Balance Miles and Cash Back in the Face of Devaluations

Today’s “no-knock” American Airlines/US Airways surprise devaluations have the mile-verse spinning.  Once mighty and customer-centric AA has shown its new stripes, and we’re all at a disAAdvantage because of them.

Devaluations are a part of the game we play, just as inflation is a concern with cash.  Today’s post will be equal parts editorial and lessons we can take away from this.

To AA/US Executives Who Might Be Reading This

When You Announce a Mile Sale and then a few days later you change the number of miles needed for travel you’re devaluing midstream. It is conceivable people shared (bought) miles yesterday and planned on booking flights today. They went to sleep thinking “I’ve bought the miles I need, all is well.” and woke up to having too few miles for their award.

I’d argue that for most “average” flyers the goal they have in mind is a fantastic award ticket. When you move the goalpost you risk alienating your core customers. Sure there are people like myself, and others here on Milenomics who don’t like to pay for any flights if they can avoid it.  But the Frequent in Frequent-Flyer Miles means that person has consciously chosen to use your services (and pay you for those services). They’ve done that for weeks/months/years with a goal flight in mind.

These aren’t called “Deserved flights” or even “free flights.” You’ve chosen to call them “Award flights,” a term which brings to mind the idea of awarding your customer. What does it then mean when you take the “award” away from your customer without notice?  Are these “punishment flights?”

Better Luck Next Time

It is easy to argue that changes need to be made. Ticket prices are rising, and award prices need to as well. I’ll agree, except that yesterday somewhere, someone had a goal, an award in mind:

  1. Maybe it was Easter Island with AA miles on an Explorer award.
  2. Maybe it was a dream trip to Asia with US Miles.
  3. Maybe a flight to/from Hawaii as part of another award

Today’s “Punishment tickets” will take the award out of “award tickets” for these and many other individuals.

Hoarding Makes Miles Sad

If before today you didn’t believe in the depreciation of miles, I hope you now do. We’ve devoted quite a bit of discussion here on Milenomics to knowing when to stop earning miles, and how to use our miles.  The reason for both of these is simple: Miles are not to be hoarded.  Earning and Burning your miles effectively insulates you from devaluations.

An empty account is nothing to fear! It means two things: It is ready to be refilled, through pooling methods we've discussed, and also that you used those miles for wonderful memories.

This is not to say that Miles are no longer valuable. We covered this with United’s gutting of Business/First awards; Our miles are not worthless, but they are worth less after an event like today’s.

A cornerstone of Milenomics is identifying the miles we need, collecting them in reasonable amounts, and then switching to cash back. This balance is a delicate one–too few miles and you’ll be paying cash for flights you could easily have used inexpensive miles for. Too many miles and you’re stuck with a Depreciable “asset” you’ve invested not only your money, but also your time and travel into.

Three reasons we want to balance our Miles needed with cash back are:

  1. Miles decrease in value and can only be used for one thing: Travel.Cash is fungible, and can be converted into miles, spent on bills, saved, or used to travel.
  2. Miles can represent a much better value than cash.  It would be hard to argue that a 110,000 mile award to Asia (In Business Class) is a terrible deal. Booking the same flights with cash would require 350,000-650,000 pennies.  Last minute flights are another good example where miles offer significant savings over cash fares. For such reasons an all cash strategy isn’t enough on its own. 
  3. Some cards give you leveraged earning of miles.  A great example is the Gold Amex PRG. Earning 2x MR at grocery stores. Coupled with the sweet spots in both Avios and ANA award charts means $10k spent can represent as much as $400 in flights. 

On a day like today it is easy to feel like quitting, and giving up on miles.  Instead of that, use this type of announcement to get your house in order.  Start looking up flights you can book with miles, book them, and draw down your balances to reasonable levels.  Start a Demand Schedule, and use it to target the miles you earn (and redeem).

Remember Milenomics is about creating your own best system of earning and spending miles. Instead of focusing on what someone else does keep an eye and and ear on what’s best for someone like you, and base your reading of Milenomics on your traveler type and travel needs.

Days like today are tough, but hopefully they’re few and far between.