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Airline miles are only worth what you are able to redeem them for, and that number is highly variable. Some people are able to redeem their airline miles for international premium cabin flights around the world that otherwise would have cost thousands, or maybe even tens of thousands of dollars. Some people can’t even find a domestic coach award to Kansas available for a reasonable number of miles.
Low Airfares Make the Case for Fixed Value Points
When you need multiple seats and are tied to a traditional school schedule then the pickings on saver airline awards can get pretty slim in a hurry. This is especially true in recent history when airlines are selling a very healthy number of seats on most routes and therefore don’t feel the need to dump them to those looking to snap seats up via saver awards.
While airlines are doing a good job at selling lots of seats right now, the prices they are selling the seats at are often a pretty good deal compared to years past. This would certainly be my opinion just based on personal experience, but the stats back up my perception. The nationwide first quarter average domestic airfare cost in 2016 was $361.20, which adjusted for inflation, was the lowest average since before I even started this site (in 2010).
Of course those of us who like to hunt down fare deals know that round trip domestic (and even international) airfare can be had for much less than $361 with some airlines offering round trips for well under $100 during their sales. With airfare that low, and traditional saver awards sometimes hard to get your hands on, the case for using fixed value points gets stronger. I cringe at the thought of major airline programs going exclusively to a fixed value redemption as that would kill some of my favorite ways to use miles, but I love having the option to use points in this manner.
New Fixed Value Redemption Options
Getting at least two cents per redeemed airline mile/point is often the standard that many of us shoot for with traditional programs, so being able do that with your Membership Reward points on any flight (with your selected airline for the year) without any blackout dates is pretty incredible and a borderline game changer for redemption strategies.
Even if you don’t have that card, there are some other very strong examples of the fixed value point gaining strength. For example, the Chase Sapphire Reserve offers 1.5 cents in value per point redeemed via the Ultimate Rewards travel site.
Southwest Rapid Rewards, which is a 1:1 Chase Ultimate Rewards transfer partner, also offers a very good per point return for many of their fares where the number of points required is tied to how much the ticket costs.
Do the Math to See How to Use Your Miles
Via Southwest, a round trip January ticket from Houston to Cancun will cost you $229.33 and you will earn 828 Southwest Rapid Reward points on that paid ticket. For that same flight, you could also choose to spend 9,936 Rapid Reward points + $51.23 in taxes/fees for an award flight. Factoring in taxes paid/points you would have earned, that redemption rings in at about 1.65 cents per redeemed Rapid Reward point (even better if you have the Companion Pass). That is very solid, even if you transfer points from from Chase Ultimate Rewards to make it happen.
In contrast, if you instead transferred your Ultimate Reward points to United at a 1:1 ratio to book a round trip MileagePlus award ticket from Houston – Cancun, it would cost you 35,000 miles + $51.23 in taxes/fees for a saver award. That return per mile spent would be much worse at about 1/2 of a cent per mile on the days when the fare is just $230 round trip. In that case, you would be much better off transferring your Chase Ultimate Reward points to Southwest to spend fewer points, or simply book through the Chase travel website to spend as few as about 15,333 Ultimate Reward points for the $230 United ticket. That 15,333 point price would be possible on a $230 ticket if you have the Sapphire Reserve card. You would then also earn United miles for the “paid” flight and not be restricted to award availability.
Of course all of those equations shift significantly on dates where the tickets are much more expensive, but that is the great thing about where we are right now in the evolution of airline miles. We have multiple fixed value redemptions in the 1.5 – 2 cents per point range which will often be best when airfares are relatively low, but we also have the fixed value redemptions that will often win when airfares are high.
Not to over simplify, but the old “buy low, sell high” adage for investments can be tweaked to “use fixed value points when airfares are low, use traditional airline miles when fares are high”, and you’ll be on the right track the majority of the time.
Has your miles and points redemption strategy shifted in the last several years as average airfare prices have dropped and saver awards have become scarce?
Editorial Note: The opinions expressed here are mine and not provided, reviewed, by any bank, card issuer, or other company unless otherwise stated.