If you’ve just started the miles and points game, the temptation might be to use your newly earned miles for everything. Or, you might be in the situation where you have a ton of miles but don’t know what to do with them. I play the miles and points game for two reasons. First, I want to experience things that I’d never be able to afford in cash (namely, international premium cabin flights). But the second reason I play this game is to make travel more affordable. If you’re in this game for the second reason at all, it’s important to know how to make judicious decisions about when and where to use your miles.
This post was prompted by an e-mail a friend sent me: “Hi Joe, I need to fly to Fremont (San Francisco Bay Area) for a wedding/bachelor party. I fly the night
of August 6th and get back to LA on August 10th (anytime).”
Let’s call my friend “Bill” so I don’t have to keep calling him “my friend.” So there are three ways Bill could get himself to San Francisco: region based award miles, distance based award miles, and a cash ticket. I’ll do a little walk through all three possibilities. If you need a refresher on award types, feel free to refer to my award type guide here, I’ll assume you understand the basics of award types for this post.
Region Based Award Miles (United, American, Delta, etc.)
Region based award tickets cost a certain number of miles depending on what regions you are traveling between. Since this flight is from LAX to SFO (or nearby airports), the region is pretty simple to figure out: continental US. All of the legacy carriers basically charge the same saver price for this award: 25,000 miles round trip (20,000 for United because the flight is < 700 miles).
Searching for award space, I found direct flights on United, which out of the legacy carriers would be the best option because it saves 5,000 miles. So, this itinerary could be done for 20,000 United miles (or 25,000 Delta, US Airways, or American if there’s space). To figure out whether this is a good deal or not, we have to check the other options.
Distance Based Award Miles (British Airways Avios, ANA Mileage Plan)
The cost in miles for distance based awards is based on how far you fly. All distance based programs add the miles flown on each segment, so if you don’t fly the most direct route you’re paying more. This gets tricky because the two main distance based awards aren’t US carriers – you just need to know their partners. But in case you don’t know, British Airways partners with American, US Airways, and Alaska, while ANA Mileage Plan partners with United.
If Bill can find a direct, nonstop flight on American, US Airways, or Alaska, it would only cost him 9,000 Avios – 11,000 miles less than the cheapest region based award! This is the power of distance based awards – they often present great value for short haul flights. Unfortunately in this case, there were no nonstops available. I searched on aa.com (which gives me results from AA, US, and Alaska if the space exists), and didn’t find anything direct. For partner travel, there must be award space at the lowest (saver) level, and there was none for nonstop flights. So for Bill, distance based was not an option.
The best place to search for cash tickets is on ITA Matrix. You can’t book from that site but if you can find the ticket on that site it exists out there somewhere. I did a search for multiple airports, although I left SFO out because Bill said he preferred OAK or SJC. He wasn’t flexible on dates so I just searched for the 6th and 10th.
As you can see from the results, the cheapest nonstop flight is $162. That’s not bad, but is it better than the award options?
Choosing the Best Option
Let’s review the options in this particular instance: 20,000 United miles or $162. How should Bill decide between the two? It’s all about opportunity cost. For 5,000 more United miles, Bill can fly in coach all the way to Boston to visit me. So if he were to book his trip using miles, he’d be giving up that possibility. If I can find a $300 roundtrip fare from Boston to LA, I consider that good – the United miles are worth much more if you use them for that kind of flight. If Bill could use his United miles during a hot period, like when flights cost $500, they’d be even more valuable.
So in this case, Bill (rightly) just paid for the cash ticket. His United miles can be more valuable elsewhere if he uses them correctly. Plus, he has the Barclays Arrival Card so he can reimburse the charge anyway.
If there were direct flights on American, US, or Alaska, I think the determination should change. 9,000 Avios is a great deal. If Bill doesn’t have Avios, he could transfer 9,000 Chase Ultimate Rewards points over. That represents a value of a little over 1.5 cents per point, which is generally pretty good.
One more thought. A classic mistake I see that drives me insane is when people redeem miles in region based programs for short flights. Redeeming 25,000 miles for a flight that costs $162 in cash completely makes my head explode. A very, very conservative valuation is to try to get at least 1 cent per mile – so if you’re redeeming 25,000 miles, at least try to get $250 of value out of it. Region based awards can be a great deal on short haul flights when prices are high, but that’s the exception, not the rule.
When you’re choosing between miles, points, or cash, knowledge is king. You need to be able to calculate the opportunity cost of the option that you choose – to do that properly you need to know all the options for all the different “currencies” that you own. Unless you’re hurting for cash, don’t redeem miles when you’re getting better value from a cash ticket, save them for something better!