December 23, 2011
Suppose you are looking for a good deal for a flight and you find that you can either buy a ticket for $400 or redeem 25,000 miles for an award flight. Which should you do? The decision can be quite complicated. You need to know how much those 25,000 miles are worth to you. Plus, if you redeem miles, you won’t earn miles from either the purchase of tickets or the flight itself. And if you’re looking to earn elite status, you need to consider that you won’t earn elite qualifying miles from an award flight.
In order to try to wipe away most of that confusion, I’ve put together a three step guide to help you figure things out. The formulas are far from perfect and they won’t match everyone’s needs or beliefs about miles, but I know that I need something like this so maybe you do to. As much as possible, I’ve kept to nice round numbers and easy formulas. Here goes:
Step 1) Take the # of miles you would need to redeem, chop off the final two zeros, and add a dollar sign in front. Example:
25000 Miles -> $250
This is the value of your miles if each mile was only worth a penny. However, according to the Fair Trading Prices chart, most miles are worth about 1.3 cents, so this is just a starting point. Also, don’t forget that by redeeming miles for a flight, you will lose out on earning new miles. So, go on to step 2:
Step 2) Answer the question: do elite qualifying miles matter to you?
When you fly on a regular purchased ticket, you earn both redeemable miles and elite qualifying miles. Redeemable miles are used for award flights. Elite qualifying miles are used for gaining airline elite status. You generally need to earn at least 25,000 elite qualifying miles on an airline in a calendar year in order to earn the lowest level of elite status.
If you are unlikely to earn elite status, then your answer should be “No”. Or, if you simply don’t understand the question, go with the answer “No”.
Step 3A) Use this formula if your answer to step 2 was “no, elite miles don’t matter”:
$250 x 1.5 = $375
This is your estimated loss for redeeming miles and forfeiting new bonus miles.
Step 3B) Use this formula if your answer to step 2 was “yes, elite miles matter”:
$250 x 2 = $500
This is your estimated loss for redeeming miles and forfeiting new bonus and elite miles.
Step 4: Compare
Take the value you computed above (either $375 or $500 in the examples) and compare to the paid flight option. If the calculated amount is less than the paid flight option, then redeem your miles. Otherwise buy the ticket.
Example A: The estimated loss from redeeming miles ($375) is less than the cost of a ticket ($400), so: redeem miles
Example B: The estimated loss from redeeming miles ($500) is more than the cost of a ticket ($400), so: buy the ticket.
- Don’t forget to use your own common sense here. If you’re low on cash, or you don’t think you’ll ever be able to use your miles for a high value redemption, or you simply don’t value your miles, then by all means use the miles despite what the formula says! Conversely, you may value elite miles more than the formula allows, or you may be holding onto your miles for much higher value redemptions. In those cases, it would make sense to err towards buying flights.
- The factor of 2 used in step 3B to compensate for the loss of elite miles is a very rough approximation. If you really want to be rigorous you can determine the number of elite miles that would have been earned for the flight and multiply by $.03 (3 cents per elite mile). Then, use formula 3A and add in the result of your extra calculation.