A lot of ink has been spilled in the last few years by travel writers heralding the precipitous decline in the worth of frequent flyer programs. I read about it in the abstract, and I wonder how reported plummeting program values might impact me. As I researched two upcoming trips which I hoped to make on award tickets, I found that the answer is thorny: It depends.
First, come basic observations:
- Since award trip mileage is tied directly to the same capacity management algorithms that determine hard currency fares, the variables in mileage costs are moved by actual and forecast demand.
- For instance, high award travel demand correlates to the calendar: school holidays, vacation periods, special events, seasons, and so on—just like paid fares.
- In turn, those date-related variables are tied to other variables, such as city-pairs, competition in the market, aircraft size (number of seats available), and time of day.
- Days of the week used to make a difference in fares (generally, midweek and Saturday travel was cheaper), but not so much anymore.
- Another variable can be how far in advance you buy fares or book award seats; the closer to the travel date, the more likely the fare or mileage will be higher than 330 days out when flights are often first opened for booking.
For all those reasons and more that I don’t understand, award fares expressed in miles fluctuate a great deal. They can and do change daily. There have been times that I shopped for award seats for the same city-pair and date range over the course of a week and suddenly saw a drop in mileage required. Tenacious perseverance sometimes pays off when shopping for award seats—if you have the time and the patience.
But I digress. What about the value of frequent flyer programs normalized for those variables?
First, a look at the U.S. $ Inflation rate for goods and services over four years:
2018 2.38% (projected)
Thus, goods and services that cost $1.00 on January 1, 2015 would cost $1.07 on December 31, 2018 (projected). That’s an overall 7% rise in price over 4 years.
How does that compare to costs we can relate to the real world? College tuition at prestige universities tend to rise at a higher rate than inflation. For instance, Duke just announced its annual tuition increase would be 3.2%, almost a percentage point above expected 2018 inflation, but still less than similar rises at Harvard and elsewhere.
What about airfare inflation in the same period? According to the Bureau of Labor Statistics, fares on average have gone down between 2015 and 2017:
“According to the U.S. Bureau of Labor Statistics, prices for airline fares were 4.98% lower in 2017 versus 2015.
“Between 2015 and 2017: Airfare experienced an average inflation rate of -2.52% per year. This rate of change indicates significant deflation. In other words, airfare costing $100 in the year 2015 would cost $95.02 in 2017 for an equivalent purchase. Compared to the overall inflation rate of 1.67% during this same period, inflation for airfare was significantly lower.
“In the year 2015: Pricing changed by -5.03%, below the average yearly change for airfare during the 2015-2017 time period. Compared to inflation for all items in 2015 (0.12%), price inflation for airfare was much lower.”
With airfare averages dropping, what about the mileage costs for frequent flyer awards?
Again, my experience is that it depends, though award seat costs are not dropping. I shopped for two weeks for Delta or American economy class awards between Raleigh (RDU) and Billings (BIL) in July, admittedly a peak summer period for western state travel. American awards were above 50,000 miles, and that was for coach! Delta’s were also pretty high until one day I found dates and flights for 32,500 miles RDU/BIL/RDU. I grabbed it. Thirty thou for an award ticket in the summer between two popular and busy places is pretty good value these days and not much different from the past.
That’s for domestic travel. For international award travel, the trend looks like business class award travel costs on Delta have shot through the roof; American’s not so much. My personal baselines derive from two 2016 trips to Africa on business class frequent flyer awards, one on AA and a partner airline, and one on Delta and its partners.
In 2016 I used AAdvantage miles on American and Qatar Airways via PHL and Doha (Qatar) in business class Raleigh to Kilimanjaro (Tanzania) for 165,000 miles. The itinerary came with good connections, too. I checked flights at the same time to Johannesburg in business class on Qatar, and I was quoted the same mileage.
At American you must phone an elite desk to book partner awards because the AA.com website is limited to showing international award seats only on AA mainline flights, British Airways, and sometimes Iberia. Trying to get to Johannesburg again in business class for early fall 2018 travel, I phoned recently and managed to book RDU/JNB using AA and Qatar Airways for 180,000 miles. I took it, though the connections are many hours. Guess I’ll be napping in the glorious Qatar business class lounge in Doha during the long layovers in both directions.
Even with crappy connections, 180,000 miles in 2018 versus 165,000 miles in 2016 for business class is just a 9% rise in mileage cost—not enough to make me shriek with fury and curse the airline, especially since that tracks well with the 7% average inflation rate for roughly the same period.
The Delta international award travel costs for business class in 2018, on the other hand, proved to be exorbitant compared to 2016. Two years ago I paid 160,000 miles for business class on Delta through DTW to AMS, then KLM to JNB. Returning was on Virgin via LHR to JFK, then Delta again to Raleigh.
When I recently tried booking the same or a similar Delta SkyMiles itinerary RDU/JNB for early fall 2018 travel, I found a dizzying array of mileage award business class costs offered:
- 750,000 miles + about $60 if using Delta via its direct ATL/JNB flight (same costs whether booking online or by phone to an elite desk)
- 441,000 miles + $170 if using Delta, Air France, and Virgin on a convoluted RDU/DTW/CDG/LHR/JNB routing going and an easy JNB/CDG/RDU route returning (booking by phone via an elite desk)
- 302,000 miles + an absurd $489-551 using Delta, Air France, and Virgin on the same convoluted RDU/DTW/CDG/LHR/JNB routing going and easy JNB/CDG/RDU route returning (booking online)
I checked a number of dates, and 302,000 miles was the rock bottom price on Delta, and the connections weren’t that great, with long layovers in Paris and/or London.
So take your pick: 302,000 (plus $500), 441,000, or 750,000 miles. 302,000 looks good only by comparison, but it is still a whopping 88.75% increase over 2016 and comes with Virgin’s hateful $500 surcharge. At the other end of the cost spectrum, 750,000 miles means my lifetime Delta mileage of 5.35 million miles would buy only 7 of those tickets.
It’s easy to think, What’s the point of staying in the Delta SkyMiles program? And frankly, sometimes I am tempted to ditch it. But then I remember that I just booked an award ticket RDU/BIL on the same program in high summer for 32,000 miles—okay, in coach, but that can cost 117,000 miles on some Delta award trip itineraries.
My conclusion is that frequent flyer award mileage costs vacillate wildly at the whim of each airline and are less subject to dollar-based supply and demand pressures that govern hard currency fares. Tighter management control of the award seat inventory means that award seat mileage levels don’t necessarily track with the global economy’s inflation rates.
Which is a fancy way of saying that I expect to pay more and get less and to have to work harder to get awards from frequent flyer programs.