Rewards and Average Fares

Rewards and Average Fares

IdeaWorks has analyzed frequent flier reward levels and average air fares in key U.S. markets to calculate the buying power of frequent flier miles during an eleven-year period from 1994 through 2004.

Consumers maximize the value of frequent flier program participation by redeeming miles for higher value tickets and using cash to purchase lower value tickets. Typically, miles are redeemed for longer-haul trips to leisure-oriented destinations.

IdeaWorks began this analysis by creating a market sample to represent the value of a typical frequent flier reward ticket. The nine U.S. markets listed in Table 1 are noted for their high passenger volume and long-distance characteristics; they have also been referenced in the travel media as top frequent flier reward choices:
Key Frequent Flier Reward Markets
Atlanta – New York
Boston – Los Angeles
Chicago – Los Angeles
Chicago – New York
Los Angeles – New York
Los Angeles – Washington DC
Miami – New York
New York – Orlando
New York – San Francisco

Average air fares were assigned to each market based upon data available from the U.S. Department of Transportation and the Air Transport Association (see note 1 at the end of this analysis). Passenger volumes for each market were used to assign a weighted value to each air fare. The result created an average weighted air fare for each year from 1994 to 2004. For example, the average reward ticket in the market sample had a price of $420 in 1994 and $354 in 2004.

Average reward ticket values were compared to the number of miles required by major airlines for domestic reward travel in the United States. Exceptions to the standard level exist and are described in the narrative of this analysis. Some programs, such as those operated by AirTran and Southwest, do not utilize miles and were not included in the analysis. Aloha and Hawaiian were not included in the analysis due to their limited continental U.S. route structure.

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