Miles Are Losing Value Faster Than Cash: What You Need to Know

Miles: An Asset in Decline

Loyalty programs like Aeroplan, LifeMiles, and Emirates Skywards have all raised their redemption rates this May. This indicates that the value of the miles in your account is decreasing swiftly, possibly even faster than cash.

A Concerning Trend

In just three weeks, four loyalty programs have simultaneously increased the prices for the same award seats. Air Canada raised Aeroplan prices on May 20, expanding the pricing structure from three tiers to five and increasing base prices by 20% to 37.5% across most categories. Emirates Skywards has also jumped on this trend with an approximate 15% increase for first class, premium economy, and some business class seats.

The Impact of Inflation

Inflation is the primary culprit behind the devaluation of miles. When the money supply increases but the availability of goods does not keep pace, purchasing power diminishes. Airports and flight frequencies have increased, yet the number of business class seats remains limited, inevitably driving up the cost of award tickets.

The Difference Between Miles and Cash

It's important to note that while the value of the dollar has slightly declined over the past year, a LifeMiles point can lose value overnight. For example, Avianca raised its redemption rates by up to 50%, and flights from the U.S. to Europe in business class have increased by 15% to 21% in a single change.

Transforming Redemption Policies

The most significant change is the shifting from fixed pricing, which once made miles feel like a real currency, to a system where prices now fluctuate based on demand. Aeroplan's expansion from three tiers to five essentially communicates that prices are no longer stable. The uncertainty surrounding the value of miles means it's time to reassess how you accumulate and use them.

New Traveler Behavior

Instead of solely accumulating miles within specific programs, many travelers are now leaning towards earning flexible points, such as those from Amex and Chase. Flexible points do not lose value until you transfer them to a specific program, helping consumers protect their asset's worth.

Key Takeaways

Maintaining flexibility in earning miles until the right opportunity arises is essential. Savvy travelers should avoid viewing miles as a fixed savings account; instead, they should see them as an asset that is depreciating over time.

Final Recommendations

May has shown an undeniable trend: the cost of miles is rising. While this doesn’t mean miles are becoming worthless, you need to recognize that the miles you accumulate today won’t hold the same value next year. Use them for trips you truly desire and maintain flexibility in how you earn and spend them.

What are your thoughts on this situation? Feel free to share your insights!

Article referenced and edited from: Live and Let's Fly