Why Delta Miles Value is Constantly Shrinking - Award Chart Devaluations Are Inevitable
Updated April 25, 2019 by CD
Back in my day a dollar bought you…
The story your grandparents told you while you were growing up. Everything used to be so much cheaper when they were young. Often neglected is that their salaries were also lower.
This is inflation. People feel good when their numbers increase, to keep up the numbers of everything must increase.
How much are frequent flyer miles worth?
Airlines don’t have a fixed value such as
1 mile = 0.01 cents but instead use a formula to based on redemption patterns and breakage to calculate a value for their entire pool of issued miles. The value of frequent flyer miles is the dollar value of this entire pool.
Devaluation is a necessity to keep up with the inflation of the dollars that value the pool of points.
Devaluation unfortunately occurs too often as more miles are issued, and the value of the redemptions doesn’t increase.
The decline in Delta miles value
The chart below shows the percentage increase in the amount of money that Delta has set aside for frequent flyer mile redemptions. This is a liability on Delta’s accounts - executives usually like to reduce liabilities.
A lot of increase… Quarter to quarter, Delta appears to practically never reduce its frequent flyer debt.
Compare with a similar chart from American Airlines: A lot of their increase is negative! The jumps at the start are likely related to the last devaluation, but since then it’s smoothed out a bit and has some negative to balance the positive.
A natural process
Devaluation is inevitable.
For all us miles geeks out there, we’d wish it were simpler, but you can’t find human nature. Personally I hope though that other airlines don’t follow Delta’s path hiding devaluations behind a search function; I hope other airlines continue to maintain their tables and devalue them only when necessary.
We need a nicer word than ‘devaluation’, any ideas?
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