Travel Rewards Credit Cards

Apr 07

American Is Selling Miles. Should You Be Buying?

Years ago, when I first started writing this blog, I was virtually 100% opposed to buying miles directly from the airlines.* Over time, I have not exactly become a fan of it, but have softened my stance somewhat. They’re a good way to round up your balance if you are close to an award, and they can get you a business class ticket on the cheap (relatively speaking).

American Miles As Cheap As 1.8 Cents Each

american aadvantage

Typically, when you buy miles, you have to buy the maximum amount to get the best rate. That’s the case in this deal, where you can buy up to 150,000 miles which, not coincidentally, is the maximum number that they will let you buy in a calendar year. If you buy that amount, they’ll give you another 115,000 miles as a bonus. Smaller purchases get smaller bonuses, both on an absolute and percentage basis.

american aadvantage

You must buy 150,000 miles to get a 70% bonus

Those 265,000 miles (more, if you use an American Airlines credit card) don’t come cheap. You’ll be shelling out $4,786.85 for them. On the other hand, you’ll get some pretty good value. Check out the AA award chart. A one-way ticket in business class to Europe costs as little as 57,500 miles. Tokyo is as little as 60,000. You can get some great value and save a lot of money on tickets that you might have otherwise purchased. Now, you are, of course, giving up the miles on the purchase of the tickets, but you’ll still likely make out well.

So why would American do this? It’s simple: They may not get as much for that seat as they would have if they had sold it outright, but they’re still getting a healthy chunk of change from the mileage sale, and there’s no guarantee that the seat you buy with your miles would have ever sold for cash. It’s the whole bird in hand thing.

The Bottom Line: I’m still not a fan of buying miles, but there may be occasions when it’s worth exploring.

 


*Beginner’s Hint: In terms of pure margin (the percentage of each dollar of sales that the airline keeps as profit), there are few businesses that are more profitable than selling miles. Several years ago, the airlines realized that they could sell miles directly to the consumer, particularly those whose math skills were not up to par. Over time, as consumers have gotten wiser, the prices that the airlines have been able to charge have come down.

 

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