Mileage Inflation Grows Worse; Act by Oct. 1 To Avoid Increases

Two weeks ago I wrote a blog warning of "mileage inflation" when it comes to frequent flyer miles.  Today I write with even more urgency, as new thresholds and new fees get tacked on many award tickets beginning Oct. 1. 

In short, in the last couple of weeks, things have gotten even worse for folks hoarding their miles for a dream vacation.

• American Airlines has tacked on a $5 processing fee for anyone requesting an award ticket except for members at the “platinum” level of its  flyer program.
• US Airways' award ticket booking fees now range between $25 and $50.
• Want to use your miles on American to upgrade to flights between North America and Colombia, Peru, Ecuador, or Venezuela on a discounted coach ticket?  That'll cost you $150 as of Oct. 1.
• Also on American, an upgrade using miles and a discounted coach ticket will require a $35 fee EACH WAY on flights between North America and Europe, India, Japan, China, Argentina, Bolivia, Chile, and Uruguay as of Oct. 1.
• Further mileage inflation means on American, you'll have to redeem 50,000 miles for a "free" business-class ticket or, more likely, 100,000 miles to secure an "Aanytime" business-class ticket domestically.  A one-way upgrade on a domestic discounted ticket that used to cost 15,000 miles is now 15,000 miles plus $50 or more as of Oct. 1.

But there’s more. As of the end of September, American will offer no more miles + cash options for buying tickets. And American isn’t alone. Almost all airlines other than Southwest and JetBlue are applying a dizzying array of new rules and new charges to their frequent flyer programs.

Why?

Well, US Airways says, “With fuel costs higher than they’ve ever been, we’ve had to look at ways to offset our increased operating costs. Increasingly, airlines are charging for ala carte services such as checked bags, seat assignments, and award travel in order to offset these increased costs.”

Why not just increase fares?

“Unfortunately, due to the highly competitive nature of the airline industry, even a small fare increase can be impractical,” answers US Airways.

Translation: If airlines simply raised fares, passengers visiting a third-party web site that compares fares (such as Expedia or Priceline) will see sky-high fares from almost all carriers other than Southwest, JetBlue, and other lower-cost carriers. The Uniteds and Deltas of the world would be at a huge competitive disadvantage. So by sprinkling a wide variety of extra fees all over the place, they can increase revenue with less transparency.

Now, this isn’t necessarily evil or ground breaking. After all, hotels often charge for breakfast, wi-fi service, admission to a health club, and so on. Those are certainly “add ons” that increase the cost of a guest’s stay. But in the case of the airlines, they presented mileage reward programs as simple, easy-to-understand propositions. You earn X number of miles, we give you a free ticket.

No more.

OK, I promised in my last blog to tell you when it’s best to use miles instead of cash, how to determine the value of your accumulated miles, and how to sell your miles if you’d prefer hard cash.

Unless you can get a ticket at the lowest number of miles (i.e., 25,000 miles for a coach ticket within the continental US rather than 50,000 or, in the case of Delta, 60,000 miles), many frequent flyers find miles most useful for upgrades. Especially on overseas flights, an upgrade can mark the difference between a comfortable flight and a hellacious one. It’s up to you. If you’re a petite woman, coach may be just fine; if you’re a 6-foot, three-inch tall guy, well, coach is going to be a tight squeeze when flying six or more hours across an ocean.

On the other hand, if you’re flying between a couple of small towns where there’s little competition among airlines and fares are sky high, cashing in miles might make perfect sense.

Here’s a good measuring stick. Figure each mile is worth a penny. That’s how the airline marketers think, and that’s about what you’d receive if you wanted to sell your award miles. (More on that in a moment.) So, 25,000 miles are worth $250. If you’re looking at a $175 ticket (not that there are many of those anymore), why spend $250 worth of miles? If you’re facing an $850 ticket, maybe even 50,000 miles (“worth” $500) is a good trade.

And what if you want to sell your award miles?

First of all, airline rules usually forbid doing that. But it’s not illegal (except in Utah), and frequent business travelers will sometimes sell or buy miles with mileage brokers who match sellers with buyers and take a bit of the cream off the top as profit.

For example, a reader of my blog in June received $1,650 by selling 110,000 American miles to flyfirstclass.com, a web site that advertises 40% to 70% savings on business and first class tickets. That’s a nice premium of 1.5 cents a mile, though the seller also had to pay $41.10 in fees and taxes. Another company, Vancouver-based BizTravelBrokers, also promises top dollar for your miles, as does, California-based AwardTravel.com.

Remember, you’re violating the rules of the airline that issued your frequent flyer miles if you sell or trade them to anyone. (Though you can certainly gift them to another person.) So proceed with caution in dealing with ticket brokers.

The moral of my two postings on the subject of award miles is this: Use them now. And be aware that lots of rules are going to change on Oct. 1, none of them in them in your favor. You can book award tickets for a year out. If you know your travel dates, do that. Now.