The Electric Commentary

Thursday, November 03, 2005

Spend your frequent flier miles now!

Gary Leff is guestblogging at Marginal Revolution this week, and for his second post he looks at the effects of inflation on the closest thing we have to an international currency, frequent flier miles (though he makes clear that, like currency, not all miles are equal).

For the past couple of years I've been sounding the alarm that the mileage required for airline awards -- especially premium class international awards -- would go up over time. And so far I've been proven correct. Last year Northwest increased the mileage cost of its best awards by 25-40%, and some Qantas awards became more expensive -- by as much as 192%).

It used to be that folks saw miles as a retirement travel fund. That's the worst possible strategy. Miles are worth more now than they ever will be in the future. The value of your retirement pool will only go down, not up.

Even if mileage values held constant, I'd rather spend miles now instead of money to get my tickets... and invest the money I saved for retirement (or something else). Money earns a rate of return when properly invested. Airlines have never paid a return on miles held in an account.

1 Comments:

  • Somebody told me once that frequent Flier miles were the second largest currency after the dollar. Does this sound possible? I guess it could be, if you counted frequent flier miles everywhere.

    Phil

    By Anonymous Phil, at 9:20 AM  

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