May 14, 2007
By Jeremy Simon
IdeaWorks Takes a Look at Airline Miles
Is your airline credit card providing all the frequent flier miles it could?
Consulting firm IdeaWorks, in its May 2006 evaluation of frequent flier airline miles, found that
the buying power of frequent flier miles may reached a low point during 2004. IdeaWorks,
which measured the number of miles needed to purchase a typical reward ticket for travel within
the U.S., found that frequent flier miles saw their value rise in 2005 based entirely on the airline
industry's ability to hike the average ticket price. In other words, the jump in mileage value for
2005 was not the result of a cutback in the number of miles needed for a free ticket.
IdeaWorks showed that airline credit card holders are getting more bang for their buck amid the
greater buying power of frequent flier miles. The buying power of frequent flier miles jumped to
1.6 cents in 2005, spurred by the 12.7% increase in average fares IdeaWorks used to define a
typical reward ticket.
According to the firm, major carriers American Airlines, Continental Airlines, Delta Air Lines,
Northwest Airlines, and United Airlines have a major influence on frequent flier programs in the
travel industry due to those airlines' size and presence. The "Big Five Airlines" highlighted by
IdeaWorks have effectively set the 25,000 mile reward as the standard domestic reward level --
with domestic travel rewards far outpacing all other reward choices as measured by member
IdeaWorks revealed a steep fall between 1994 and 1995 in the Mileage Value Index (calculated
by dividing the weighted air fare by the standard reward level for each year of the analysis
period from 1994 to 2005), which it attributed to the rise in the standard domestic reward level to
the previously mentioned 25,000 miles.
And, although the value of air travel has fallen significantly, those five major airlines have held
the price of reward travel at 25,000 miles, causing a weakening in the value and buying po