Thursday, January 20, 2011

Maximize value from your frequent flyer miles

In my last post I gave a small frequent flyer tip on reducing the cost to fly to South America using Jetprivilege miles. A lot of people might ignore that tip as being of little relevance to them thinking that they don’t fly too much on Jet Airways domestically or internationally. But hang on for a minute, over the course of this post and couple of subsequent ones I will try and bust the myth that you need to be a frequent flyer to earn miles for free domestic & international trip.

A assumption that I have made for this and subsequent posts looking at frequent flyer programs is that for most people the number of miles that they collect is finite as compared to the travel they want to do using them. In simple language the places that you want to fly to in a year would require more miles than you can collect through flying and other means which makes selecting the right trip to use frequent flyer miles an important objective.

Before I get into the details let me first try and define the value and cost of frequent flyer miles. So if you have 25000 miles in your account, how much is it really worth in monetary terms? The answer to that is that “It depends!!” (Hey I am a consultant after all). It depends on what you want to do with those miles, so we will pick up a few representative flight that you can redeem and the cost saving/mile for these flights to establish a base figure. These figures are all approx and assume that typically the flights are booked well in advance (1.5-2 months) for the cheapest fares on any airlines (if paying personally we would typically go for the cheapest flight right?) and the redemption figure is for Jet Airways:

Sector, Miles required, Market price, Tax Amount, Cost Savings, Cost Savings / Mile
Mumbai-Goa, 10000, 7500, 1000, 6500, 0.65
Delhi-Mumbai, 21000, 7000, 1000, 6000, 0.29
Del/Mum - London, 54000, 34000, 18000, 16000, 0.30
Del/Mum – Bangkok, 40000, 18000, 11000, 7000, 0.18
Del/Mum – New York, 94000, 50000, 20000, 30000, 0.32

There is a fairly big variance of Rs 0.18/mile to Rs 0.65/mile in terms of value (see I said it depends!!) but on an average Rs 0.3/mile is a fair representation of the value that you can get for your miles. What this table also tells you is that if you redeemed 80000 of your miles to fly to Bangkok on Jet for the last vacation with your better half, the miles could have been utilized better and resulted in a saving of approx Rs 8,800 {(0.29-0.18)*80000} by visiting the family in Mumbai/Delhi/Kolkata over 2 years and paying for the Bangkok tickets in cash rather than the other way round (well most of us only have a finite number of miles except those lucky few who regularly fly trans indian, pacific, atlantic etc etc on business & first class..)

Tip #1 for using FF miles is to do a rough calculation of the Cost Saving/mile and comparing it against the benchmark of Rs 0.3/mile to figure out the attractiveness of redeeming or saving the miles for a later trip.

What is also visible from this example is that short haul flights (<700 km) offer the best value for redeeming miles with the highest cost saving/mile. The high cost saving/mile gets further amplified if you take these flights on Kingfisher Red which has some fantastic mileage bargains.

Tip #2 is to redeem miles for domestic mileage bargains such Mumbai-Goa, Mumbai-Aurangabad, Delhi-Shimla, Delhi-Manali, Delhi-Amritsar, Delhi-Leh, Delhi-Srinagar (8000 miles return or 4000 miles OW) which in most cases work out to a cost saving/mile in excess of Rs 0.6. If you have been collecting Kingclub miles this value can go up to higher than Rs 1.25/mile for redemption on Kingfisher red (Mumbai-Goa, Del-Shimla etc for 5600 miles return). Yes that’s over 4 times the value of using your miles for a Delhi-Mumbai trip.

Will dedicate the next blog post on ways to maximize the cost saving/mile before solving the mystery to earning enough frequent flyer miles for the deam vacation without taking a flight in the subsequent post. Cheers till then.

1 comment:

  1. Searching cheap airfares in India, is a system which will facilitate. i do not mind compromising on IndiGo, as it's very not an huge a part of my vacations. it has always daily at the start, and daily at the tip. generally the journey is that the end, however not continually.