One hundred thousand miles a year. That would do nicely, wouldn’t it? If you could retire with a bank of about 100,000 annual frequent flyer miles, life would be pretty sweet. You could afford to do all the things we associate with “the golden years.”

Or could you?

The latest buzzword in the frequent travel game is “devaluation.” Many mileage and point junkies are lamenting what they view as a downgrading of their favorite programs and fear the worth of their miles and points are diminishing with each passing day.

Whether referring to increased redemption costs or the whittling away of elite benefits (ok, sometimes it’s all out slashing), those pronouncing the slow death of frequent travel programs are doing so loudly — and they’re garnering plenty of attention. Pick up most any newspaper today, turn to the travel section, and you’ll probably find some travel journalist espousing the need to burn your miles quickly, while you still can.

But is it true? Are programs losing their value? More to the point, will all your years of collecting miles to be used for retirement travel pay off, or will you find yourself reminiscing about the good old days of frequent travel? And, what can you do to maximize the value of these programs?

Devaluation: Fact or Fiction
Reports of program devaluation seem to occur on an almost cyclical basis. In the June 1995 edition of Inside Flyer, we addressed the “Myths of Award Availability,” and found that, despite the protestations of many members, awards were just as easy to get, if not more so, as in the preceding 14 years of the programs’ existence.

And, as far back as our May 1987 issue, we were reporting on the perceived devaluation of frequent flyer programs. At the time, most of the major North American programs had raised award redemption levels to popular locations like Hawaii and the Far East. The major media, always on the lookout for a juicy airline industry story, jumped all over the redemption increases. Before long, Time, Newsweek, The Associated Press, The Miami Herald and others had all written stories admonishing the frequent flyer programs for severely devaluing members’ hard-earned miles and holding the redemption increases up as proof that these types of programs were untenable in the long run. Of course, the reality was far less dramatic, as we pointed out to our readers, but the stories spurred near panic among mileage hoarders — a panic that was summarily put to rest in 1988, the year of Triple Miles.

This newest wave of devaluation mania has been brought on by a number of factors. The chatter actually began about two years ago when many of the major North American programs eliminated off-peak domestic awards, in effect increasing the cost of year-round restricted domestic awards to 25,000 miles across the board (which, in point of fact, was actually a reversion to the award levels in place prior to the introduction of off-peak awards). This, of course, was followed by the events of 9/11 and their near disastrous impact on the airline industry, and the economic realization that the airline industry was facing serious financial difficulties on the whole. The mood of the roaring 90s began to quickly dissolve, as frequent travelers feared something would surely have to give, and that something would probably be the frequent travel programs.

Then, in just the past six months, several programs made dramatic changes that seemed to confirm the fears. Delta SkyMiles redesigned its program, switching to a qualification system to earn elite status and at the same time restructuring its elite levels. In the eyes of many SkyMiles’ members, the restructuring amounted to a full blown attack on elite flyers, as several of the elite benefits perceived to be most valuable were eliminated entirely. British Airways Executive Club also contributed to the buzz when it redesigned its program to standardize its awards globally and, in the process, increased several of its business and first class award redemption costs substantially. And the flames of frequent traveler discontent have been flamed again recently, as Hilton HHonors increased the redemption cost of its VIP awards, only available to elite HHonors members, by as much as 75 percent.

Looking at this evidence alone, it would seem difficult to argue against those who claim program devaluation is an eventuality whose time has come. But, as usual, there are two sides to every story.

While the individual program changes noted above have received disproportionate press and have dominated the conversations of members in the know, a look at the more encompassing statistics paints an interesting, and contrasting picture.

Each year, U.S. airlines are required to file numerous reports with the SEC. Included among those reports are statistics on the number of awards claimed by members and the percentage of award seats that are distributed. Astonishingly, among the major programs, award redemption increased by over 16 percent in 2002 — marking the highest increase in award redemption since 1999. What does this mean? Well, the naysayers might claim that it’s evidence of a run on miles by those who fear their devaluation. And, in fact, the naysayers may very well be right. But the numbers also demonstrate that the programs are working as advertised, and are providing value to the over 15 million members who flew for free last year.

Also of interest among the statistics reported in the SEC filings was the percentage of free awards redeemed as a percentage of revenue passenger miles. Basically, this statistic identifies the percentage of passengers on a given flight who are flying for free. In 2002, five of the six major North American airlines had a higher percentage of passengers flying for free on their flights than the previous year, and four of the programs exceeded or matched their highest percentage totals for the past five years. Again this demonstrates that seats are available for passengers flying on awards in ever greater numbers.

A Matter of Redemption
Think for a moment about all those people you know who belong to these programs. Do any of them approach programs earning and burning even remotely in the same manner as you?

There’s that guy you see post a lot on flyertalk.com — the one who tracks his holdings religiously and loves to post his latest “hot” tip — who swears programs are worth more than two cents a mile and is off on yet another mileage run to further prove his theory of the relativity of miles. And there’s the travel journalist who has self-styled himself to be an expert and is certain that the sky is falling and programs are devaluing their miles almost daily. Then there’s your business associate, who puts all his miles into one program and worries about it exactly one afternoon a year, when redeeming miles for the family of four to jet down to Orlando as soon as school is out.

No two people use these programs exactly the same way, and it is the manner in which programs are used that, more than anything else, truly affect the “value” derived from them. Sure, programs change from time to time. Sometimes the changes are positive, sometimes not so positive, but over the years the relative degree of change has been excessively minor. The positives and negatives have tended to balance each other out, leaving programs that are different than the originals, but not necessarily better or worse.

On an individual basis, the single most influential factor in determining the relative value derived from frequent travel programs isn’t the changes made to the programs, but the manner in which you react to the changes and manage your programs.

Invariably, any decision based upon fear and greed is likely to lead to less than optimal results. If instead you choose to make decisions based upon a well thought out plan that has been individually designed to suit your own specific travel goals and that incorporates your own acceptable levels of risk, you will be much further ahead.

With that in mind, we have put together a few mileage-management scenarios, with the goal of looking at ways to optimize the value you receive from your programs, no matter what your unique redemption objectives.

Goal: Earn and Burn as You Go
Just because you want to enjoy the fruits of your miles sooner rather than later doesn’t necessarily make you a chicken little. We live in a society obsessed with immediate gratification, after all. It does, however, mean you probably won’t be able to gain the same value from your program as the person who maintains a mileage reserve would.

This is true for several reasons. For example, members who maintain higher balances can use their reserves to take advantage of limited-time award saving opportunities. If you only have 30,000 miles in your account, building toward your next family trip, you could miss out on the chance for a romantic getaway for two to the Caribbean when your program is offering awards at a reduced rate of 18,500 miles. And, though we appreciate the mileage purchase options offered by most programs nowadays, a reserve in your account would save you from being tempted to top off your account for the hefty fee generally charged.

Still, if you’re committed to this strategy (if you can call it that), there are things you can do to get more from your miles.

If you’re looking to burn an award, it’s generally better to book the award sooner, rather than later. In response to various forces, many airlines and hotel chains are upping the “price” of awards in the short term. Remember: for most programs, you can book now at the lower rate, and make the actual trip any time in the next 12 months.

To gain more flexibility with your small mileage cache, consider booking a fairly “expensive” award somewhere in the future … a transpacific trip to Australia, for example. When the time comes, you can either take the trip, or cancel, and pay a modest redeposit fee, giving you the option to use the miles on a better opportunity that comes along.

It should be noted there are two drawbacks to this strategy: First, even if you’ve got your award ticket in your hot little hand, there’s no guarantee that it will be honored if the airline folds. The Aviation and Transportation Security Act recently extended by Congress, protects ticketed passengers by forcing other airlines to honor the tickets of defunct competitors, but nowhere does the law specifically protect award travelers.

Second, some might consider this strategy unfair, if not unethical. By clogging up the reservation works, you might well be preventing someone with a more earnest desire from taking their trip of a lifetime.

Goal: Saving for Retirement — The Early Years
Visit FlyerTalk.com sometime, and see what happens when a new poster asks for advice. Then stand back and watch the avalanche roll.

There are more opinions on the right ways to earn and save miles than there are fish in the sea. It would be monumentally arrogant to suggest that we have the one true way.

Instead, here are some suggestions: Pick an airline that you’ll actually use. AirTran will not be a good choice for Seattle residents, for example. Chicagoans, go with United. Minnesotans, Northwest. You get the picture. Don’t worry about a limited range for awards. Most of these guys are buddied up with someone who flies where you want to go, leaving you with plenty of award options.

Does this mean you should never fly another airline? Absolutely not. Chances are, you’ll be flying just about every kind of plane there is before you’re through. Joining — and therefore earning — with every program you can is a good idea. But remember, you’ll never get anywhere with a few thousand points here and a few thousand points there. You’ll want to focus on one — we’re talking about loyalty, after all.

Pick a hotel program, preferably one that’s partnered with your primary airline. This has three beneficial effects. First, it diversifies your portfolio. Not all your eggs will be in one basket, and you may be able to move eggs between baskets. Second, you’ll pad your mileage account with every stay. And third, you may decide to cash in points instead of miles — hotel programs offer some of the most unique awards at the best values.

Get a credit card allied with the program. If you don’t trust yourself with one, get a debit card. Your earning ability will be cut in half, but you’ll still be squirreling away miles every day.

Here again, the value of having a primary hotel program comes into play. The Starwood American Express card, for example, allows you to earn Starwood points, which are transferable to most airlines one-to-one. Again, it’s a way to diversify without sacrificing your loyalty to a particular program.

Also consider Diners Club. Its acceptance may be limited, but the card can function as a de facto co-brand for every major carrier. Club Rewards points translate two-to-one for all of them. And either as a way to pad your account or as an escape route, it’s good to have a transfer option to run to in times of trouble.

These steps alone should get you off to a good start. Then, of course, if you find yourself becoming a mileage junkie, there are always ways to play the game. In these pages, or on FlyerTalk, you’ll find ample opportunities to work the system — be it through buying $40,000 worth of pudding, or test driving a jaguar.

Then: Hold. Do not burn these miles. Miles “banking” is like any other sort of investment, if you’re just starting out, you can afford to take a little risk. The rewards could be huge.

Goal: Planning for Retirement — Almost There
You’ve scraped, you’ve hoarded, you’ve saved — you’ve done everything but earn miles for that tattoo your daughter got while you were out of town (and, truth be told, you were less upset about her getting the tattoo than you were at the thought of the lost opportunity to put it on your credit card and apply it toward your lifetime AAdvantage Platinum benefit). Now you’re just about ready to retire and start redeeming all those wonderful awards to tropical paradises.

But now that you’re there, how do you protect yourself against the possibility that your primary program will suddenly double all of its redemption rates? This is perhaps the most stress-filled time of any mileage earners career. If your miles suddenly lose value, all those years of earning and saving might be for naught.

First, be assured that this scenario is highly unlikely. Second, be prepared for the worst (needless to say, we don’t envy those retirees who were hoping to use their miles for first class flights on British Airways right about now).

There are some steps you can take to protect the value of your mileage investment as you near and enter your retirement years.

First and foremost: Don’t stop earning. Even though you’re not flying around on business every other week doesn’t mean you can’t still generate a steady stream of mileage income. Pay attention to special fares and elect to earn instead of burn for trips on which it makes good mileage sense. Shop at the online malls offered by the various programs, you might be surprised at how many everyday items you can buy online. Use the extra time you now have to your advantage — take a drive across town to try that iDine restaurant you’ve been meaning to get to, clip and send in Kelloggs certificates, read and re-read this magazine every month. In short, stay on top of your mileage game.

If you have a mileage-earning credit card that allows you some flexibility in converting to different programs, now is the time to begin thinking about moving miles into your secondary and tertiary programs (unless you are near to achieving lifetime status, which we’ll talk about later). By spreading your wealth, you gain a modicum of security should your primary program implement negative valuation changes.

Pay close attention to your hotel programs. Over the years, airline ticket prices have remained relatively stable, while hotel prices have risen steadily. If this holds true, and if hotel program award charts remain stable, the relative value of hotel points will rise more quickly than the value of airline miles. By paying close attention to hotel values when planning award trips, you might even find that it sometimes pays to convert airline miles into your hotel program.

Finally, if you have any chance of achieving lifetime elite status on one or more airlines, do your darndest to get it. If you think you appreciate that upgrade now, imagine how much your body will appreciate it 20 years, and many aches and pains, down the road.

Steady as She Goes
Simply put, we believe that if you pick good programs and you see no long-term reason to change programs, then hang on. Over time, they’re bound to make your travel dreams come true.

We don’t treat it as some sort of religion — we’re as tempted as the next guy to throw in a few miles the next time we hear that a program is raising an award level or may be in financial trouble. It’s really more of a practical matter. Unless you’ve got a lot of experience and interest, it’s simply unrealistic to expect that you’ll be able to “time” the programs short-term changes by jumping in and out of programs. That’s best left to the fools.

A successful earn-and-hold strategy, though, does require that you create a diversified portfolio of miles and points. Unless you’re saving for a travel retirement at least 30 years away, you can’t just put 100% of your miles in one program and expect it will be there when you need it. By the same token, you can’t afford to go “safe” and burn your nest egg of miles and points in a first in-first out approach to award redemption.

What’s the right mix for you? Program allocation is based on just a few key variables: your age, mileage and point income, net worth of miles and points, redemption needs, risk tolerance and expectations about the future. Generally speaking, the younger you are and the more miles and points you have, the more you can afford the short-term volatility of these programs. But as you age — or if your redemption needs increase (family size is growing thus more demand on miles available for family use) — the more you’ll need to protect your goals by shifting to other programs in the future.