Frequent flyer questions – mileage devaluation

As promised, I am answering some of Wendy Perrin’s readers’ frequent flyer questions. This batch of answers are about mileage devaluation.

Sam asks:

“In a world where more and more miles are earned through credit card bonuses and partner activities, (especially true for my primary airline Delta). Is it still feasible for people like myself who earn miles solely through flying to continue to be loyal to a frequent flyer program, when miles are constantly being devalued.”

My answer:

“If you fly enough to qualify for elite status then you do get recognition of your loyalty through the elite benefits which are unavailable to those who earn all or most of their miles from non-flying activity. Furthermore these benefits are more useful the more you fly.

If you are worried about frequent flyer mileage devaluation then try to redeem the miles for good awards or upgrades when you can rather than saving too many for “a rainy day”.”

Ken asks:

“I have 1,214,662 Delta miles available miles to use because I purchase revenue tickets and make purchases on my airline affiliated credit card. I am based out of DTW and just got Delta Platinum Medallion last year. How many miles is too much to accumulate and is it time to start cashing in my miles?”

My answer:

“Some people accumulate very large balances with the view of using them for extensive travel in their retirement years. I think frequent flyer miles devalue too much over any given 10 year period to retain them for too long. I aim to use them up (on good value award or upgrade redemptions) at a similar rate as I earn them with a moderate balance (say half a million miles) so I can go an a great trip at short notice if the opportunity arises.”

Michael Cleveland asks:

“My situation: Took the Latin Pass mileage run where 3 in my family earned 500,000 each. Latin Pass group began reducing airlines for which we could redeem miles soon after earning these 1.5 million miles.

Dilemma: Go on multiple whirlwind trips to consume my mileage bonanza quickly or hope that the Latin Pass group holds together for 5 years so we could spread out my vacations to suit my desires and schedule?”

My answer:

“Devaluation is a problem over long periods of time. How about going for a couple of really nice trips in the next 2 years so that you use up over half your balances? That way no matter what happens in subsequent years you have already gotten good value from the program. If there is still no devaluation at that stage then you could slow down your redemption rate to better match your plans.”

George asks:

“Airlines and hotels are flooding us with miles and points lately. There are so many miles and points in the system that devaluations are running rampant and award seats at the lowest mileage level are like finding a needle in the haystack. So, why am I continuing to bother with this and seeing continued frustrations with a constantly devaluing currency and loads of time wasted on finding the ever elusive award seats?

Should I just start flying the low cost airlines and get me the best cash rebate credit cards and save me from this addictive hobby? Is there a cure for my disease? A facility for miles/points detox perhaps? ”

My answer:

“Some frequent flyers have evaluated the situation and decided that switching to cheapest airline pays off – the fare savings outweigh mileage and status benefits. Others in different situations (or with different values?) may not be.

I suggest an annual review of your expected travel patterns, the costs and benefits. I’d also suggest not hoarding excessive amount of frequent flyer miles so that any devaluation has less impact on you.”

Cimber asks:

“As LH FQTV I would like to know, how I could protect against mile inflation making awards even more unattractive. Also I would like to know Randy´s advice on the best programme among Star Alliance carriers in regard to get Gold Status easily.

Kind regards
cimber”

My answer:

“The best protection is to not hoard miles but use them on good value redemptions when you can.

Depending on your travel patterns, one of the following may be easiest to earn Star Alliance gold elite status on – Air Canada, Asiana, bmi (but only until the program is folded into Lufthansa), and Turkish Airlines. All have relatively low qualification and requalification thresholds.”

Nancy Miller asks:

“Use ‘em now or save ‘em for later? Use ‘em for upgrades or blow ‘em on an F trip around the world? We should all have such problems – but that’s the one I’m facing now – finally retired recently and have the time to use my hard-won caches of miles (not enough to just keep going almost forever or even for more than a couple of those F RTW trips) – and I know if I wait too long they’ll be devalued even more than they have been already – Randy – what’s the word from your all-knowing crystal ball and ear to the ground?”

My answer:

“Congratulations on your retirement Nancy. If you are worried about devaluation then perhaps you could take one or two really nice trips in first or business class during the next year or so and then scale the travel back to a more economical use of your miles? That way even if the programs are devalued later you already have gotten some great trips and memories from using your miles.”

Ciaran asks:

“I am a moderate traveller earning enough miles and points to take one nice international business or first class trip per year for myself and my wife; now we have kids is it worth saving up my miles for 2 or 3 years to bring them too, or is this a risky strategy, as airlines can devalue the currency or even go out of business?”

My answer:

“Most mileage devaluations have some notice period before they apply – eg six months. As long as you’re prepared for the possibility of booking to beat program changes there is no harm in waiting until you have enough miles for a great redemption. The real risks are borne by people who hoard miles for many years, over which period devaluation is a certainty.”

Paul asks:

“My biggest dilema regarding mileage and points is a straight economic one–how will I know what my points will be worth tomorrow, or a year from now? Obviously miles and points are not liquid like cash, but it’s almost guaranteed that the value will decrease over time (just like holding cash at 0% interest, inflation gives you a negative interest rate).

So my real question is, has there been any study of mileage depreciation over time? Miles have been around for awhile, and it seems that one could at least find a way to plot depreciation over time, or perhaps diagram it in a nice an visible way.

The diagram/plot could be useful for predicting changes (other than just “worse than last year”), or comparing program to program changes objectively. At the very least it might look cool to see how miles have progressed over time.”

My answer:

“I think what you are suggesting is an analysis of the mileage required for awards (perhaps on some typical routings) over time?

While that could easily be tracked (I haven’t done it but others may have), it is only part of the equation for mileage value.

The ease of earning miles fluctuates over time. Arguably at the moment it is easier than ever to earn frequent flyer miles.

A numerical analysis ignores changing availability which impacts how easy it is in practice to get those awards. For example while the award cost for first class between Asia and Europe flying Singapore Airlines may be unchanged in a particular program, in the past few years availability has dropped to near zero due to blocking of first class awards on their A380 and 77W aircraft.

Another factor which a numerical analysis either ignores or is difficult to allow for, are changes in award rules. When American AAdvantage started allowing one-way awards this was a significant improvement and appreciation in value of their miles. But at the same time, stopover rules were tightened considerably, a simultaneous devaluation.

But perhaps the biggest non-quantitative effect over time are changes in the places you can go and the options to get there, as alliances have grown over time, airline frequent flyer partnerships come and go, and airline route networks expand or shrink.

It is not impossible to allow for all these effects, but it does make an analysis of mileage value over time challenging.”

There will be some more frequent flyer questions and answers posted shortly.