As airlines enjoy a period of depressed oil prices, full planes, and record profit, many have taken steps to reduce the value of their loyalty programs. This has led to a sustained chorus of skeptics singing that miles are now worthless. Actually, that could not be further from the truth. Here are five reasons why:
1. Airline Miles Still Offer Flyers More Value Than Cashback Credit Cards
Whenever I hear people say that they are going to shred their airline-branded credit card in favor of a cashback card, I cringe and this example should prove why.
Forget the 25K round-trip domestic travel. Make no mistake, all U.S.-based airlines still offer theoretic “saver” redemptions at this rate, but I am not going to argue that this award space is readily available. Instead, we tend to see economy class domestic trips range from 35-50K round-trip. Even that, though, is often a much better buy than applying your cashback points toward the purchase a ticket.
Let’s say you need to go from Seattle to Burlington, Vermont at the last-minute and are weighing options. A paid ticket is $660 round-trip while an award ticket via Detroit on Delta is 45K miles. The best cashback cards will give give you 1.25 cents toward the purchase of a ticket per point, so that means you’d need 52,800 points for the ticket versus the 45,000 Delta points. The airline points are more valuable, even paying 45K for a round-trip ticket.
Want to fly business class? The value-difference is even more stark. Say you find space on Delta for 160,000 miles round-trip in business class to Europe, which is not hard to do on delta.com. Use a Capital One card to book the same trip and you are generally talking about a $4,000 ticket or 400,000 points per ticket.
I will not say that a cashback card is worse in every circumstance, but those who spend just a few minutes searching airline websites for award space will see that it invariably makes more sense to collect airlines miles versus cashback points if your object is to use those points for travel.
2. Airline Miles Still Make Aspirational Travel Affordable
I alluded above to the incredible value of exchanging your points for premium class travel, but it merits elaboration. The incredible thing about airline miles is that you can use them to fly some of the world’s most luxurious premium cabin products for a fraction of the retail sticker price.
Here’s an example. At the end of year, my wife and I are flying from Los Angeles to the Maldives in Etihad First Class using our American Airlines miles. The trip was 180,000 miles round-trip per-person and taxes of about $100. Quite a lot of points, no?
Not really when you consider that the same tickets sell for over $29,000 and thus had I only had a cashback travel rewards card, each ticket would have cost in excess of 2,900,000 points. What is the better value? 180K airline miles or 2,900,000 cashback points?
Wait a minute – who would ever pay that for a price? Fair point, but let’s say the tickets were only $3,000 each. Even then, 180,000 American miles represents a much better value than using 300,000 cashback points.
There are examples galore, but remember this – you would be a fool to collect cashback points if you want to travel in first or business class. Your miles will take you much further for much cheaper. Rules and award availability may require some flexibility in your travel dates, but the difference in value is astounding.
3. Airline Miles are Still Free to Collect
I scratch my head when I hear people say it is not even worth adding your frequent flyer number to your airline reservations. Airline loyalty programs are free to sign up for and awards start at as little as 5,000 miles. There is no reason not to spend the few extra minutes signing up for a frequent flyer account or a few seconds adding it to your reservation.
Here’s some food for thought. Let’s say you travel between the West Coast and Europe twice per year on American Airlines. Even the cheapest fares will net you about 10,000 miles per trip. Thus, you’ll earn about 20,000 points per year in just two trips, which is enough for a one-way ticket to Europe during the low-season.
That works out to buy four round-trips and get one free, which I’d say is a pretty darn good cost proposition and well worth the effort of adding in a frequent flyer number.
4. Airline Miles Remain Versatile
It’s not like your airline miles can only be used to book flights. Although that is the best use of points in terms of monetary value, remember that your miles can be used for car rentals, hotels, magazines, special events, cruises, household goods, and electronics.
Using 100K miles for a $1,000 iPhone versus using 100k miles for a $6,000 business class ticket to Tokyo makes little sense to me, but I do know people who travel enough for work, earn miles through that, and have no desire to travel on their own time. For people like that, 100K miles for an iPhone may make a great deal of sense.
5. Airline Miles Allow Better Flight Combinations
Usually when you buy an airline ticket, your ability to construct elaborate routings or mix and match carriers in order to get to your destination is limited. Adding extra stops or extra carriers will quickly spike the cost of a ticket. Using airline miles tends to be a little different.
Your United miles are not just good on United Airlines flights, but on 30 additional airline partners. Similar story with Alaska, American, and Delta points. Further, routing rules on award tickets tend to be looser, meaning you have more options to get you where you need to go.
Let’s say you need to get from San Francisco to Hong Kong and all the non-stop options and one-stop options are either sold out or very expensive. You’re pretty much out of luck in terms of buying a ticket. But if you are using your miles, looser routing rules means you may be able to go through, say, Tokyo and Beijing enroute to Hong Kong and thereby use only 40K miles in each direction.
Do you see the value? With a revenue ticket, you either buy the expensive ticket or stay home, for adding extra stops will only increase the price of the ticket even further. With mileage tickets, you can stitch together unorthodox routings to save money and maximize the value of your points.
Airlines don’t exactly make it easy to use points, but those willing to invest minimal effort in learning how airline programs work will be rewarded. Whenever anyone says that it is not worth collecting miles, remind them that it does take some effort to smartly use points, but it is definitely worth the effort.