[originally published Feb 11, 2008 on www.loyaltytraveler.net/wordpress]
The other night a discussion evolved around transferring airline miles. The issue of transferring frequent flier miles from one account to another is generally a poor value transaction in my opinion and I shared this comment.
The argument for the transfer of 20,000 US Airways miles was the special offer currently available for transfers at the rate of $10/1,000 miles.
The woman discussing the transfer said her friend had moved out of the country and his miles would expire soon. When she said she planned to use the miles for a 25,000 mile domestic airfare, I commented that transferring miles was usually a waste of money. In her mind, spending $225 to get her friend’s miles, combined with her own US Airways Dividend miles would be a bargain ticket for Albuquerque, New Mexico compared to the $400+ she spent for travel last Christmas season.
I told her I would show her a better way to use her friend’s miles to get the ticket for less or at least get more value for her money.
My research question - At what point is it better to transfer miles compared to buying miles or earning miles from other partner activity?
(The scope of this analysis is only considering domestic awards at 25,000 mile level. These are the majority of all frequent flier award redemptions in the US. My analysis would be quite different and very likely favor a miles transfer if the redemption were for an international ticket or upgraded cabin award.)
At one extreme a person could just buy miles for a 25,000 mile award ticket.
US Airways special offer to purchase miles from January 1 – March 31, 2008 is $25/1,000 miles.
The cost to buy 25,000 miles is $625 + $25 service fee for a domestic award ticket. $650 is higher than most domestic fares. Some last minute fares may actually cost more than $650 and in this case the best value strategy may be to buy miles -- if there is award availability.
A US Airways itinerary can be ticketed using miles up to 6 hours before flight time.
Online redemption of miles, valid for US Airways and America West flights, is a strategy to avoid a service fee.
There will be a $15 service fee for ticketing using the US Airways Reservations Desk phone number. Partner airline awards require Reservations Desk booking. An airline award within 14 days of flight time will also have a $75 service fee if booked through Reservations Desk.
Cost for a domestic 25,000 mile ticket using only purchased miles will range from $650 for US Airways online redemption to $740 for a domestic partner award within 14 days of flight made through the Reservations Desk.
Buying all the miles for a domestic ticket is generally not a good cost/benefit move unless you are looking at a sky-high ticket cost in the $650 to $750 range.
I agree that transferring miles is often a more economical way to get an airline ticket, rather than paying market fares, but only if conditions favor this choice. An alternative usually is to earn miles through flight activity or special offers to earn sufficient miles for an airline award. My primary mileage earning strategy is flying for miles, but when flying is not feasible, I look for other activities earning airline miles.
Today, February 11, I can earn Dividend Miles with several options:
• a purchase at FTD florists. Valentine’s Day is Thursday. A $100 purchase will earn 20 miles per $1.00 = 2,000 Dividend Miles.
• $75 to register an internet domain name for three years with Network Solutions. Earn 2,000 miles for each new domain name registered.
• Miles purchase during February promotional sale are discounted. 5,000 miles will cost $25/1,000 miles or $125 for 5,000 miles. Plus a $25 service fee = $150/5,000 miles. The normal rate for miles is $35/1,000 miles and a $25 fee or $200 for 5,000 miles.
Here is my analysis for travelers who may be considering transferring or purchasing miles. Assume our US Airways account holder has 20,000 miles.
#1 – The account holder can keep the Dividend miles active by a variety of mileage-earning activities. Dividend Miles was one of the airline frequent flier programs to change its rules for miles expiration in 2007. All account miles are forfeited upon 18 months with no earning or redeeming miles activity in a Dividend Miles account. Some activities allow Dividend Miles to be earned for free like Points.com registration through the Dividend Miles website.
Objective is 25,000 mile domestic award
Option A: Cost = $225
Transfer 20,000 miles for $200 (+ $25 transfer fee) from the business traveler’s account to the leisure traveler’s account = $225 for 25,000 mile ticket redeemed from Leisure traveler account. (This is a good option if you are not planning an upcoming trip and want the miles for future use. The leisure traveler may have 5,000 miles already in account or can work at getting more miles over time.)
Option B: Cost = $150
Business Traveler buys 5,000 miles for $125 (+ $25 transfer fee) = $150.
Business traveler redeems 25,000 mile domestic ticket for leisure traveler friend. This is the best option if the leisure traveler wants to get a ticket soon and costs less than a transfer.
Option C: Cost = $200 to $250 for goods and services that earn miles.
Business traveler and leisure traveler can work out agreement to spend $250 with FTD florist and earn 5,000 miles in business traveler's account with purchase. This is $100 more than simply buying miles, but the purchased gifts have added value, in excess of $100.
The cost of earning 5,000 Dividend Miles can be reduced to $200 with two internet domain name registrations for a 3-year period ($150 earns 4,000 miles) and a $50 FTD purchase (earns 1,000 miles).
Business traveler redeems 25,000 mile award for leisure traveler after the miles post.
This is a good option if you are not in a hurry to redeem miles. $250 for purchasing items to earn 5,000 miles and an award ticket is a better value than paying $225 to simply transfer miles for an award ticket.
Network Solutions Domain Registration offer: http://www.networksolutionsretail.com/flyaway/usair.htm
There are many options for maintaining active mileage accounts during periods of no flight activity. I have miles in frequent flier accounts over ten years old with no flight activity.
Transferring and buying miles are two options for building frequent flier account balances to ticket redemption levels. Keep in mind that non-flight purchase activity with loyalty program business partners is often a way to grow your miles while getting added value from purchased items. Partner activity to grow mileage accounts is often a good alternative to buying or transferring miles.