When To Use Miles Vs. Pay Cash For Flights: Here's How To Do The Math

Ben,

A couple of notes :
1) On Alaska Atmos you get miles for your award travel, which simplifies the equation.
2) potentially if you points on an alliance carrier, it may require fewer points to be on the same plane. Recently, I booked a trip that was going to require 49k. I went to its European partner booked it for 28k. Opened the booking on the US carrier and it allowed me to upgrade to 1st Class one way for 14k. So for 42k was able to book the same trip, and upgraded to first class vs 49k for round trip coach.

Great analysis and considerations where many are simply focused on some inflated cpp statistic as the only metric.

Some other considerations-

1) Miles/points do not earn interest. It's kind of like keeping cash in a checking account. If you don't have a travel goal in mind over the next 12-24 months, you may be better off with cash back versus points.

2) Miles/points generally do not increase in value. Redemption opportunities seem to be getting more expensive. Redemption opportunities are a bit fewer and more far between.

3) What amount do you value the experience at? Ticket price does not necessarily correlate with your own valuation of what you would pay for the ticket.

Miles and points can nonetheless be incredibly valuable! But there's an overall discount value that should perhaps be applied to all of this beyond cpp = cash price - taxes/fees - value of miles not received by paying cash / miles redeemed.

I really want to turn this article into a spreadsheet at some point. The other factor I consider is if I have expiring travelbank with United or expiring credits.

When there's so much inequality in miles, some having hundreds of thousands and some earning hundreds of thousands in a year while others earn few miles, it's time for Mamdani social justice.

Tax out of existence those with more than 250,000 mile balances. If you earn more than 100,000 miles in a year, even by sign on balances, you should be taxed at 50% of the miles. The rich get richer. Platinum level elite should earn fewer miles per dollar spent

Mamdani number 1.. free bus service to JFK.

The flyer (theoretically) pays taxes on money acquired, but doesn't pay taxes on points acquired. $100 in cash requires earning $120+, whereas $100 in points requires earning $100.

A big consideration for me when the math is “near breakeven” is the opportunity of having that choice. How often do I purchase flights where I have the flexibility of making that choice (usually flights booked a few+ months out, routes with competitions, etc) vs how often will I find myself needing to book a last minute ticket that has a high paid rate but great point roi. As aspirational bookings become scarcer, I find myself getting most value out of those last minute (often domestic) flights. Alaska points on AA comes to mind here

@Peter, I was just thinking about your item #3. I would probably never pay $4000 for a one-way business class ticket from US West coast to London for example, but would likely pay up to 100,000 miles if I that was the best I could find and I was locked into a certain date. I likely wouldn't pay more than $1.5K cash, so I'm not really getting 4 cents per mile if I did have to pay that many miles.

Hope you get the help you need.

People said the same with Adams 4 years ago.

Now the only thing free to JFK is his flights on TK.

It would be really interesting to know the average rate of devaluation/"negative interest" per year, and how much this differs between programs.

Your calculations will be incorrect as your valuation can be unrealistic.

It's like you value LAX-LHR experience at $1500. Therefore if every airline is selling at $4000 i.e. anything at $1501 or more I will not fly?
What about $1550 will you fly?
And now with you value 100k at $1.5k valuation will be 1.5 cpm. So you will rather get 2% cash back instead of that business class ticket?
What about flying in coach to LHR at 1.6 cpm, you will really pick coach over business?

Yeah, I think the point is that cpp only tells part of a story, right? It's a metric that folks like to flaunt in many ways - "I would never redeem my miles for less than 4.0cpp... only novices would redeem at 1.5cpp!" But it's really just a number we tell ourselves to make us feel better about an economic choice. And Ben's point, which is a good one, is that most people do not even deduct the miles they otherwise would have earned in arriving at the cpp number.

Or what about one way vs round-trip ticketing. Very easy to use the one way number because award tickets are best booked in one-way segments. But you might pay $5k roundtrip versus $8k if you booked two $4k one way cash tickets, right? So in that made up example, shouldn't the denominator be $2500 versus $4000?

And then there's the "philosophy of a point" itself - it's almost as if points exist in this suspended animation world where they are this valuable mythical thing that is not quite money. Redeeming a point feels different somehow than spending $1, even though it's just another form of financial transaction.

I think you've made some really good points. I wander generally how volatile the valuation of miles/points are compared to USD, especially how often it is devalued. Since the miles only loses value overtime, it doesn't really make sense to bank them unless you have a specific, immediate goal in mind.

You forgot to mention miles / MCE seats.

Good article. Currently I’m using my flight credits to buy tix. As an EXP I’ll gladly take the bonus miles.
When the credits are exhausted, I’ll do the math.

Ok - how about "If AA would bother to have a sufficient number of MCE seats for people to pay for, it may actually be able to convince folks that fly AA only a handful of times a year to use their small mileage balances to pay for MCE seats that AA would otherwise give away for free to its status members. Someone who took a marketing 101 class could probably figure out how to do that more effectively - could even pretend they are "on sale" by showing that ordinarily the MCE seat would be [7500] miles but with the power of a strikethrough line you could get that MCE seat right now for the low price of [4999] miles! Act now, AI operators are standing by."

Better?