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March 21, 2005

Frequent Flyer Advice: the End of Nuance and the Last Man

The Denver Post carries a piece in what seems like a neverending stream of stories on how difficult it is to use miles, and how miles are worth less today than ever before. (Hat tip to Today in the Sky.)

The article makes the correct point that major airlines are on financially shaky ground. After two years in bankruptcy, United still lost over $300 million in January. But while the future of USAirways is up in the air, most flyers have little to fear in the immediate term over losing their miles. To name just one data point, American Express prepaid half a billion dollars for miles, they seem pretty confident about the future of the Skymiles program.

Still, the article is correct that the number of miles required to redeem many awards has gone up, and increased demand for seats from an ever-growing stash of unclaimed miles has made award redemption at times quite difficult.

The flip side of that equation is that it's easier than ever to earn miles. Where once you could earn miles by flying, or staying at a hotel, or maybe renting a car, nearly half of all miles are earned from credit card spending. You can now earn miles by refinancing a house, switching long-distance companies, clicking on emails, and shopping online. So the higher prices are, to my mind, balanced out by the ease of acquiring those miles.

Furthermore, most programs now offer robust partnerships that allow award redemption across multiple international and domestic partners. That increases the range of award options and carriers offering seats. That upside has to be factored into the equation as well.

That's why the simple formulation of 'the sky is falling' doesn't quite ring true. Award prices will go up tomorrow and the day after that. I've written extensively on this in the past. Furthermore, there is some risk to holding miles in simply betting that the sponsoring carrier will exist in the future or that their miles will be honored by another carrier. But the programs are still highly valuable.

The real answer is to 'burn as you earn'. Walking away from the programs makes no sense. Awards are valuable, and miles are easy to earn. But any given mile will never be worth as much as it is the day that you earn it. So earning and spending activity need to be matched, and the concept of saving up large quantities of miles needs to be discarded.

Posted by gleff at March 21, 2005 12:19 PM

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