Not too long ago the common view was that the best value for redeeming frequent flyer points was on upgrade awards. The logic was actually pretty straight-forward. The cost of a business class seat was prohibitively high and the number of points required for an upgrade was reasonably low. It wasn’t hard to realize a per point value of around ten cents without too much effort. Sadly, however, those days seem to have mostly passed by.
Upgrade awards today are more expensive than ever before at the same time as the cost of redeeming for a business class seat outright has remained relatively level. Moreover, the costs of booking those upgrades have increased not only in the number of miles required but also in the cash outlay – in the form of a "co-pay" – that frequent fliers must cough up for the big, comfy seats.
New charts, crazy costs
This trend has become even more pronounced in recent weeks as Continental and United Airlines announced their updated award chart rules which took effect on June 15, 2011. The regular awards are a mixed bag, with some going up in price and others going down. The major shift, however, was in the upgrade awards and the costs are nearly all increasing. Some of them are downright silly now.
A domestic one-way first class award can be had for 25,000 points. So why would anyone purchase a ticket and then pay 20,000 points just for the upgrade? Seems quite unlikely, but that’s what the new award chart shows as the rate. Oh, and if you’re on a cheap ticket and not elite there is also a co-pay added on to the upgrade costs, potentially adding another $100 or more. Just not a good deal at all, especially considering the mediocre quality that the domestic first class product entails.
The international upgrades are similarly expensive and increasing, Plus even elites are stuck paying the co-pay rates on those trips. Combine this with the more frequent availability of discounted business class fares (though certainly not on every route or for every trip) and the value proposition for the upgrades continues to decline. Paying $1,000 for airfare plus $1,200-1,500 in co-pay fees and then 60,000 miles on top of that for the upgrade is brutal, particularly when the discounted business class tickets on a similar route can be in the $3,000 range.
Everyone is doing it
The high costs of upgrades are not limited to just the new United/Continental award chart. The co-pay phenomenon extends to American Airlines and US Airways, too, while Delta only offers upgrades from their highest fare buckets. Even worse, there’s still no guarantee of the upgrade clearing. Paying thousands more and still sitting in coach definitely sucks. Oh, and with some partners Delta upgrades from coach only get you into the premium economy section, not even business class. Pretty nasty there.
The reduced upgrade values are not limited to just miles-based upgrades. Certificate-based upgrades, known as System Wide Upgrades or SWUs (swooos) are offered to top-tier elites at the airlines and the have similar limitations. At United there are a handful of the lowest fare classes that do not qualify. This means you have to pay a bit extra just for a chance at the upgrade. And that "bit" can but quite significant. Check out the analysis of prices from Frequently Flying here. At Delta the fare requirements are even more stringent, with the same Y/B/M requirement that they have for miles-based upgrades.
American Airlines offers the best option for their top elites to use upgrade certificates – more certs (8) and no minimum fare requirements. Unfortunately they also have a rather weak global presence so there are fewer destinations to choose from.
Continental previously offered a lower number of certs (4) but no fare requirements. As part of the United merger they’ve converted to the United SWU policies.
So are there any decent value upgrade awards still out there?
There are, but finding them can be a challenge. Generally speaking, the more expensive the fare, the lower the co-pay. Plus some of the higher fares earn more miles. So when an affordable B or Y fare comes along – I know, not too often – that can be a great opportunity for an upgrade. Make sure that the upgrade can be confirmed at the time of booking, however, if planning on paying more to decrease the co-pay. There might just be nothing worse than paying extra for the chance of an upgrade and then not having that upgrade come through.
The other place where the upgrades can be of some value is when someone else is paying for the ticket but they won’t spring for the premium cabin. In those cases it is definitely a bit easier to justify spending some cash and the points to ride up front, but the valuations are still pretty poor. The main difference is that you aren’t personally spending so much for the upgrade.
At this point, the best advice I can offer folks is to avoid using the miles for upgrades. For flights up front look at redeeming directly into the cabin you want to travel in or grabbing a discounted business fare. For last minute revenue travel where the discounts are not available, look for a straight redemption, especially if whoever is buying the ticket will pay you the going fare rate on that ticket. If the award inventory is there the point valuation might be significantly better than the upgrade options.
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It certainly is becoming much more attractive to book discounted business class, especially since there tends to be much more availability for discounted business class then for either upgrades or “saver” level bis seats. Plus you earn EQMs. It does get harder to find good times to use the miles.
PS: I find it hard to find international flights where you can confirm an upgrade at the time of ticketing. The certainty of a confirmed biz class seat is an added benefit vs. waiting for an upgrade to clear at the gate.
I guess the analysis depends on the route, and what you value. 25,000 = only coach, while cheapest domestic fare + 20,000 miles = first/business class. For example, roundtrip JFK-SFO can be had for $350 or so in coach, while discounted business is around $2,000 for premium service flight. I rather use miles for a chance to upgrade than shelling out extra $1,650.
I think you got the math wrong, ptahcha. The 20K + coach fare (+ potential co-pay) compares to 25K one-way for a p.s. C seat award, not a one-way coach seat. That 5,000 point difference may or may not cover the fare + co-pay difference. But awards also generally come with more flexibility and fewer restrictions than the coach fares.
@Carl: I agree that being able to confirm at time of booking is of significant value to a lot of folks (though less so to me) and it is getting harder as the discounted fares are showing more demand and the airlines try to further tweak their revenue management models.
Discounted biz fares and straight redemptions appear to be much more the future of the business model for the airlines. And that’s not necessarily a bad thing, so long as we plan and attack appropriately.
A lot of “inexperienced” mileage redeemers still find value in their minds for the miles+copay route… especially to Hawaii (as was the case for friends of mine). Agreed, though, that straight redemption is the way to go.
Frustrating but I completely agree. It’s just not worth it for upgrades these days. With that said, I just took a 5-month trip from the US to Hong Kong and back through Narita, free on air miles, so I’m a big fan of the concept. More about my trip through 15 countries on Visit50.com. Thank you Onepass! Nice post. -ToddCo
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