Wednesday, September 12, 2012

Alaska Airlines revisits Mileage Plan bonus

For the second time this year, Alaska Airlines is offering a bonus of up to 40% through Sept. 28 for Mileage Plan™ members who purchase miles, either for themselves or as a gift.

"We anticipate most customers will use the purchased miles to top off their account for an award ticket," Komal Ram, manager, partnership marketing & loyalty communications told me in an e-mail when the carrier made its March/April offer. "We hope the bonus miles will also offer an incentive to purchase miles for gifts as well."

Mileage Plan™ members who regularly cruise the airline's web site may have learned of the promotion sooner; the rest of us likely learned of it via the airline's Sept. 11 e-mail announcing the deal.

The actual value of airline miles, when it comes time to use them, is generally accepted to be about a penny a mile. So the math guy in me had to delve into the numbers to see if this was an offer worth exploring.

Alaska's offer can be a pretty good deal.

Alaska sells additional Mileage Plan™ miles at $27.50 per 1,000 miles, plus a 7.5 percent federal excise tax. Compare that to United, which sells MileagePlus® miles at $35 per 1,000 miles plus tax, and it immediately appears Alaska is offering a better value.

But is it? And if so, how much better?

Clearly, the greatest additional value would be realized when buying enough miles to earn the top-tier bonus. That requires a purchase of at least 30,000 miles, and would garner 12,000 additional bonus miles, for a total of 42,000 miles. The total cost would be $886.88 ($825.00 plus 7.5 percent federal excise tax), which works out to a purchase price of 2.11¢ per mile, considerably lower than United's rate above, which works out to 3.8¢ per mile. Obviously, Alaska's current offer of bonus miles help reduce the per-mile cost.

More impressive, however, is the value received when actually using those miles.

Earlier this year, I decided to see how much it would cost to fly from Sea-Tac (SEA) to Reagan National Airport (DCA).

On the travel date I picked (using a weekday because I was presuming business travel), several flights were available for 40,000 miles, plus a $5 processing fee.

Comparing these tickets to what they would cost when paying cash is the only meaningful way to determine the actual value of the miles you’re using. In this case, I was pleasantly surprised by how much value my miles would buy.

Depending on which of two outgoing flights I chose, there were two different prices for a non-stop round trip: $618 or $841.

Remarkably, that means the Mileage Plan™ miles would be worth either 1.5¢ if used for the cheaper flights or ...wait for it... 2.1¢ if used for the more expensive ticket – almost exactly what one would pay to purchase those miles!

Granted, this is only one example and, as I said at the beginning, you’ve got to do the math to know if it makes sense for you and your travel plans. And without getting the 40 percent bonus miles, the math will work out differently.

However, it supports the very positive impression I have of Alaska Airlines and the value it strives to deliver to its customers.

But it forces me to revise what I said in an earlier post.

Certainly, frequent flier miles are a nice perk when earned by actually traveling, using an affinity credit card for purchases, signing up for programs like Rewards Network, and by opting to earn miles at your favorite hotels and car rental companies.

And sometimes, under the right circumstances, it can even be economical to purchase them outright.

Related post:
United Airlines' exchange offer: long on hype, short on value

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.



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