Frequent flyer miles continue losing value

This may come as a surprise – or perhaps not – but the value of your accrued frequent flyer miles is dropping. In some cases, rather rapidly.

A survey done by the IdeaWorksCompany shows that the average cost of an economy seat, in miles, has increased significantly for five of the six major U.S. airlines it has surveyed since 2019. That means that your accumulated miles are worth less than they were a year, or five years, ago.

The company conducted 600 booking and fare queries on the websites of American (NASDAQ:AAL), Southwest (NYSE:LUV), jetBlue (NASDAQ:JBLU), Alaska (NYSE:ALK), Delta (NYSE:DAL) and United (NASDAQ:UAL) for flights between city pairs that are among each carrier’s top markets, with departure and return dates evenly distributed during June, July, August, September and October.

Results showed that the average cost of a main cabin (“coach”) seat increased from 2019 for all airlines except American. As the chart below shows, Southwest had the biggest percentage increase, going from 7,400 points to 14,500 points; an increase of more than 96 percent! Still, Southwest leads the pack with the lowest overall average reward price.

Alaska showed the most modest increase at six percent, while American actually dropped about 35 percent.

The research showed that average reward payback has fallen as well. That’s the number of frequent flyer miles that will accrue for each dollar spent on base fares. Again, Southwest leads the pack with 6.7 percent return, which represents a rewards value of $6.70 for every $100 spent on base fares. Delta has the lowest return at 0.4 percent per dollar spent.

A question that frequent travelers often ask is: How much is a mile worth when it comes time to redeem it? Historically, travel writers and others have said, “About a penny a mile,” and this survey shows that’s about right.

While American again bucked the trend inasmuch as the value of their miles increased – from $0.007 to $0.014 per mile – the values of the other carriers’ miles dropped slightly from the 2019 survey, as shown below.

When frequent flyer programs appeared in the 1980s, buying a ticket on an airline was the only way to accrue miles. Now, the majority of mileage accrual originates from partner transactions and the minority is generated flying the airline.

Today, consumers achieve the best reward value by using a carrier’s co-branded credit card and remaining loyal to the airline for flight purchases, in large measure because the co-branded credit card usually includes valuable benefits such as earlier boarding and the waiver of checked baggage fees.

But not always.

With the United Airlines affinity cards, baggage fees are waived only when the ticket is purchased on the traveler’s card. American Airlines offers free checked bags to its cardholders, even when another entity purchased the ticket, such as an employee who is traveling on company business and therefore a company-paid ticket.

IdeaWorksCompany concluded: “The original appeal of frequent flyer programs remains just as valid today as four decades ago: Offer consumers a reason to be loyal repeat customers who spend money on the carrier's basic product – seats on the plane.”

“That’s how durable sales relationships are created, and yes . . . that’s how members can also find reason to apply for that cash-cow credit card.”

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Charts provided by IdeaWorksCompany
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