April 23, 2017

A Week in Japan: Flight Milenomics

Last week, I published the Planning & Booking segment of the trip report for our upcoming trip to Japan and Hong Kong.  I included the mileage and cash cost of each flight segment and I've receive some questions around how to value the redemptions.  I figured I'd write a post around the flight valuations and can follow-up with hotels if interesting.

Valuing miles is definitely more art than science but I personally value the vast majority of airline miles between 1.5 and 2 cents a piece.  I wouldn't redeem unless I'm getting really close to 2 cents and one of the newest benchmarks is the ability to redeem Amex Membership Rewards points (with Amex Business Platinum) for 2 cents against airfare - which to me is essentially as good as cash.

Here's a recap on the miles redeemed (for 2) for our upcoming trip:
  • United Polaris Business Class DEN - KIX for 130,000 United MileagePlus miles
  • Cathay Pacific First Class HND - HKG for 55,000 Alaska Mileage Plan miles
  • Singapore Airlines First Class HKG - SFO for 140,250 Singapore KrisFlyer miles
And the cash costs when I looked last week:
  • $9,276 for United to Osaka
  • $8,168 for Cathay Pacific to Hong Kong
  • $16,392 for Singapore Airlines to San Francisco
  • $212 for United home to Denver
  • $268 in taxes/fees

In total, that is 325,250 miles redeemed for $34,048 in flights.  Note that is the retail value and if you were going to purchase the flights, you could likely do somewhat better with discounts, credit card bonus categories, and mileage earning.  Let's assume that all in, that would amount to a 20% rebate (would vary wildly based on status and fare class but I think a fair assumption) valued as cash knocking the retail value down to $26,970 (including taxes/fees).

At that rate, the blended rate for each mile redeemed would be 8.3 cents.  Still amazing.  But how much would you actually pay for these flights?  That question is totally subjective but this is our fifth anniversary and I'd consider a splurge.  The best I could do to mimic the flights (combination of United and ANA) in economy priced out at $1,323 each.  No thanks.  

I think premium economy fares would be a fair comparison as I think a lot of you would be willing to pay a premium to be a bit more comfortable for a big trip like this for a special occasion.  How do those flights price out?  $3,238 each on Orbitz.  Since this is not a premium fare, booked from an OTA, and unlikely to earn as many miles, I'll discount the rebate to 15% which brings the fare to $5,505 for 2.  

See what I'm talking about in terms of the art?  That brings the redemption per mile to 1.7 cents - right in the middle of my valuations.  Another factor to consider is that I'm mileage rich and it's not that big of a deal to burn 325,250 miles on a balance of +1,000,000 miles.  It's a different story when considering paying $3,000 - $6,500 for two tickets.  I'd much prefer to spend the miles which require a bit of time and ingenuity to acquire and save the cash for other experiences.  In addition, there are both comfort and enjoyment factors that need to be considered.  We'll arrive rested (on both ends) and enjoy our vacation and make the transition back to work a lot easier.  We also love flying - especially on these carriers and wouldn't be able to do it without miles.

Overall, this is a great set of redemptions regardless of your valuation.  

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