Experts: Buying flier miles frequently doesn't add up

By Chris Walsh, Rocky Mountain News (Contact)

Published October 14, 2008 at 12:05 a.m.

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In their ongoing quest to boost revenue amid crushing fuel prices, several airlines are pumping up efforts to sell passengers frequent-flier miles and points.

On United Airlines, for instance, consumers can now double or even triple the miles they earn on flights - for a fee. And Denver-based Frontier Airlines recently offered a roughly 30 percent discount on mileage purchases.

Although these deals seem enticing, industry experts say fliers almost always should avoid buying miles. The price tag, they say, often offsets the benefits, and the availability of reward seats is limited to begin with.

Many airlines also are upping the number of miles needed for a ticket, further detracting from their value.

"These programs that let you buy miles are basically enormous money-makers for the airlines," said Tim Winship of Frequent Flier.com, which provides information and advice about airline reward programs.

"But the converse is that, from a consumer standpoint, they're lousy deals. What you will find is that you would almost always be better off, and indeed significantly better off, simply going out and buying a ticket, even if you only need a few thousand miles."

Airlines started frequent-flier programs more than two dec ades ago as a way to maintain and gain loyalty by rewarding customers with free flights and other perks. But carriers eventually began selling miles to customers as well, and in recent months many of them also have started tacking on fees to cash in points.

The actual value of a mile varies depending on what the consumer uses it for, how many are needed for a reward and how much the ticket would normally cost. Experts, though, say a good rule of thumb is to value each mile at roughly 1.2 to 1.5 cents. In that case, 25,000 miles - the standard for a free ticket on most airlines - is valued at roughly $300 to $375.

Airlines, however, usually charge anywhere from 2 cents to 4 cents or more to buy a mile. In many instances, therefore, purchasing enough miles for a free flight can set you back double or even triple the amount of just buying a ticket outright.

One example: United offers customers the option of purchasing 25,000 miles - enough for a restricted ticket within the U.S. - for $841.25, or about 3.4 cents a mile. That's well above the average domestic fare nationwide, which was $332 in the first quarter of the year, according to government data.

Airlines, on the other hand, say most consumers aren't looking to buy the total amount of miles needed for a free trip. Rather, they buy them in smaller increments to pad their accounts.

But even that can get expensive. Purchasing 1,000 miles on United costs $67.25, or 6.7 cents per mile.

United's new awards accelerator program, where passengers can earn extra miles on each flight, is a better deal. From Denver to Frankfurt, Germany, for instance, a passenger can pay $151 for an extra 5,038 miles, which averages out to about 3 cents a mile.

But that's still nearly double what experts say miles are worth.

"Consumers really have got to do the math to see if buying miles is worth it," said Jay Sorensen, president of IdeaWorks, a Wisconsin-based aviation consulting firm. "It varies in every situation, but I look at these programs that let you buy miles and I always shake my head. It's just not something I would do."

Frontier allows travelers to purchase up to 10,000 miles a year, which amounts to half the number needed for a free ticket. It typically charges roughly 2.5 cents per mile, although the carrier offered a discount last month for about 1.8 cents per mile.

But buying enough for just half a ticket would still cost $180 at the sale prices. Customers also now have to fork over an extra $25 to book an award ticket on Frontier, adding to the cost.

Airlines say the idea behind these programs is to provide more choice.

United's award accelerator program "has enabled us to give our customers another way to earn miles," United spokeswoman Robin Urbanski said. "So far, the customer response has been very positive."

She said about 600 customers each day purchase extra miles through the award accelerator program, with more than half of them opting to triple their miles.

Buying miles can make sense if you need a few thousand more for an international trip, where the fares are typically higher.

And consumers don't just use miles for tickets. Another main perk is to cash in miles for upgrades to the premium cabins. Buying miles for an upgrade to business class is often significantly cheaper - sometimes by hundreds or even thousands of dollars - than purchasing such a fare outright.

Not every carrier sells miles, though.

Southwest Airlines, which bases its rewards on a point scale rather than on miles, has considered it but at this time doesn't have the technology in place to do so, said Chris Mainz, a Southwest spokesman.

Besides, Mainz said, "most of our frequent fliers don't have the need to purchase credits because they earn awards at such a rapid pace."

Buyer beware

* Frequent flier experts say consumers should be careful about buying miles or reward points. Often, they say, the costs associated with doing so far outweigh the benefits. Some examples of what it would cost you to buy miles on different airlines:

United

Miles needed for a restricted domestic ticket: 25,000

For restricted ticket to Europe/South America: 50,000

Cost to buy 5,000 miles: $196.25

Cost to buy 25,000 miles: $841.25

Cost to buy 50,000 miles: $1,647.50

American

Miles needed for a restricted domestic ticket: 25,000

For a restricted ticket to Europe: 40,000

Cost to buy 5,000 miles: $137.50

Cost to buy 25,000 miles: $625

Cost to buy 40,000 miles: $1,000

Frontier

Miles needed for a restricted domestic ticket: 20,000

For a restricted ticket to Mexico: 30,000

Cost to buy 5,000 miles: $140

Cost to buy 10,000 miles*: $250

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