By The Pointer
In the world of travel hacking, not all points are created equal. Each miles and points currency has strengths and weaknesses. In some situations, one loyalty program is a great fit; while in other situations, it’s a terrible idea. Let’s look at the 4 major types of points, and discuss when it’s best to use each one.
Region-Based Airline Mileage Programs
This is the traditional type of airline miles that most people are familiar with. The number of miles you need for your flight depends on what region you’re flying from and to. Below is the American Airlines award chart. If you’re Rob and Elena, and you want to fly from the Los Angeles (Contiguous 48 U.S. States) to Paris (Europe) in economy class (Main Cabin), then the price will be 30,000 American Airlines AAdvantage miles (per person each way) if they fly on American Airlines or one of their partners, or 22,500 miles during off-peak times.
The region-based system has many advantages:
- Even the most expensive flights have the same price – Region-based programs usually have one set price regardless of the ticket price you’d pay if you were paying cash. For example, flying round trip between Miami and Santiago, Chile in American Airlines economy class would cost 60,000 miles all year round. However, the cash price can fluctuate wildly. Some days, it’ll cost $797, other days it’ll cost $1,072. You can choose to fly at the height of the tourist season, in the middle of the Chilean summer, and you’d pay the same price (in miles) as if you went in the low season. Distance doesn’t matter either. Whether you’re flying from Seattle to Santiago (over $1,300 and 6,000 miles round trip) or Miami to Santiago (over $750 and 4,000 miles round trip), it doesn’t matter to American Airlines. You’re still traveling from the Contiguous 48 U.S. States to South America Region 2, and it’ll still be 60,000 miles.
- Business Class and First Class Affordability – You’ve probably never spent your own money to pay for a business class ticket in cash. Who would? The price is usually ridiculously high compared to economy. Flying from Dallas to Madrid in economy class could cost you $1,434 while flying business class on that same flight would cost $4,925 (about 3.5 times as much). With region-based programs, business class is more attainable. Look at the American Airlines business class award chart below. Flying from Dallas (Contiguous 48 U.S. States) to Madrid (Europe) costs 60,000 miles in economy, and 115,000 miles in business/first class (1.9 times more). All of the sudden, flying business class (or even first class) isn’t as crazy as it seems when you look at cash prices.
- Predictability - You can start earning points now, knowing exactly how many points you’ll need when it’s time to redeem. Let’s say you were paying cash, instead. You couldn’t look up the price today, save up exactly that amount, and expect the price to be identical when you’re ready to book.
There are also a few disadvantages to be aware of:
- Subject to Availability – In this system, you can’t simply book any seat at any time just because you have the required number of points. The airline has to make seats on your flight available for award redemption. Basically, the airline says to itself, “Do I think I can sell all of the seats on this flight for cash?” If the answer is “yes”, they won’t make any of the seats available for award redemptions. If the answer is “no”, they’ll make award space available. Certain flights are very difficult to book because airlines rarely release seats while others are plentiful.
- Devaluations – Mileage programs are like currency. Airlines “print” miles for their programs, and you earn these miles by flying on their flights, using their credit cards, renting cars from their partners, etc. As more miles are put into circulation, the number of seats available doesn’t necessarily change. As a result, airlines increase their mileage prices every so often. Programs with good customer service give their members plenty of notice that the prices are changing. After all, who wants to save up 100,000 miles for their dream trip, then be told the price is now 200,000 miles? However, no program guarantees a certain amount of notice of price changes, and some are notorious for making significant changes with no notice at all. I’m looking at you, Delta!
Some examples of region-based airline mileage programs are: American Airlines, Air Canada, ANA and Singapore Airlines to name a few.
Distance-Based Airline Mileage Programs
The name says it all. These programs determine the number of miles you need based on the distance you’re flying. The British Airways Avios program is the most prominent example. They don’t have an official award chart, but I built one below based on their actual pricing.
With distance-based programs, pricing is primarily driven by how long of a flight you’re taking. If you need to know the distance of a flight, you can use the site gcmap.com.
This system has many advantages:
- Value on Short Flights – Let’s say you want to fly from New York to Charlotte on American Airlines. That ticket could cost you $139. With a traditional region-based program like American Airlines AAdvantage, you’d pay 12,500 miles. That’s the same price you’d pay from New York to Los Angeles (since it’s still within the “Contiguous 48 U.S. States” region). Meanwhile, that same flight would only cost you 9,000 British Airways Avios.
- Fly at Expensive Times of the Year – As noted above with region-based programs, you pay the same (or similar in the case of Avios) mileage prices regardless of the cash price of the ticket.
- Predictability - As noted above with region-based programs, the price is fixed so you know exactly how many miles to earn.
Distance-based programs share the same disadvantages that region-based programs have with one new one:
- Subject to Availability – You can’t book any seat you want. The airline has to make it available for redemption.
- Devaluations – The airline can change their mileage price at any time without giving you notice.
- Leg by Leg Pricing – Let’s say you’re flying from New York to Miami with American Airlines miles, but there are no direct flights so you have to connect through Chicago. AA would say you have an origin and a destination within the contiguous 48 U.S. states so it’ll cost you 12,500 miles each way in economy. It doesn’t matter that you have to go via Chicago. If you were using British Airways Avios, they’ll price each leg separately. New York to Chicago will cost 9,000 Avios and Chicago to Miami will cost another 9,000 Avios for a total of 18,000 Avios. A direct flight from New York to Miami would also cost 9,000 Avios so you pay twice as much for having to connect from another city.
Some examples of distance-based airline mileage programs are: British Airways, Iberia, Aer Lingus, Cathay Pacific and Japan Airlines t name a few.
Fixed-Value Points Programs
In these programs, the number of points required is based on the price of the ticket. A few prominent examples are Southwest Rapid Rewards (each point is worth about 1.5 cents), Discover It Miles (each “mile” is worth 1 cent exactly) and Barclays Arrival Points (also worth 1 cent each). In other words, the value of each point is fixed, hence the name.
The system has some advantages:
- Availability – In these programs, you don’t have to hope that the airline will release seats for award redemption. Typically, you can buy any seat on any of the program’s flights using your fixed-value points.
- Great for cheap flights – On extremely competitive or inexpensive routes, fixed value points make a lot of sense. For instance, if you fly from Fort Lauderdale to Tampa (one-way, economy), that’s about $69 in cash. If you use region-based miles (12,500 American Airlines miles as an example), you’re getting 0.6 cents per mile in value. If you use distance-based miles (9,000 BA Avios as an example), you’re getting 0.8 cents per point in value. With a fixed value program like Southwest Rapid Rewards, it’s only 3,975 points (~1.7 cents per point in value). That’s your best bet. Notice that I said Southwest points are worth about 1.5 cents each, but this redemption was worth 1.7 cents? Well, even some “fixed” value programs aren’t exact, but they tend to stay within a tight band compared to other types of programs. Southwest tends to be between 1.4 and 1.8 cents in value, with an average of 1.5 cents.
- Earn While You Burn (Sometimes) – When you use fixed value points from a credit card company (eg. Barclays Arrival Points), you basically buy the ticket on your credit card, then you apply your points to get a statement credit. To the airline, you just purchased a ticket so you’ll earn butt-in-seat miles for the flight. When you fly a typical award flight that you’re spending miles on, you won’t also earn miles. This doesn’t apply with all fixed value points, though (eg. Southwest Rapid Rewards).
- Simplicity – Many people don’t understand the ins and outs of award charts and finding award seat availability so this system is much more intuitive.
The fixed-value system has a few disadvantages worth pointing out:
- No Outstanding Values – No matter how much you plan things out, you will always get the same value from your points (usually around $0.01 per point). Meanwhile, you can get outstanding value with other systems if you plan properly. For instance, in the example we used above (Dallas to Madrid), the cash price in business class was $4,925 while the mileage price was 115,000 miles. That’s a value of 4.3 cents per mile. You could never achieve that in a fixed-value program. This is why I think of fixed-value programs as “no fun.”
- Unpredictable – This is the opposite of the advantage pointed out for region-based and distance-based programs. Since the points price is based on the cash price of the ticket, the number of points needed changes all the time. For example, I signed up for a jetBlue credit card to earn enough points (about 40,000 points at the time) for a flight to Liberia, Costa Rica. By the time I received my sign up bonus, the cost of the flight had jumped to about 85,000 points.
Some examples of fixed-value points programs are: Barclays Arrival Points, Discover It Miles, Southwest Rapid Rewards and jetBlue True Blue points to name a few.
Transferable Points Programs
These points don’t tie you to any one airline program. You usually earn points from a credit card company, and because that company has relationships with many different airlines, you can transfer your points to any of their partners. The most popular transferrable points programs are American Express Membership Rewards, Chase Ultimate Rewards, Citi ThankYou Points, Capital One Rewards (Venture Rewards and Spark Miles) and Marriott Rewards (now owns the former Starwood Preferred Guest program).
Let’s look at a quick example of how transferable points programs work. If you want to fly from Los Angeles to Tokyo in economy class with one of United Airline’s partners, you’d need 70,000 points for the round trip. Maybe you already have 50,000 United miles, but that’s not enough for the booking. If you have a lot of Chase Ultimate Rewards points from one of your credit cards, you could turn those points into United miles at a 1,000:1,000 ratio. In other words, 1,000 Chase Ultimate Rewards Points = 1,000 United Miles, or 20,000 Ultimate Rewards = 20,000 United miles. The same approach would work with any of Chase’s other Ultimate Rewards partners like British Airways, Southwest, Air France, etc.
This system has some advantages:
- Flexibility – I hate earning lots of points with one airline, salivating about the great flight I’m going to book, then the seat I was hoping to snag disappears before I can earn enough points. With transferable points, I’d have the option to transfer points for that flight, but if the seat disappears, I can always pick another destination and transfer my points to a different airline better suited for that destination. These are the best points for people who know they’ll be traveling in the future, but they’re not sure where they’ll be going yet.
- Get Fixed Value Points Without Committing to Them – Transferable points from banks (eg. AmEx Membership Rewards, Chase Ultimate Rewards and Citi ThankYou Points) can be turned into statement credits (usually 1 point equals a 1 cent statement credit). Depending on the credit card you have and the rules of the program, they can often be worth more than 1 cent per point when you redeem your points toward the purchase of airline tickets.
To be honest, the transferable points system doesn’t really have many disadvantages. I’m always earning points in a transferable programs whenever I have the option to. There’s only 1 issue I’d point out:
- Transfer Times – Let’s say you want to transfer 88,000 American Express Membership Rewards points to ANA Mileage Club (a Japanese airline’s mileage program) because a few perfect flights are available at a great mileage price. Well, you’ll have to wait several days for the transfer to process with no guarantee of how long it will take, and no guarantee that the seats will still be available by the time you have the miles in your ANA account. Some transfers are faster. For example, transfers of Chase Ultimate Rewards points to United Mileage Plus are instant. You lose some of the flexibility of a transferable program depending on the specific transfer you’re trying to make. In all cases, you can’t transfer the miles back (ie. no do-overs).
Some examples of transferrable points programs are: American Express Membership Rewards, Chase Ultimate Rewards, Citi ThankYou Points and Marriott Rewards.
Dynamic Award Pricing
This is the latest fad led by Delta, and United recently announced they'll switch to a similar system. It's a truly terrible system for consumers. Let's look at the story of a program notorious for how bad it's program has been historically: Delta’s Skymiles.
Once upon a time, Delta had a traditional region-based mileage program. Then, they turned it into something very different. They stopped publishing an award chart to tell you what their regions are, and the price to expect in miles. Instead, the price is whatever they say it is when you run a search. They seemed to find a way to bring together the worst of all worlds (at least for consumers): none of the predictability of a region-based or distance-based program, no committed point value like a fixed-value program and none of the transfer options of a transferable points program.
If you haven’t guessed yet, I’m not a huge fan of Skymiles (or Skypesos as some call them because of their limited value compared to other programs). I’ve certainly used them many times, but I would never build up a stockpile with Delta. You never know whether your miles will retain value from day to day.
While I hate dynamic award pricing for all of those reasons mentioned above, you can occasionally find good values. For instance, Delta runs flash sales (see below for an example), but you can never predict when they'll happen and they're usually quite restrictive (only on certain dates, have to book very quickly, etc.).
Next Up: Airline Alliances & Partnerships
Now that we know the different types of programs out there, we need a bit of background on how they work together. Did you know that even if you want to fly on Air New Zealand from San Francisco to Auckland, you don’t have to book that flight with Air New Zealand Airpoints? You can use any of their partners’ loyalty programs (eg. United Mileage Plus, Lufthansa Miles & More, etc.). We’ll go through how these partnerships work, and how they give savvy travelers more options.