Showing posts with label Alaska Airlines. Show all posts
Showing posts with label Alaska Airlines. Show all posts

Monday, May 18, 2015

Frequent Flyer Program Points / Miles Inflation

Airline Award Price Inflation
Inflation is a great way for governments to take wealth and reduce their debt. It happens continuously, but no one really notices, so it's a low risk political move.  By creating more currency, the government receives the full value of the new money while everyone's existing money is worth slightly less.  It's something everyone endures, but no one enjoys. 
South American Style Currency
Recent Inflation Victim
Airlines also manage a currency and create inflation. Airlines created their own currency with points programs and have been adding more currency than is being redeemed.  This creates an over supply of currency against a static (more or less) supply of awards.  The unbalanced supply and demand creates an opportunity for point inflation. Airlines manage their currency like Venezuela or Argentina.  There is constant inflation by creating more currency with fixed award opportunities.  They also engage in large and sudden devaluations periodically.  Venezuela has inflation every day, but they will also suddenly change exchange rates.  Both destroy currency value, but the gradual devaluation stings less.  Airlines do the same when they change their award charts (British Airways most recently).  Awards that cost 80,000 miles yesterday can cost 100,000 points today when the award chart changes over.  These massive changes are usually, but not always, announced several months in advance.
More Miles Pursuing Same Seats
Hyper Inflation Airlines
Airlines create new currency, point or miles, at no cost to them.  They sell this currency to partners, like credit cards or hotels and receive real money for their proprietary money.  United Airlines sold $2.9 billion of frequent flyer miles in 2013 and has about $4.9 billion of frequent flyer miles outstanding.  They expect 20% these miles to expire, so the mileage expiration policy creates $1 billion in profit.  They did not disclose how they value a frequent flyer mile.   

“Five million and 4.7 million MileagePlus flight awards were used on United in 2013 and 2012, respectively. These awards represented 7.7% and 7.1% of United’s total revenue passenger miles in 2013 and 2012, respectively. Total miles redeemed for flights on United in 2013, including class-of-service upgrades, represented approximately 80% of the total miles redeemed.” (UAL annual report)  20% of mileage redeemed was used for partner flights, merchandise awards, and other ground based awards. That’s a massive amount of miles chasing relatively few awards and creates a great inflation opportunity.
Costs More and More To Sit Up Front
44% Inflation over 9 Years
When I started collecting United miles in earnest, a round trip to Europe in business class was 80,000 miles.  Then it became 100,000.  Now it's 115,000 on United or 140,000 on a partner.  1,000,000 United miles was worth 12.5 round trips, but is now worth 7 trips.  This is a massive currency devaluation of 44% over 9 years.  Frequent flyers should be marching and banging pots in front of United's corporate office, but I doubt many realize their miles are worth so much less.  Most customers measure their balance by the number of miles in it.  This is a poor indicator of value though.  Viewing it as the number of awards you want (business class tickets to Europe in my example) is a better indicator of value. 
Program Changes Can Reduce Award Balance Value
Reducing Inflation Risk
Collecting miles and points creates an inflation risk.  The more you collect, the larger the risk.  Inflation can't be eliminated, but the risk can be managed.  Here are a few tactics to help support an inflation hedge strategy:
  • Collect Points in Multiple Programs – All programs have inflation, but at different rates and different times.  Diversification reduces your exposure to a single program's risk.  It also creates more reward opportunities.
  • Spend Points Regularly - A smaller point balance lowers the potential loss of value to inflation.  Also, why bother collecting miles if they are never used?
  • Be Aware of Pending Award Price Changes - Don't be taken by surprise, read emails from your programs.  If a change is coming, book at the lower prices if able.  I booked a round trip to Europe before British Airways changed their award chart this year.
  • Change Programs if Required - Most airlines have partners and one partner may have a more rewarding and stable award structure.  Alaska miles seem more stable than Delta miles and you can earn either on a Delta flight.
  • Set Award Based Goals - Don't set a balance number as a goal.  1,000,000 United miles has a nice ring to it, but it isn't an end in itself.  4 round trips to Europe in business class is a better goal because it has a fixed value while the miles could change value.  Redeem when you reach your goals.
  • Create A Single View of Your Assets – Take a look at your award balances on one screen.  Copy and paste into Excel or Gmail if needed.  Looking at your assets on the same page will help you understand where your risks are.  It also may help you be more creative with your awards. 80,000 Delta miles and 62,500 American miles is a round trip to Australia in business class.

Monday, December 15, 2014

Alaska Airlines Adds Streaming Entertainment

Alaska Airlines is jumping on the trend for airlines to provide streaming content over WiFi on board.  It's starting out free, but will cost something in the future. As a bonus over Southwest, Alaska is also adding power outlets. The bigger news story is Alaska adding larger overhead bins to speed boarding and reduce the risk of having a bag gate checked. Removing the stress of boarding is a larger benefit for me than having movies available for purchase.
Alaska Airlines 737's at LAX
It's great that airlines are adding to the in flight customer experience after removing so much in recent years. Off the top of my head, I still miss coach meals, leg room, seat padding, easy mileage earning, free checked bags, free seat assignment, United's channel 9, and pillows. Every little bit helps I suppose.

Sunday, April 20, 2014

Saturday, September 28, 2013

Alaska Airlines Coach Food

Alaska Airlines is promoting their food in coach; it actually looks pretty good too. I had always been a fan of their premium beer options including Alaska Amber.  United flirted with premium beer and spirits briefly, the the days of Leinenkugel's and Maker's Mark on board have long passed.  The Alaska food offerings also look just and good and comparably priced to food in the airport, so next time I fly with them, I just might skip eating in the terminal and enjoy a buy on board meal instead.
Alaska 737

Friday, July 19, 2013

British Airways Avios Award Chart

British Airways doesn't post their award chart, but lets you only price specific routes.  To save you the trouble of making your own award chart, here's the one I created.  The prices are for economy and are the same for British Airways, their oneworld partners, and Alaska Airlines.  Multiply by 1.5 for premium economy, 2 for business, and 3 for first.  Prices are per segment too, not total trip distance (find segment length or airport range), so avoid connections.  


Cost Max Dist
4500 650
7500 1150
10000 2000
12500 3000
20000 4000
25000 5500
30000 6500
35000 7050
50000 7500
25,000 Miles To Go SFO-LHR On British Airways

Thursday, October 25, 2012

IDine & Other Miles for Dining Programs

Miles for nothing, that's the goal, right?  Well that doesn't exist, but there are many ways to earn miles for no marginal cost.  Mileage dinning programs are ones way to pick up miles without spending more.  Just sign up for the program(s) of your choice (see links below), register your credit cards and you are set.  When dinning at a participating restaurant, you earn about 3 miles for every dollar spent.  The miles post a few weeks after your visit; no work required on your end after signing up. I use programs for airlines I don't earn miles in frequently to have another way to reset the miles' expiry date.  You might be able to grab 1,000 bonus miles for joining too.

American Express (Earn Amex Gift Cards) Dinning Program

United Airlines Dinning Program

US Airways Dinning Program

American Airlines Dinning Program

Delta Dinning Program

Alaska Airlines Dinning Program

Priority Club Dinning Program
American and United Jets at DEN

Monday, September 10, 2012

Bad Airline Coffee Epidemic

United Airlines once had good coffee, just last year actually.  US Airways had a decent brew too.  From recent experience, airline coffee, both in the air and on the ground, has been either bad or undrinkable.  This is a serious problem that is growing out of control.  How hard is it to get some Dunkin' grounds and add hot water? I doubt it costs that much more for good coffee than bilge water. Airlines need to fix this quickly because I need a strong cup of Joe before I land, but I can’t grab coffee before takeoff or I can’t sleep. Alaska Airlines just started serving Starbucks on board, so they may be the lone exception to this despicable trend.
US Airways Club Coffee
United Club Coffee

Monday, June 4, 2012

What is a Point or Mile Worth?

What is a point / mile worth?  It’s a simple question with a complex answer.  A mile or point in every program will have a different value too.  Also, miles might not have any value until a certain number are collected.  Ultimately the value is different for each person, but here are my answers and how I got to them.
Jets Lined Up at FRA
Miles and points are a currency that can be exchanged for goods and services.  These goods can also be purchased for cash, making it a simple equation: Total Value / Total Points = $x.xx per point.  If a flight to Europe is $1,000 or 50,000 miles, then each mile is worth 2c.  The denominator will always be known, but the numerator gets fuzzy when you are buying awards that you would never buy with cash.  A first class trip to Europe costs $13,000 or 135,000 miles; yielding almost 10c per mile in value!  But I would never pay $13,000 to fly to Europe, so what is it really worth?  Priceless is the best answer, but it doesn’t help with the math.  I just total the perceived value of the experience and that’s the value.  The means a first class award is more like 3-6c in value; still a good deal.

Do the math for yourself and use your answers to decide if to spend miles or cash.  For example, I would use miles to book a $450 domestic round trip, but use cash for a $300 ticket.  It’s a gray area for borderline redemptions.  I’ll lower my threshold if my balance still has a large number of miles.  Also, if your credit card doesn’t earn at least 2c in value for every dollar spent, just use the fee free Fidelity Amex. It has 2% cash back on every purchase and cash is accepted by any airline.
Sun Rise at ORD
SPG – 3c
Starwood Hotel (SPG) points are my favorite.  With the Cash & Points redemption option, SPG points are consistently worth about 4c each, while full points awards run 2-3c.  The SPG Amex (business card has the better sign up bonus) earns one point per dollar and two points for spending at SPG hotels.  Points can also be transferred to about 30 airline programs with a 25% bonus for every 20,000 points transferred.  This makes the SPG card better for earning American or Delta miles than the airlines’ own credit cards.  SPG is my favorite program and currency because of its high value and flexibility. 
W South Beach Miami Hotel View
Drawbacks: There aren’t SPG hotels everywhere and the top level hotels cost too many points to have any value.  The cobranded credit card is an Amex and not everyone takes those (like my local liquor store).  Mile awards with United and Southwest are poor value. 

Minimum balance of 4,000 needed to achieve top value.

United – 1.75c
United miles are the best in the air.  They are part of the Star Alliance (25 airlines and growing) and have a few other strategic alliances for miles redemption (Aer Lingus has great availability to Europe).  Their reservations people are very good and the website can be used to find and book complicated award trips.

Minimum balance of 12,500 needed to achieve decent value.
United Airlines Jets at EWR Sunrise
American – 1.5c
American is a oneworld partner and doesn’t charge excessive fuel surcharges on awards.  They allow one way bookings and have a decent award chart.  American availability, coach and first, to most places not over the Atlantic, is second to none.  Good off season discounts and a cheap oneworld partner chart (80,000 miles in first London to Australia).  oneworld coverage is spotty and fuel surcharges pop up on European carriers.

Minimum balance of 12,500 needed to achieve decent value.

Delta – 1c
Delta has a three tier award chart and every time I want to redeem, my flight is in the second or third tier, destroying the value of my miles.  They are a Sky Team partner and Virgin Australia partner, so It’s best to redeem miles with Air France/KLM or Virgin Australia.  I wound up cashing in my miles for Economist subscriptions, 3,200 for a year or 3c in value.  Not bad considering my options.

Minimum balance of 25,000 needed to achieve decent value or 3,200 for a year of The Economist.
Not Every Trip Is Glamours
Alaska Airlines – 1.6c
I credit my Delta and American flights to Alaska.  Alaska isn't part of an alliance, but are partners with most airlines you would want to fly not in the Star Alliance.  The award chart is downright cheap in places too.  The flexible earning and redeeming of miles makes Alaska a great program to have miles in.  One ways are allowed and there is a cash and points option.  Partner awards have to be a single carrier plus Alaska to get you to the gateway city.  Not Star Alliance good, but close.  Other than flights and credit card spend (not a good deal), it’s hard to earn miles with them (SPG transfers mostly).

Minimum balance of 12,500 needed to achieve decent value.

US Airways – 1.7c
Star Alliance member with a reasonable award chart (more reasonable than UA to Asia in business).  Only allow round trips.  Can’t book partner awards online, so be prepared for an hour long call with reservations.  Great deals on off peak awards.  The Mileathon promotion runs annually and is a great way to stock up on miles.  US Airways also runs frequent mileage purchase promotions.   I constantly fear award chart devaluation. 

Minimum balance of 25,000 needed to achieve good value.
Use BA Miles to Fly LAN Around South America
British Airways - .5c or 2c
BA is great for short one segment trips on American or LAN.  BA has a distance based award chart, allows one ways, and has partner booking online.  For long flights (less generous pricing), connections (each segment is charged, not total distance), premium cabins (x2 for business, x3 for first), or trips in Europe (steep fuel charges) don’t bother.  Good deals are found mostly in the America’s. The scary high fuel charges take the value out of any BA, Iberia, of Finnair award.

Minimum balance of 4,500 needed to achieve decent value.

Other Carriers – 0-10c
Southwest will sell any seat at 60 points per dollar so they have a fixed value of 1.67c per point (not bad really).  Other airline programs can be anywhere.  My Frontier miles might only be good for a magazine subscription.  Foreign carriers could have no value or tons of value, depending on if you need to use those airlines.  If you are going somewhere only Emirates flies, then those miles will be worth much more.  It’s too subjective for me to give a definitive value.
Southwest and US Airways Jets at ABQ