Study: Value of a Mile Jumps in 2005

Study: Value of a Mile Jumps in 2005

The value of a frequent flyer mile seems to be increasing, and yet other measures suggest a troubled mileage marketplace, according to IdeaWorks in its new analysis of frequent flyer mile.

The Mileage Value Index computed by the IdeaWorks company describes fluctuations in mileage values for the most recent 12 years of the 25-year history of the major US programs.

The company stated: “Airline bankruptcies, rising fuel prices and low fare competition have impacted frequent flyer program members in the United States and throughout the world. Frequent flyer programs do not exist in a vacuum and have been affected by the extreme turbulence afflicting the airline industry. These conditions have created a confusing environment for program members and marketing partners.”

The buying power of frequent flyer miles, as measured by the number of miles required to buy a typical reward ticket for U.S. domestic travel, may have hit bottom during 2004. Here is a sampling of the observations from the analysis: In 1994, when the prevailing U.S. reward level was 20,000 miles, the typical frequent flyer mile would purchase 2.2 cents of reward travel; Since 2001, falling domestic air fares have brought the value of a frequent flyer mile down to 1.4 cents in 2004 — its lowest level since 1994; Frequent flyer program members can take some comfort in the increased buying power of frequent flyer miles, which rose to 1.6 cents in 2005.

NOTE: Somehow we doubt with all this analysis that any member would suggest to the airlines go ahead and increase airfares so their miles could be more valuable. Go figure.

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