How much are airline points and miles worth?

Not all points/miles flight bookings are created equally. Without careful consideration, one may jump at the opportunity to spend hundreds of thousands of points for a "good deal". For example, United Airlines has direct business class flights from New York to Japan that cost upwards of $4000 in cash. The cost in points for the same flight is often 200,000 + taxes and fees. (Remember, a good rule of thumb for most airline miles or credit card points is 100 points=$1. In this example, 200,000 points has a 'value' of $2000, but is enabling a redemption for a $4000 flight, doubling the value). Given this valuation, it seems like 200,000 United miles might be a good redemption.

It wouldn't be a terrible idea given the generally poor value of United miles, but there are much better options out there. For example, one could book a one-way business class flight on Japan Airlines using 60,000 American Airlines miles + taxes/fees. This is 1) generally considered a better airline to fly on and 2) a much better redemption value. In fact, you can earn over 60,000 AA miles by opening an Aviator Red Mastercard, making a single purchase, and paying the $99 annual fee. Other options include booking that same Japan Airlines flight using British Airways, Qantas, or Cathay Pacific for closer to 80-100,000 points. Alternatively, one could book business-class on ANA (All Nippon Airways) through Virgin Atlantic for closer to 40-50,000 points plus ~$500 in taxes/fees. Even United offers 'saver fares' for their business class trips to Japan for 88,000 United miles, making the 200,000 seem absurd. Without knowing the landscape and what constitutes a good or bad deal, it is easy to use all of your hard-earned points on a single trip that, admittedly, would have been better off booked with cash.

This begs the question: what is a reasonable cost in points for a given flight? How should I value my points and miles?

Generally, the highest value redemptions are on long-haul, international business class flights, like from the USA to Asia/Oceania or to Europe. Some of the least valuable redemptions are domestic economy class, although this is not universally true. The worst redemptions are typically when choosing to pay with both cash and points/miles. Often, the cost for these redemptions is higher than if the booking was made entirely with cash or with points. [Cash + miles does not mean using miles for the entire fare and then paying taxes/fees with cash. Taxes/fees are always paid in cash. Cash + miles is an option at checkout that will use miles and cash for the ticket cost, and then also charge taxes and fees. Avoid at all costs.]

Redemption value doesn't imply the least amount of points needed, but rather how much each point you use is worth based on the cash price of the flight. Again, using the example above, a business class flight requiring 60,000 AA miles for a $4000+ flight means each AA mile has more value. For simplicity, for airline miles or credit card points, I like to remove the last two digits to get the minimum value of those miles then compare it to the cash price.

60,000 AA miles -> 60,000 -> $600 minimum value. I would almost never use 60,000 AA miles for a flight that costs $600 or less in cash.

For a flight that costs $4000 in cash, one can see that 60,000 AA miles ($600 minimum value) is a great deal. By using miles, you've effectively turned $600 into $4000. The metric of Cents Per Point, or CPP, is a common way of estimating value and whether to use points or cash. In the above example, each point has a value of 6.6 cents; airline points/miles should have a baseline value of at least 1 cent each, meaning points are 6.6x more valuable than normal in this case.

There isn't a hard science for reasonable redemption values, although many have tried. In my experience, I consider using points or miles when I get at least 2 CPP. This doesn't mean that I will book any flight that meets this criterion, but rather I will consider it based on my current stash of points, how many other trips I am booking, etc.

For example, I booked a return flight on American Airlines in economy class from Athens, Greece to JFK for 19,000 AA miles and $54 in taxes and fees. The cash price for this flight was $730. The math I used is below:

19000 AA miles-> $190 (minimum value) + $54 taxes/fees = $244 minimum value. If I'm going to redeem my miles, the cash price needs to be higher than $244. You can divide $730/$244 to see the rough value of points in this scenario. You are 'paying' $190 in AA miles and $54 in taxes/fees and receiving a flight worth $730.

Below is a very brief summary of the best and worst ways to use your airline or credit card points and miles. As always, award travel requires careful planning and consideration of routes, transfer partners, partner airlines, and more. While long-haul international flights often yield the highest CPP, one would need to evaluate all the options first to assess the point value and decide if cash suits you better. Additionally, flights with such high redemption value are typically booked up to 365 days before departure; just because you find a business class ticket able to be booked with points doesn't mean it will be a great value.

There is discussion within the award travel community about whether or not CPP is a useful metric. Some argue it encourages people to "fly beyond their means" and chase business class flights to places like Australia that they would never pay for with cash. I don't really see that as a bad thing, especially in the instances where you can use points/miles with a minimum value less than the cash price for an economy ticket and fly business class instead. I'm in the points and miles game to travel the world and experience cool things. If done right, you can do this and pay much less than you ever could with cash.

When should you throw caution to the wind and use your points, even if some internet blogger thinks you're making a mistake? If you are cash-strapped and simply cannot afford to pay for a flight with cash. In this case, of course you should book with your points or miles. Go on that trip! Similarly, if you don't foresee traveling for the next few years and your airline miles expire soon, you should jump on the opportunity to use them. As someone wiser than me has said recently: the value of an unredeemed point is precisely zero. When else should you consider opting for sub-par redemptions? If you're fortunate to be sitting on millions of points or miles, or if you need more paid flights to get status with an airline.

(Typical) Best to worst uses of airline points/miles*

1) 10-12+ hour flights (long-haul) in a first/business class cabin (e.g., west or east coast USA to eastern Asia). Often yields a CPP of 6 or higher.

2) 6-10 hour international flights (e.g., east coast USA to Europe) in a business class or premium economy cabin. Often yields a CPP of 4-5 or higher.

3) 5-7 hour domestic business/first class flights (e.g., New York City to Los Angeles). Often yields a CPP of 3 or higher.

4) 5-7 hour domestic economy or premium economy flights. CPP varies; use floor CPP of ~2.

5) Domestic economy flights or flights booked using both miles and cash; CPP can dip below 1.

*Often, the very best redemptions take advantage of airline alliances. I've written before about booking flights on Singapore Airlines or Turkish Airlines using Air Canada's Aeroplan and Avianca Airline's LifeMiles. The best to worst uses may vary depending on if you book an award flight through the same airline you're flying or through one of their many partners.

In a future post, I'll list out well-known 'sweet spots' for award flights and how each award currency should be optimally used.