=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2008/10/30/DDUT13PE82= .DTL --------------------------------------------------------------------- Thursday, October 30, 2008 (SF Chronicle) Figuring out the value of a frequent-flier mile Ed Perkins, Tribune Media Services Delta's new three-tier frequent-flier program - which I discussed last week (sfgate.com/ZFFV) - provides a new benchmark to help answer the vexing question of just how much an airline frequent-flier mile is worth. For most of us, the latest answer is a bit above 1 cent. That figure isn't new, but it's a bit more precise than some earlier estimates. First, a bit of background. When frequent-flier programs first became popular, most of us figured miles were worth at least 2 cents each. That was based on an easy calculation: A long-haul domestic coach round-trip flight generally cost no more than $400, and the base-level award for that trip required 20,000 miles, so each mile was worth 2 cents. That figure was pretty precise: A large majority of travelers used their miles for domestic-coach awards, and back then, base-level award seats were fairly easy to score. Miles were worth even more for the minority of travelers who used them for premium-class travel or upgrades, although the exact values depended on several assumptions. Now, the typical cost of a domestic coach round-trip flight is probably = up to, say, about $500, and the mileage required for a base-level award is up to 25,000 on all the big lines. Nominally, that works out to the same 2 cents a mile. But there's a big hitch: Now, base-level awards are almost impossible to get on popular routes. So many of us devalued our estimate by an arbitrary 50 percent, to 1 cent a mile, to offset the difficulty of getting seats. Clearly, that 50 percent was a wild guess, with virtually no hard evidence to support it. Fortunately, Delta's new program helps improve the calculations. As I noted, although its base-level 25,000-mile awards will probably be harder than ever to get, its new midlevel award, at 40,000 miles, probably replicates the same chances of finding award seats that travelers used to find at the base level. That means a value of $500 or less for 40,000 miles, or 1.25 cents a mile. To Europe, an economy-class round-trip flight costs anywhere from $500 (off season, from the East Coast) to $1,500 (summer season, West Coast). Delta's new midlevel Europe award requires 90,000 miles, so each mile is worth from 0.5 to 1.5 cents. That averages out to 1 cent, but, of course, miles are worth more if you can score a seat in the summer. Figure your own odds. The calculation is tougher for premium travel. Domestically, a transcontinental first-class ticket runs about $2,000; Delta's midlevel award requires 80,000 miles, for a value of 2.5 cents a mile. Of course, that's true only if you'd really pay that much more for a first-class seat. Business-class list-price round-trip fares to Europe run anywhere from about $4,000 to $8,000, depending on the route. However, big discounts are often available in business class, and, at worst, a couple can get two tickets for the price of one on several major lines if they get an American Express Platinum card. So let's use a range of $2,500 to $5,000 as the real value. Delta's midlevel business class award requires 200,000 miles, so the mileage value works out to 1.25 to 2.5 cents - again, if a premium seat is worth that much to you. The bottom line: The current value of a Delta mile remains at a bit over 1 cent when used for coach/economy travel or up to double that for premium travel. So far, no other line has matched Delta's three-tier system. I suspect several will; in effect, it's an easy way to devalue the "currency" of the outstanding backlog of unused miles. But even if no other airline picks up on the system soon, I believe Delta's new value benchmarks are still accurate: They provide an insight as to just how much to discount the base award levels on other lines to adjust for the difficulty of finding seats. = ---------------------------------------------------------------------- Copyright 2008 SF Chronicle <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> If you wish to unsubscribe from the AIRLINE List, please send an E-mail to: "listserv@xxxxxxxxxxxxxxxxx". Within the body of the text, only write the following:"SIGNOFF AIRLINE".