You see the email come into your inbox – Alaska Airlines is offering a bonus on Mileage Plan miles you can purchase for yourself or gift to someone else. It’s a sale - it must be a good deal! Hmmm…or is it?
Alaska has two ways to purchase miles - Fly & Buy and the option to Buy and Share Miles anytime.
Both of Alaska's options to purchase miles only make good economic sense if you are redeeming miles for an upgrade or award flight where the cash value of each mile required for the award is worth more than the price you pay to buy the miles. And it never makes sense to share miles with another person. Read on to find out why.
We think the Alaska Fly & Buy Miles program is pretty nifty. While most other airlines charge over three cents for each mile you purchase, with Fly & Buy you can purchase up to 10,000 additional Mileage Plan miles for 2.15 cents per mile (2 cents per mile plus a 7.5% excise tax). This feature is only offered during the initial purchase of a paid ticket at alaskaair.com.
Alaska also allows the option to Buy and Share Miles anytime. And bonus and discount promotions, when offered, are typically based on tiered purchase levels. Therefore, the more you buy, the larger the bonus. Miles are often available in increments of 1,000 up to 40,000 miles. The cost of each mile for this option without a bonus or discount is 2.75 cents plus a 7.5% excise tax, which is very expensive. That means you pay 2.96 cents for each mile you buy.
As you know from prior trvlvip Perks and Tips, we value Alaska Mileage Plan miles at 2 cents per mile, which is the value we would be willing to pay for Mileage Plan Miles if we could buy them for cash. It is also the minimum value we feel you should expect before redeeming your miles. To see how trvlvip determines the value of a rewards point or mile, see our great Tip: What in The World are my Points and Miles Worth?
So now we know you will pay 2.15 cents per mile with the Buy & Fly option and 2.96 cents per mile for the Buy and Share Miles option without a bonus or discount.
Here then is a calculation you can use to determine the cost of each mile with a bonus or discount offer:
Multiply the total required cash outlay for the Mileage Plan miles purchase (make sure you add in the 7.5% excise tax).
Divide that amount by the total number of miles offered to determine your cost per mile.
So, does it ever make good financial sense to buy or gift Mileage Plan miles? Maybe – but typically only if you purchase using Fly & Buy or during a bonus or discount offer to secure a specific award.
In order for the miles purchase to make good economic sense, you will need to use your miles to book an award ticket or upgrade where the value of each mile is more than what you paid for it.
Let’s walk through a specific example assuming you bought miles using Buy & Fly for 2.15 cents per mile:
You find a coach class, round-trip, domestic award ticket for 25,000 Mileage Plan miles plus taxes and fees of $20, which you are required to pay separately.
You paid $537 to acquire the miles (25,000 x 2.15 cents).
In order to make good economic sense, you need to redeem those miles for a ticket that costs more than $537 ($517 if you paid cash for the ticket + $20 in taxes and fees for the award ticket).
And remember, purchased miles will not count toward Mileage Plan MVP or MVP Gold status for you or the fortunate member to whom you decide to gift your miles.
And the option to share miles never makes good financial sense! Why you ask? The price to share a mile is 1 cent per mile plus a $25 transaction fee, which results in a very expensive transfer especially if you intend to share a small number of Mileage Plan miles. If you share miles it will cost you approximately 1.08 cents per mile for 30,000 miles, up to 3.5 cents per mile for 1,000 miles! And because you’re simply transferring existing miles instead of buying new ones, you have to factor in the value of the shared miles (which we value at 2.0 cents per mile). This makes it a very expensive transaction at any purchase level. You are always better off using your Mileage Plan miles to book an award ticket for a friend or family member instead of sharing miles.
Instead of gifting or sharing miles it is a better value to use your miles to purchase an award ticket for the intended recipient. And it rarely makes sense to buy or gift Mileage Plan miles speculatively as it is a very expensive way to acquire miles especially without a bonus.
Once you've picked a location and your dates and have taken the steps to ensure award availability, make the small effort to crunch the numbers to make sure the miles purchase makes good economic sense - you will be very happy you did!
Click here for the Alaska Airlines and partner award charts to review award availability and to book award travel.
If the purchase makes good financial sense based on the award flight or upgrade you’ve found, we suggest you choose the Fly & Buy option over Alaska’s Buy and Share Miles option whenever possible UNLESS you qualify for a bonus offer that results in the miles costing less than 2.15 cents per mile.
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