Valuing AAdvantage Miles Post Devaluation

American Airlines devalued the AAdvantage Award charts on Tuesday 22 March so we’re all now living in a world where AAdvantage Miles aren’t worth what they were last week. While Economy Class rewards haven’t taking too much of a beating (most weren’t great value anyway), Business Class awards and First Class awards have seen some quite significant changes. So what are American Airlines AAdvantage miles worth today?

Different people will value their mileage balances in different ways so I’m not here to tell you what value you should be putting on your miles and points. How people use their points (which can vary quite widely) will be the biggest contributor to how they perceive the value of their reward account balances so I’m just going to show you how I choose to value my AAdvantage Miles.

Etihad Business Class A380 – So far, my favorite way to redeem AAdvantage Miles

Valuing AAdvantage Miles

With the exception of a recent mileage burning spree I went on as D-Day approached, I’m not prone to using my AAdvantage miles for First Class travel. I also don’t tend to burn miles on Economy Class awards either…although the old Europe-Hawaii off-peak Economy MileSAAver awards did come in useful a few times.

I mostly use AAdvantage Miles to book Business Class awards so that’s what I’m going to use for the basis of my valuation methodology.

My process:

1. List out the routes on which I use or would like to use AAdvantage Miles for travel
2. Work out the number of AAdvantage miles needed to book Business Class awards on those routes
3. Estimate the taxes required to purchase those awards
4. Based on my knowledge of the routes, estimate a cash price that I’d be prepared to pay for a round trip Business Class ticket on each route.
5. Work out the associated cost per mile.

Here’s what that looks like in table format:

Notes:

• The figure for a one way award has just been included in case anyone needs it
• The taxes figures are approximate and have been taken, mostly, from trips I’ve recently booked.
• The prices I’m prepared to pay are based on what I know I can get a Business Class flight for if I’m prepared to be flexible (a lot of fares like these can be found on the Airfare Deals page)

The formula I used is: (Fare I would pay – taxes)/Round trip cost in miles

The taxes associated with an award ticket are already included in the cost of a cash fare so, to get a true cost/mile figure, they need to be stripped out (which is what the formula does).

As you can see, various routes give a wide array of valuations for the miles but, if I take an average of all those values, I get a value for AAdvantage Miles of 1.54 cents each.

But the calculation doesn’t stop there.

When you buy a Business Class ticket for cash, your trip will earn you redeemable miles…something which you won’t earn on an award ticket. This needs to be accounted for.

American Airlines 787 Business Class Seat

Accounting For Redeemable Miles

It’s relatively easy to get oneself into an infinite mathematical loop in this situation so, for the purposes of this exercise, I’m going to value the miles I would earn on these routes (if I bought a ticket for cash) at the values in the table above.

To work out the number of redeemable miles I would earn if I was to purchase a Business Class ticket for cash there are a few things I will need to know:

• What airline I would most likely fly on each route – this is because the methodology for calculating redeemable miles earned can differ from airline to airline.

• Cost of a ticket less taxes – going forward that’s what American Airlines will be using to calculate redeemable miles due on flights purchased though American Airlines.

• Distance flown – needed to work out redeemable miles due on flights booked through OneWorld and Partner airlines.

• Redeemable miles earning formula for each airline.

For the purposes of this exercise I have use the following facts/assumptions:

1. The calculation is based on American moving to its revenue based model later this year.
2. I have Executive Platinum status
3. Business Class flights on all the OneWorld and partner airlines earn redeemable miles at 100% of miles flown + a 25% cabin bonus
4. American Airlines will pay a 100% bonus (based on base miles flown) for flights booked through OneWorld and partner airlines.

This what all that looks like in table format:

I now know the number of miles I would be forgoing if were to choose to buy a ticket with miles rather than with cash and I also have a value for those miles.

The last stage is simple. 

I adjust the price I would be prepared to pay for a cash Business Class ticket for the value of the miles I will be forgoing by purchasing the ticket with miles….and I then re-do the cost/mile calculation:

Once again I get a reasonably wide range of values but, once I take an average, I get a valuation I’m happy to accept.

Post devaluation I value American Airlines AAdvantage Miles at around 1.24 cents each.

Bottom Line

As I said at the beginning, this is the methodology that works ok for me and gives me a basis to work from that I’m comfortable with – you need to decide what’s best for you.

I could have made this more complicated by factoring in the frequency with which I fly each of those routes (that probably would have bumped up the calculation a bit) and I haven’t taken into account the fact that you also earn Elite Qualifying Miles on tickets purchased with money rather than miles. But that would have been unnecessary complicated and how do you value Elite Qualifying Miles anyway?

Anyone else care to share their valuation for AAdvantage Miles?