I’ve developed a new process for determining the reasonable redemption value of airline miles. Separately I published my findings for Delta and United. We’ll expand this process to other airlines and also repeat the processes regularly so that we can keep track of values over time. For this exercise, I found that AA miles are worth 1.0 cents each, on average, towards domestic U.S. flights.
At Frequent Miler, we keep a database of point valuations (we call these “Reasonable Redemption Values“). These are point estimates of airline miles, hotel points, transferable points, and more. The idea is that we try to identify the value at which it is “reasonable” to get that much value or more from your points. This information is critical for making informed decisions. In fact, it’s a key component of the First Year Value information shown on our Best Credit Card Offers page, and it’s similarly used to show which cards offer the best value for everyday spend, and which offer the best category bonuses.
Reasonable Redemption Value Process for Airline Miles
Most airline miles are redeemed in the United States for domestic flights. To identify the value of redeeming miles for domestic flights, I put together a list of 8 of the busiest airports (or airport markets) in the United States which are also spread out geographically across the lower 48 states. The airports and airport markets I selected are:
- New York Metro Area (NYC)
- Washington DC Metro Area (WAS)
- Atlanta (ATL)
- Los Angeles (LAX)
- Chicago Metro Area (CHI)
- Dallas Fort Worth (DFW)
- Denver (DEN)
- Seattle (SEA)
I then setup a list of airport pairs so that one-way flights between every airport (or metro area) listed above was accounted for. This resulted in a list of 28 airport pairs.
For each of the 28 airport pairs, I used the airline’s website to search for a one-way flight and recorded both the cash price and the mile price (plus fees). Since we’ll be collecting data at different times for different airlines, I made up a process for picking a flight departure date:
Departure date: Look 3 months from today’s date and find the closest Wednesday. For example, if it is currently March 17 2021 when collecting data, then look forward to June 17 and find the Wednesday closest to that date (June 16, 2021).
For any given airport pairing and date, there are usually many flight options. In order to identify a specific flight for each airport pair, I came up with a scenario to try to make a realistic real world choice. The idea is that the person booking the flight doesn’t want to have to get up too early in the morning, prefers nonstop flights, wants an actual seat assignment in advance, and would like to arrive before 5:30pm in order to make it to a late dinner. So, I used these rules as a guideline:
- No flights before 7:30 am (6:30 from west coast flying east)
- Arrive no later than 5:30pm
- No more than 1 stop (prefer nonstop)
- Prefer cheapest flight
- Prefer shortest connection
- Never pick basic economy
- No preference for particular airport in a metro area (this last rule was the least realistic, but useful for collecting the data quickly)
- If the best paid flight option is different from the best award option, then record the cash price of the best paid option and the award price of the best award option
In some cases, the best option will slightly break the rules, but I’ll pick that option anyway based on the idea that most people would do the same. For example, if a flight arrives a bit after 5:30 pm but is significantly cheaper than the alternatives, I’ll take it.
Calculations
For each flight, I recorded the following pieces of information:
- Cash price
- Cash ticket miles earned (Non-elite members earn 5 miles per dollar)
- Award miles required
- Award fees ($5.60 TSA fee)
With the above, I calculated the Cents Per Mile (CPM) value, as follows:
- CPM = 100 x (Cash price – Award fees) / (Award miles required + Cash ticket miles earned)
By including the cash ticket miles earned in the above formula, we calculate a more conservative value for our miles. The idea is to account for the fact that when you book an award ticket you give up earning miles from that flight and so the cost in miles to you is both the award cost plus the miles not earned from a cash flight.
Findings
I calculated the CPM, as described above, for all 28 flights via aa.com. Here are the results:
- Median CPM: 1.0
- Minimum CPM: 0.8
- Maximum CPM: 1.6
Similar to our Delta findings, the median CPM varied by airport:
- New York Metro Area (NYC) = 1.1
- Washington DC Metro Area (WAS) = 1.0
- Atlanta (ATL) = 1.1
- Los Angeles (LAX) = 1.2
- Chicago Metro Area (CHI) = 0.9
- Dallas Fort Worth (DFW) = 0.9
- Denver (DEN) = 0.9
- Seattle (SEA) = 1.0
With four city pairs, the best AA award flight was different from the best AA cash price. Usually this was because the best cash option wasn’t available as an award flight at all. I never found this situation with Delta or United.
Comparison
Let’s look at how the major U.S. airlines compare:
| AA | Delta | United | |
|---|---|---|---|
| Median CPM | 1.0 | 1.2 | 1.1 |
| Minimum CPM | 0.8 | 1.0 | 0.6 |
| Maximum CPM | 1.6 | 1.7 | 1.2 |
| Median Cash Price | $103 | $149 | $120 |
| Median Award Price | 7,750 | 10,750 | 15,000 |
| Mean Cash Price | $107 | $162 | $132 |
| Mean Award Price | 8,929 | 12,179 | 12,393 |
Delta offers the best average value compared to their own cash prices, but they also charge more for their flights and so it’s debatable whether their miles are really worth more towards domestic flights (since you could fly a cheaper airline when paying cash). In fact, if you look only at the number of miles required to fly the routes I looked at, AA comes out cheapest, then Delta, then United. And if you look only at the cash price, AA still comes out cheapest, followed by United, and then Delta. So, ironically, AA fares the worst in the Cents Per Mile calculation even though you need fewer AA miles to fly around the country. I imagine that when flight prices increase in the future, we’ll find that AA then offers better value than the competition since their award prices aren’t as closely tied to cash prices as are Delta and United. If/when that happens, we’ll re-calculate the values and post updates.
Conclusion
The exercise described above resulted in a new Reasonable Redemption Value (RRV) for AA miles. Where we previously pegged AA miles at 1.3 cents each, we now list AA miles as being worth 1.0 cents each. Update: Due to the considerations I posted recently (Undervaluing airline miles) I’ve decided to delay updating the RRV until we have a resolution.
Please keep in mind that this does not mean that you will always get 1 cent per mile value from your AA miles. Most likely, you’ll sometimes find better than 1 cent per mile value and sometimes you’ll find worse. And that’s specifically with domestic flights. When booking international flights, especially in business class, I expect that you’ll find opportunities for far more value.
My goal is to calculate RRVs for most popular airline and hotel programs, and to update the values regularly. Eventually I’d like to automate the processes described above, but for now I consider this a work in progress and so a manual process makes sense. I expect that when I tackle additional programs I’ll find that I need to alter the process a bit. Once we have a single process that works across multiple programs we can then automate it and update values more often.
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This is an interesting analysis. As others have pointed out there are many other more lucrative uses for AA miles, on premium cabins and international travel. Recently I have been seeing many “web special” flights around 10k OW economy. Some of these routes can easily be 4cpm such as two I booked this year (ORD-EGE, ORD-LIR).
Great work Greg! Love this type of analysis.
One question on your methodology, once you found the lowest cash price airfare, did you just use the Award Points required for that specific flight or the best for all options (that met the criteria)? I seem to remember while looking at domestic Delta flights that the lowest points required for a given itinerary didn’t always align with the lowest cash price.
This only came up with AA. With Delta and United, the best cash rate that met my requirements was also the best points rate. With AA, I often picked different flights when picking the best mileage option vs the best cash option.
Correct me if I’m wrong here. (All of you first and biz flyers might not like to hear it this way.) I think based on your analysis and technique, the lower CPM value is actually showing the best opportunity to find good value on average. The RRV is actually useful for comparing value, not to just determine how much points are worth. RRV shows that as long as you are getting value at or above the RRV, you are getting good value. Currently, AA is showing the best opportunity to get good value (on average). For the domestic flyer, it is looking for good value, not just CPM or CPP. You basically hit on this in your summary, a higher CPM means the points are being traded for higher dollar amounts, but a lower CPM shows the average opportunity to find good value. Therefore, lower CPM is better.
No, I don’t see it that way. A low RRV means that the median CPM is low.
Love your work Greg, thanks! Would have loved for you to include Philly though.
Just proves that value varies so much depending on your usage. At the moment, AA has been the holding the most value for me with transcon biz readily available at 22k.
Worth a whole lot more if you live in/near an AA hub. Am still consistently getting .015 on points usage even with a drop in cash rates.
Certainly an interesting take on things. While your examples likely reflect normal usage for the general membership, I’d say that your readers are a lot less likely to use AA miles for low value redemptions like you illustrate here. For example I know that I use American miles for premium cabin flights on partners to Asia. Europe in business class on AA metal can also provide good value if you can find saver space. I’d love to see a comparison of the major award programs that list business class space from Chicago to Bangkok or Los Angeles to Paris. I imagine the redemption values would skyrocket.
Another consideration is that airfares are often much higher in secondary or tertiary cities, which would raise the value proposition for awards. Reduced award rates for having an AA credit card would also make miles worth more.
We are in an alternative universe now (and in the future too?) where AA miles are worth less than the worthless DL miles.
Also interesting that the SW and JB approach seems to be more honest – 1.3-1.4 c value
Also useful to know that Chase UR are now worth no more than 1.3c and the pay yourself back is the best value redemption
I have given up completely miles and focus on cash back – The BofA premium rewards with Platinum honors gives 2.625c – that is better than any mile today – and you can always buy miles on sale when needed
I used to think of a mile as lost cash of 2c based on the Citi card, but now when looked at as 2.5c, only the bonus categories make even minor sense.
I also now focus on cash back, especially since the world shut down. I don’t think I’ll go back though, even if the world opens up.
It does make me consider the relative value of a point vs. cash back. With the exception of SUBs which bring in multiple points per cent, is cash not a better way to go? Hmmmmm….
(Edit: some bonus spending might also be better than CB)
My estimate for Delta is very close to yours, but my searches for AA always provide better value than 1.0 cpp. I rarely see anything less than 1.4 cpp. I primarily search from a regional airport (MDT), which may have something to do with it.
@ Greg — I appreciate you being willing to lower the “advertised” value of your sponsored credit card offers. Many other bloggers probably wouldn’t be willing to do that.
The results of your analysis are definitely surprising. I was certain that AA was the most valuable of AA, DL and UA, but I also generally look at business/first class domestic redemptions. Even with EXP status, we dread coach so much that we are willing to just pay for first. I could be wrong, but it does seem that first/business redemptions on AA have gotten significantly less expensive since COIVD. Given the decline in business travel, I guess that would be expected.