I think it’s a lot more miles to fly Cathay which makes the deal even more palatable).

    Any comments?

  13. In reality the value is variable. While I can easily quantify 25k miles (domestic Y ticket) and the same for 135k miles (CX F ticket), I have a harder time with a balance like 80k miles. I become much more hesitant to use 25k miles in that case, knowing that I would get much more ROI the closer I get to the F ticket.

  14. You say the value of miles is relative and I agree with that sentiment. But, you still put values on the miles…so, what is your anchor or baseline and how do you arrive at that value?

    If airline X is worth 10% more than airline Y and airline Y is worth 5% more than airline Z and airline Z’s miles are worth 1.3 cents, you can then back into the rest. But, how do you come up with the value for airline Z?

  15. Well, as to valuation, it certainly varies even within the same airline. For example it costs me X miles to fly Envoy Sleeper on US Air but I can BUY an Envoy Sleeper upgrade 24 hours in advance of the flight, on any fare, with any status, for cash…so it depends on timing too.

  16. Miles/points are a form of restricted currency. Their primary use is purchase of travel services, but with highly variable availability and variable rate of depreciation.

    Ben is not being clear what he means by their ‘value’ in USD terms. There are 2 options: an acquisition cost that one pays to get a mile/point, and a redemption value that one reasonably expects to achieve when using them. I believe acquisition cost can be pretty straightforward, based on replacement of credit card miles/points by 2% cash back cards, difference in itinerary cost vs. cheapest acceptable replacement seat or room through channels like Priceline or most convenient airline itinerary. Redemption value is quite subjective and personal based on usage patterns and the value one puts on a airline seat or hotel room, which can be substantially different than retail price. Choosing to acquire travel services above a base personal requirement through miles/points is like any other discretionary purchase like a restaurant dinner or high end clothing or attending a concert or sports event.

    Personally, I decide whether to buy based on cost and desirability. I don’t HAVE to have more than 1 ‘big’ vacation a year, and even then a premium cabin seat and luxury hotel are not essential. However, it’s highly likely that vacation with my spouse will cost a minimum of $3K using cheapest acceptable travel options. In addition, we have required family visits that will cost another $4K. Our minimum travel budget is therefore $7K and we would generate about $1K in points back anyway, so $6K budget.

    If I can acquire points/miles that enable the same level of travel for substantially less than $6K net, then I am interested. My redemption value for miles/points will be based on how many miles/points it takes to enable this essential travel. THERE’S MY PERSONAL VALUE ANCHOR, which everyone needs in my view, a base level of travel services which you would pay cash for and can potentially be paid in miles/points hopefully at a discount through a low acquisition cost.

    For any additional travel services beyond your absolutely required base that you pay cash for, prepaying through miles/points can be properly evaluated as a discretionary purchase based on the acquisition cost of those miles/points. I don’t think the $26K retail price of CX F roundtrip NYC-HKG is relevant for most, just as most are not paying $40K to rent out a skybox at a Cowboys game. These are high end experiences that are potentially available through points at a much lower than sticker price. That lower price is as relevant to true value as the stated retail price. I choose to simply add a markup of $100 per way over economy for a longhaul business flight and $150 for first on good airlines, priceline +$50 for a luxury hotel night with a breakfast and lounge.

    That and my base travel requirements and the time and effort taken to acquire and redeem and potential devaluations lead me to currently value Alaska miles at 1.4c and AA, BA, US, United miles at 1.0c, and acquire them at no more than 0.33c so that I always get a 66-75% discount on even my cash based redemption values. Hilton, Carlson, IHG points have redemption values of 0.5c and I acquire them at no more than 0.2c each, and Hyatt at 1.0c and SPG at 1.25c I acquire at no more than 0.33 each. Getting these 60-80% discounts on my own subjective true value leads me to generally spend the same $6K in cash, but get 2 vacations instead of 1 and a luxurious experience instead of a middle of the road one. of course, I could choose to spend $2K, stick with the base travel requirement and save the other $4K, but that is a conscious choice I make.

    I think too many get carried away with all the miles purchase promotions, forget the incidental costs of travel and dont add up the forgone cash back. In my example, they get 2 great trips but end up spending a total of $10K on travel. Maybe that’s still a huge discount to retail, but they don’t specifically state outright “Honey, I want to spend $10K and have more luxurious vacations instead of the $2K we could be spending on our base 1 vacation+family visits”.

  17. @ traderprofit — And that’s a great deal, but that’s an outlier of a fare (and you had to get to the Maldives). A roundtrip ticket between Los Angeles and Male in Cathay Pacific business class is upwards of $6500, which is probably the better comparison for most of us.

  18. When I travel internationally it is usually to get to the embarkation point for a cruise. Sine

    I won’t ever fly international economy again I so as I see it I have only two choices, buy the ticket or use miles to obtain the ticket. So for me the cost comparison is easy. Just divide the dollar cost of the ticket by the number of miles necessary to obtain the ticket.

    The result is the value of a mile to me. In the past the value was usually about $.10 per mile for my uses. So for me a 50,000 point signup bonus is worth about $5,000 USD.

  19. I recently did a Hyatt mattress run to to the Diamond challenge……after all the bonus miles it was 3 cents per point to pay for the mattress run…….but if I calculated 12 breakfast at the Paris Vendome at $50 each then my cost per point went down to 0.9 cents and then the 4 upgrades at Maui (2), Carmel, and Seattle all became free…….if you want to do it there is always a way to crunch the numbers to justify the ethical hedonism we strive for………..

  20. Need a crowd decision: Along the same line of this conversation I am booked to Sydney in Business Elite, 2 people, 480,000 Delta Miles.
    The Amex platinum 2 for 1 price is now down to $6932 for the 1st ticket and about $800 in taxes for ticket 2, so $7732.
    We are now down to 1.61 CPM in value (and a small tax on the award ticket).
    Even given everyone’s mistrust of the Delta Program, if one takes into account the 15000 base miles ,class of service bonus, and perhaps the most valuable benefit–15000 SPG points, do you guys still think it’s better to use the Delta points here or can I get more value out of them in some other way? I can afford to pay the fare if someone suggests a significantly better use of the miles 1.6 cpm (really more like 1.4 after SPG and Delta points), I would use the points elsewhere. Does anyone have an idea for getting 2+ cPM in value?

  21. I’d use the Delta points just because you can. Delta miles are generally difficult to redeem. I’d stick to AA, BA or United.

  22. I don’t travel when I’m not paying enough to worry about maximizing value. When I travel for fun I typically have enough miles through some combination of earned miles/credit card stuff to get wherever I want to go in F/J.

    Aside from that, I typically burn Delta miles first because they are so hard to use so I guess I don’t value them as highly as Star Alliance/OneWorld miles. If I have to take a domestic trip for example and the prices are really high, I would rather spend 40k DL miles roundtrip than use UA/US/AA miles (even if I can find a trip at the saver level).

  23. @ traderprofit — If you can find something at the “low” level, even in one direction, you’d be getting a much better value for your miles. Agree that at those numbers it’s a tough call otherwise.

  24. The only correct answer to this question is – “it depends” 🙂

    Even with alliances and partners, some mileage programs are going to be more valuable because of what your home airports are and what routes you/your family flies commonly. For example, for us Singapore’s KrisFlyer program is valuable for a specific nonstop TATL route and BA Avios for cheap, intra-European flights (distance based).

    Insofar as calculating value is concerned, unless you can/do buy revenue premium seats, I don’t think it’s correct to take into account ticket’s price — it should be what you’d feel comfortable with paying (e.g. price of economy ticket + some premium). Would work the same for hotel rooms. Also, as someone mentioned above, have to think about mileage/points accrual you are forgoing by using miles/points.

  25. Lucky, I think it is always a good idea to keep into perspective the ‘value’ of a mile. I think your estimations are pretty good.

    A couple of points to add. If you compare a $5000 full fare business ticket to Europe for miles you are dead wrong in estimating a 5cpm (assuming 100K miles = business class ticket)

    A $5000 ticket is usually changeable without fees, available anytime. So more comparable to AA’s new 275,000? business redemption. However even then its not comparable. You don’t earn elite status, nor bonus and promotion miles. Also in case of irops, also not comparable.

    Lets take a limited space standard award. (Say for now 100K award which will likely change soon without notice) So frequently we see business class tickets to Europe for $2000, that ticket again is more valuable then even the 100k redemption because your earn miles/promo/status and because you can find often 4 seats together. In case of weather/mechanical problems you can change your ticket much more easily. In fact one downside to a miles ticket is even in mechanical problems you will likely not get the ticket endorsed to another airline to get you home in reasonable time, nor will you be able to get the kind of help or bonus inconvenience package from the airlines. This is especially true if you are flying a different carrier then where the award came from.

    I appreciate your evaluation of miles, and this is how I use evaluations like yours. Promotions. – OK suppose there is a fly business class and earn 25,000 miles. (25k * 1.6 = $400) So if a business class ticket is only $600 more, I may be $400 temmpted to buy it rather then using a system wide upgrade.

    Or suppose there is a promo like elite rewards, and I will figure, if I fly another 25k miles, I can get a bonus of 15,000 which is about $240. So I am getting a rebate in that neighborhood.

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