The Value of Award Booking

The Value of Award Booking

There is a lot of debate ongoing in the frequent flyer community about the value of a mile. Many blogs and threads have been created to discuss this topic, and I feel the need to discuss here as well, as there are too many bad ways to spend a mile.  I like to use the price point of about 2 cents per mile in general, but little of this is based in hard science.  What matters more than their "actual" value is what you can get out of them.

Let's go back to my honeymoon trip as an example - Business class tickets from LA to the Maldives and Singapore, then back again.  What are they worth to you?   In pricing these tickets out, I realized very quickly that there is a lot of possible variability with regard to perceived value.  

Perceived value

First, the perceived value of the trip needs to be determined.  This is really a subjective measure.  To me, this means looking carefully at what you would have paid for the tickets if you paid in cash.  Looking at the price for the trip in coach was my best proxy for perceived value, but even so - I'm not sure I would take a journey like this if not for frequent flyer miles.  So, the cash price for flights to and from the Maldives looked to be about $1,800, with no stop in Singapore.  I think that this is a reasonable estimate of what I would pay if I booked myself in cash.  Subtracting the fees paid for this portion of the trip (about $300), it appears that my 120,000 miles are worth about 1.25 cents per mile.  Adding in the trip to Singapore doesn't really add much value in coach, as the amount of fees is nearly the same as a coach fare on MH.  

Now the question is, what's the cost for sitting up front?  Why haven't you considered this yet.  Below is a breakdown of the cost for ticketing my flights all in J.

Los Angeles (LAX) to Male (MLE) - Fri, Jun 28 Los Angeles (LAX) to Guangzhou (CAN) -  China Southern 328 Dep: 11:00PM Arr: 5:20AM 15h 20m Airbus A380 Business (J) Layover in CAN 11h 10m Guangzhou (CAN) to Male (MLE) - China Southern 3083 Dep: 4:30PM Arr: 7:50PM 6h 20m Boeing 777 Business (J)    Male (MLE) to Singapore (SIN) -  Male (MLE) to Kuala Lumpur (KUL) -  Malaysia Airlines 176 Dep: 10:45PM Arr: 6:10AM 4h 25m Boeing 737 Business (C)    Layover in KUL 3h 15m Kuala Lumpur (KUL) to Singapore (SIN) -  Malaysia Airlines 611 Dep: 9:25AM Arr: 10:20AM 0h 55m Boeing 737 Business (C)    Singapore (SIN) to Los Angeles (LAX) - Singapore (SIN) to Guangzhou (CAN) - China Southern 354 Dep: 1:30PM Arr: 5:30PM 4h 0m Airbus A320 Business (J) Layover in CAN 4h 0m Guangzhou (CAN) to Los Angeles (LAX) - China Southern 327 Dep: 9:30PM Arr: 7:00PM 12h 30m Airbus A380 Business (J)    Cost per passenger (including taxes & fees) $6,827.70 Total cost for 1 passenger $6,827.70

Given this price, minus the $600 in fees, I would assign the value per mile at 5.19 cents per mile.  This is a significant price difference over the value of a coach fare (and all the more reason to book in J). 

I think that paying cash, I would suffer through sitting in Y (coach) for all of the hours necessary to get me to my destination (about 22 in-air to MLE) - but this was not happening with miles (and I'm glad I don't have to ).  I had saved these with a goal in mind, and that goal was a luxurious honeymoon, and one which involved flying in J.  

There is no way, given my current financial situation, that I could dream of paying for a ticket to MLE in J, so why would I assign this value to my miles?  This is an answer each person must come to separately.  For me, it's certainly more than 1.25 cents and less than 5.19 cents per mile, and probably on the lower end of this range.  

Making sense out of award pricing

The real key to understanding this math is that it's dynamic.  The relative price depends on your goal with the miles and what you're willing to give up to use them.  When booking awards, two major items are forfeited: Flexibility and miles (status gaining miles as well).  

Flexibility is lost, as it is unlikely that you'll be able to book exactly the trip you want if using miles.  This is because airlines release limited numbers of seats for awards, and you may be forced to fly a less convenient schedule or less optimal connections

Miles are lost because airlines do not award redeemable or other miles when flying on an award ticket.  No biggy you think?  Look at the example above.  Worst case scenario with our miles, they are worth about 1 cent per mile, but best case they're upwards of 5 cents.   Make sure you factor in the cost of lost mileage into your cost of redemption!

What not to do

I suppose there is a moral to this post, which is to be goal directed.  Miles should be saved to reach an aspirational goal.   Don't ever redeem your airline miles for cash or "pay with points" as both guarantee you a rate of 1 cent per mile.  You can certainly do better that this.  Always evaluate your potential gain over what you could do yourself.  How much money are you saving using those points, and how much better with they make your trip if you book in J?

Whatever you choose to do, just make sure it's what you feel is best for you at that moment.  Only then will you be certain that it's a good value!

Best of luck!

Snagging upgrades

Snagging upgrades: Keys for a low-level elite

Despite the undue animosity towards you from higher-level elites, there's nothing wrong with being a casual traveller who gets an occasional upgrade.  Delta, United, and US all grant their low-level elites (all called Silver) unlimited complimentary upgrades if space is available.  American has a very different program that is (in some ways) simpler.

How upgrade programs work

Airlines commonly have unsold seats in first class, and frequently have very full or even oversold coach cabins.  The airlines see these open seats as a great way of rewarding their loyal passengers, and thus may upgrade their elites into these seats.  Rest assured, there is no randomness to the process and I will explain below.  These examples will not contain any description of mileage/SWU upgrading and will be limited to domestic travel only.

Full coach tickets first (Y)

Chances are, you're not holding one of these.  These are tickets booked in coach, but they cost thousands of dollars, and are typically sold last-minute.  These are the first tickets to get upgraded, and may be at the time of purchase.

All other coach fares

These tickets are upgraded based on the elite status of the ticket holder, from highest to lowest elite.  So for example, if there are 10 gold members on your flight and 8 first class seats up for grabs, you are not getting those seats as a Silver member (unless you paid for a Y ticket).  

Should there still be seats remaining after all higher elites have cleared - then it's on to Silver.  Your lucky day, right?  Well, this is where the price you paid for the ticket comes into play.  At this point, it comes down to fare basis (slightly different on UA, US, and DL), but higher fares will get greater priority.  

For instance, if you're flying UA and you bought a ticket in G class (pretty inexpensive coach), you would get beat out to an upgrade by a Silver on an M class ticket (pretty expensive coach).  If there's one seat up for grabs and multiple Silvers with the same fare basis - then it comes down to time of ticketing (unless it's DL and one of those Silver members has a Delta Reserve Credit Card).

How to do better

Okay - so it seems that a lot of this is outside of our control and as low-level elites, expecting not to be upgraded is the best way to not be disappointed.  Well - maybe not.  There are some strategies that can help improve the likelihood of an upgrade.  Here's what I suggest.

Booking at the right times

Seek out flights that will likely have fewer elites flying.  Who are these elites?  Most are business travellers, who tend to fly heavily on Sunday night, Monday morning, and Thursday and Friday nights.  Try the following options (assuming you have flexibility in your schedule)

• Saturday flights
• Early Sunday morning flights
• Tuesday and Wednesday mid-day flights
• Or mid-days on weekdays (between 10 - 3 Monday through Thursday)
• Holiday weeks

Ticket booked in H class

Avoiding these peak times can seriously lighten the elite load and increase your chance of getting an upgrade

Be aware of your fare

As discussed, those fares (signified by that little letter next to the word coach when you're booking) can play a role in your chances at an upgrade.  Sometimes a slight increase in price ($5 - $10) may be all the difference between a U and an L fare, and this will push you one category up.  I don't often buy up, as I am not really a gambler - but this is something to be cognizant of.  If other signs are good that you'll be in a spot for an upgrade, this is something to consider.

Understand inventory

The airlines release upgrade seats starting about a week prior to the flight when they have some certainty that they will be unable to sell them.  Silvers get these upgrades 1 - 2 days in advance, after all of the higher elites have received theirs.  There are products on the market that can help you decide which flight to pick, as they actually show exactly how many upgrade seats are available at the time.   Expertflyer does this for Delta.

The golden ratio

A common misconception is that the more seats in F there are, the better chances you have for an upgrade.  This is unfortunately not true, as more seats in F can mean more elites with coach seats vying for the same upgrades.  What's more important is the ratio of F:Y seats.  The higher this ratio, the better chances for a low-level elite to get an upgrade.


Some of the best planes are the little guys - but I plan on covering all of that in a future post.  The exception to this is repositioning ferries, where unnecessarily large planes are used in place of other equipment in an effort to move a (typically international) plane across the country.  If you ever see a 747 or a 777 flying on a route that normally has a 737 - book it!

More to come

I will post more regarding the F:Y ratio in an upcoming post, so please stay tuned.  Use the follow button on the right for updates via twitter!

Entry-level status vs. Credit Card

Entry-level status vs. Credit Card

There seems to be an ongoing debate on FlyerTalk regarding whether there is any benefit to achieving entry-level status with an airline when many credit cards offer similar benefits.

In my opinion, having entry level status affords a flyer much more than that offered by a credit card.  Rather than simply taking my word for it, let's examine the benefits of status and credit cards for the various airlines.  This analysis will mostly deal with domestic travel.

Of note, I am skipping Southwest in this discussion, as their card does not convey any benefit other than the earning of miles.

American Airlines

Citi AAdvantage Card

	Gold Status	Credit card
Bonus Miles	25% miles flown	2 pts/$ on AA
500 Mile minimum	Yes	No
More Low Awards	No	10% back
Priority Boarding	Yes	Yes
Security Priority	Yes	No
Free Checked Bag	Yes	Yes
Baggage Handling	No	No
Preferred Seating	Yes	No
Upgrades	Yes	No
Companion upgrades	Yes	No
25% In-flight savings	No	Yes

As shown above, there are couple of nice perks come out of carrying the Citi AAdvantage card that Gold status simply doesn't offer.  At the end of the year, you receive a 10% refund of all redeemed miles, meaning if you spent 100,000 miles on a trip to Europe, at the end of your year you would receive 10,000 back.  Not a bad deal

Delta Airlines

AmEx Delta Gold Card

	Silver Status	Credit card
Bonus Miles	25% miles flown	2 pts/$ on Delta
500 Mile minimum	Yes	Yes
More Low Awards	Yes	Yes
Priority Boarding	Yes	Yes
Security Priority	No	No
Free Checked Bag	Yes	Yes
Baggage Handling	No	No
Preferred Seating	Yes	No
Upgrades	Yes	No
Companion upgrades	Yes	No
20% In-flight savings	No	Yes

These two align quite closely, and Silver appears to convey a lot of the same benefits as the AmEx gold card.  The 20% savings makes a cup of boxed wine and a fruit and cheese plate cost only about $13 as opposed to $17, which is nice on some of the longer flights in Y.  Additionally, you can purchase 1-time passes to the SkyClub for only $25 with this card (usually $50).

United Airlines

Chase United MileagePlus Explorer

	Silver Status	Credit card
Bonus Miles	25%	2 pts/$ on United
500 Mile minimum	Yes	No
More Low Awards	Yes	Yes
Priority Boarding	Yes	Yes
Security Priority	Yes	No
Free Checked Bag	Yes	No
Baggage Handling	Yes	No
Preferred Seating	Check-in	No
Upgrades	Unlimited	No
Companion upgrades	Unlimited	No
In-flight savings	No	No

The United MileagePlus Explorer offers no in-flight savings, but supposedly does expand award availability and comes with 2 club passes per year..

US Airways

BarclayCard US Air Premier Card

	Silver Status	Credit card
Bonus Miles	25%	2 pts/$ on US Air
500 Mile minimum	Yes	No
More Low Awards	No	5,000 mile discount
Priority Boarding	Yes	No
Security Priority	Yes	No
Free Checked Bag	Yes	No
Baggage Handling	No	No
Preferred Seating	Booking	No
Upgrades	Unlimited	No
Companion upgrades	Unlimited	No
In-flight savings	No	No

This card has a great redemption benefit, saving as much as 20% on redemptions, but offers little in the way of in-flight benefits.  Some other perks of this card are the Companion Certificates, which cost $99 each and you may use 2 per year.

Is a credit card good enough?

In short, I think status trumps a credit card alone any time.  All of the cards are missing perks regarding seating.  Economy comfort, economy plus, and preferred seating can all help make a long trip considerably more enjoyable.  These perks can be purchased, but may cost you up to $79 each way for longer trips.  With all of these programs, upgrades to first are offered if you carry low-level elite status.  No credit card conveys this, and these upgrades may not even be purchasable.  Although upgrades are uncommon for low-level elites, it is a very nice perk.

The other main disadvantage of simply using a credit card to convey some perks with an airline is the lack of priority during IROPs can really hurt.  Having flown quite a bit through the northern half of the US this winter, I can attest to the fact that you are rebooked sooner when problems arise.  This means that when there is limited space on upcoming flights, you will have a much better chance of getting that space compared with others in the same situation.

What to do now?

Delta SkyMiles MQM Bar 

If you don't have status with an airline but fly enough to get it, try to focus your efforts on getting there.  I would also probably (depending on your financial situation and level of comfort with credit cards) get an affiliated credit card to help make the experience a bit better.

If you don't have status and don't fly enough to get it, you will probably do fine to just get an affiliated card, as you'll get a handful of helpful perks and will earn extra miles towards an award flight.  This assumes that you fly enough to care about these things.

What if you already have status, then what?  I would probably get the affiliated credit card.  Why?  Extra miles, extra bags (some airlines stack the benefits), and some discounts.

Notes

I do not have links to sign up for any of the credit cards listed above, as there are many of offers available for much more lucrative sign-up bonuses than I could ever offer.  Please feel free to contact me if you want to know where to go to find good bonuses.