One of the most common conversation I have with my friends who are trying to redeem their miles is – how can I get from point A to B, using my stack of miles. And there are usually the same two issues I encounter in this conversation:
1. They have, let’s say, 50,000 miles, which is really good for multiple domestic redemption, or may be an international return flight to Singapore or Thailand or Sri Lanka, may be even further. But the problem is they usually have these miles spread across 2-5 accounts. And suddenly this makes the entire redemption work so much more difficult, in some cases impossible.
2. They are too focused on using the miles rather than getting the most value out of their miles. For them it’s all about getting from point A to B, rather than understanding which of their miles will get them there while providing the highest redemption value for their miles, or being able to get there travelling in business, or getting from A to B with a nice stopover in C, using the same number of miles.
It’s important to understand what is the value of your miles and why is it relevant.
Last week I touched upon the topic of value of miles. If you treat your Frequent Flyer Program (FFP) miles as an investment, it is important to think about where you want to invest your time and effort to extract the most value from your investment.
Let’s take a very simple example. Say you want to make a quick weekend gateway from Bangalore to Colombo. This one and half hour SriLankan Airlines flight requires a cash outlay of 17,000 INR for a return trip, for tickets that are 2 months’ out. SriLankan Airlines is a OneWorld partner, so you can use miles from any OneWorld partner to book these tickets. Let me save you the trouble and tell you that British Airways is the best OneWorld partner for this short flight. Now, SriLankan airways also partners with Etihad Airways, so you can use Etihad Miles also for this flight. And since Jet Airways also serves this route, they do offer a miles redemption option on their own flight. Not to forget, you can also use SriLankan Flysmiles for this flight. If you happen to have all these 4 miles, which one would provide you the most VALUE? Let’s see this in the chart below:
Now, you can see from the chart, that British Airways miles are worth 1.29 rupee, while Jet Airways is only worth 0.74 rupee – almost one and half times. If you would have used your Jet Airways miles, not only would you need 3000 extra miles, you would also need to pay higher taxes – in effect, a lower bang for your bucks.
Let’s take this example a step further and see what our value would be, if we were to fly business class on this flight:
British Airways charges twice the miles for Business Class redemption, so their value comes to only 1.40 rupee per mile. But Etihad charges only 40% extra. So the value of their mile is much higher in case you decide to redeem Etihad miles.
There are a few fine points to note here:
The value of miles differs based on sector, class of travel and in some cases, even the date of travel. We can comfortably repeat this experiment using any routes in the world and a number of different FFP and see that the value of each mile will differ based on usage.
There is very little difference in the miles requirement between Jet Airways economy (12000) and Etihad Business class (14000) redemption. And the value is more than twice of what Jet Airways is offering (0.74 vs. 1.77). So for just 2000 extra miles, you receive more than twice the value of your miles, and a more comfortable journey.
The tax value differs considerably from airline to airline. This is because airline have different rules when it comes to charging “Fuel Surcharge (YQ)”. The aim should be to avoid airlines that charge YQ, to reduce your cash outlay. Some airlines add some taxes when flying business class, which make it just impossible in some cases to redeem their miles for business class in certain cases – e.g. British Airways adds a hefty tax when flying business class out of London Heathrow.
Some people may argue this is not exactly a free lunch, as I had argued in my first article, as there are considerable taxes to be paid. But consider this – at the end of the day, you are getting to save money on a flight that you would have either taken anyways or you wouldn’t have taken because of the high flight cost and missed out on a holiday. The money saved with miles makes a trip go from not possible to possible. Isn’t that a free lunch? And if you are really adamant on the free part, then there are two solutions to that problem too:
There are credit cards that offer their own points, that can be used to offset any travel expenses, including flights. You can use those directly to get a completely free flight. The value of those points though are considerably less than what you would get from the FFP.
You could use a mix of FFP and these credit card points. So you can pay for the taxes using these credit card and offset that tax from the credit card points.
There is a reason why I insist on understanding the value of miles. And it’s quite simple – this is not a one-time game. And as much as I would like to think we have access to unlimited miles and points, it’s not completely true. If you use more miles than you need to for a flight, that prevents you from being able to use them for a second flight. If you look at this as a continuous, non-ending game with a limited stack of miles, the best thing to do is use miles for high value redemption and use cash, when the return on your miles is below a certain threshold. Not to forget, airlines are continuously devaluing their Frequent Flyer program (means they are charging more miles for the same route, than earlier, which decreases the value of your miles). So it’s better to make the high value redemption earlier on, rather than wait for later.