Are Air Miles Rewards a Good Deal?

Are Air Miles Rewards a Good Deal?

I’ve been collecting Air Miles rewards for many years now.  To be honest, it’s not because I have done a bunch of research and determined it to be the best reward program.  It’s simply out of complacency.  I have not felt the need to make a change and have not had time to do the proper research.

Well, this has all changed and the primary cause for my analysis is happening because I am in the process of redeeming a bunch of  Air Miles points to go on a family holiday later this year.  I’ve redeemed points for flights in the past but this is probably the biggest redemption I have done which has motivated me to go into a little more detail

A family trip to Ottawa

The plan is to go to Ottawa for a family vacation to partake in the Canada Day festivities.  My wife’s family is all based in Ottawa and it’s been a few years since we have been there for a visit.  The real reason we have not visited Ottawa is because we have 4 kids and flights for 6 is not a small ticket item for a frugal guy like me.  It’s been easier to take driving holidays to the Okanagan or even down South to the US than to fly 6 people to Ottawa.

Calculating the Air Miles rewards

Air Miles rewardsTo fly 6 people to Ottawa for Canada day is going to cost 19,800 miles plus $1334.16 in taxes.  At first glance I thought this is not a good deal.

To make things a little better, I have a BMO Gold Air Miles Master Card which reduces the number of Air Miles to 14,850 (The taxes on the flights still stays the same).

I then went to Westjet.com to look up the cost of the flight without using Air Miles.  When I book the exact same flights the total cost of 6 flights from Edmonton to Ottawa was $3810.06 ($1992 for flight and $822.06 for taxes).

If I take the $3810.06 and subtract the $1334.16 which Air Miles will charge me for taxes (not sure why it’s higher than the taxes Westjet charges but I may tackle that in another post), I figure the 14,850 air miles is saving me $2475.90.  In my mind that means each Air Miles I collected is worth 16.7 cents ($2475.90 divided by 14,850 Air Miles).  If I did not have the BMO Gold Air Miles Mastercard, then each Air Mile would only get me 12.5 cents.

Comparing travel to merchandise

Another one of my blogging friends Robb Engen at Boomer and Echo is also an Air Miles collector and he posted an article on how he likes to redeem Air Miles for gift cards.  A $20 gas certificate uses up 175 Air Miles.  Based on the same calculation above, that means each Air Mile is worth 11.4 cents.  Here’s a list of other items and the worth of the Air Miles based on the cost of the item:

  • $50 Boston Pizza card = 475 Air Miles (10.5 cents per Air Mile)
  • $250 Bose Sound Dock = 2250 Air Miles (11.1 cents per Air Mile)
  • $399 Delongi Coffee/latte machine = 3240 Air Miles (12.3 cents per Air Mile)
  • $10 Shell card = 95 miles (10.5 cents per Air Mile)
  • $170 Olympus Waterproof Camera = 1650 Air Miles (10.3 cents per Air Mile)

When I compare these items to my flight to Ottawa, I am getting good bang for my Air Miles at 16.7 cents compared to 10 to 12 cents.

Flying in low season

If I take the family to Ottawa in low season as opposed to high season, I would only have to use 11,250 Air Miles for the 6 tickets (Again, the taxes would cost the same).  Flying in low season, my Air Miles are actually worth 27.4 cents each.

After doing this analysis, I am feeling pretty good about using my Air Miles rewards for our family vacation this year.  When I explained this to my wife, her first instinct was to ask “How much money did we have to spend to get 14,850 Air Miles?”

It’s a great question so here’s the answer . . . How to get more AIR MILES rewards?

Written by Jim Yih

Jim Yih is a financial expert, columnist, best selling author and award winning blogger. He is also a Group Pension Consultant for Clearpoint Benefit Solutions.To learn more about Jim, visit www.RetireHappy.ca and JimYih.com.

25 Responses to Are Air Miles Rewards a Good Deal?

  1. I’ve been thinking about writing on the same topic for a while, so I’m interested to see your analysis.

    But my first question was the same as your wife’s. The rate of accumulation of Air Miles needs to be figured into the calculation.

    For instance, many standard Air Mile qualifying purchases only earn you 1 Air Mile for every $20 spent. So when Safeway offers a bonus of 100 Air Miles if you spend $100, that’s like spending $2,000!

    I’d be more inclined to calculate your “Air Miles ROI”, if you will, by taking the total cost saved by your Air Miles redemption and dividing it by the total cost of goods required to accumulate the redeemed Air Miles. I think you’ll find a result that is quite different than the one you calculated.

    We also use the RBC Visa Avion card and have been very pleased with the value of air travel redemption we get from that program.

  2. I have never been an collector air miles.

    I have always felt that you paid more for the items to which the air miles are attached. If you get double air miles for a product but you pay twice as much for the product where is the savings.

    Some credit cards also have annual fees.

    Seems to me to get so complicated so I have a credit card that gives me 1% cash back with no annual fees.

    Your good wife I think has nailed it (how much did you spend or over spend to obtain these air miles)

    • Thanks Frugal Guy with Balance

      I’ve been pretty consciously aware and I do not think you pay more for items when collecting Air miles. For example, I can purchase gas at Shell and gas there does not necessarily cost more than Petro Can or Esso. When I rent a car at Budget, I get Air Miles. When I shop around, if I get a much better deal somewhere else, I have to weigh how bad I want the air miles. Sometimes it make sense to take the points but sometimes it makes sense to get the deal.

      Next week, I will compare my Air Miles rewards to your 1% cash back based on my wife’s question . . .

  3. My Analysis when planning a trip. I used NYC as my standard. But am also looking to fly to Hong Kong. Also I have a ton of Aeroplan miles so my analsys was focused more on that:

    AIR CANADA & WESTJET (Edmonton to NYC Round Trip)
    $645 Edmonton to NYC round trip.
    With aeroplan miles 25,000 miles plus $182

    AIRMILES (usable at more retailers) (My family share one airmiles card to earn faster)
    You need to spend $20-25 to earn 1 point
    Need 95 points for $10 girft card
    That’s equivalent to 0.5% cash back. So with 3x – 20x the points promotions that’s a good deal
    With flights that should be a better payout but I don’t have the sign in to check the equivalent cash back

    AEROPLAN (usable at crappy retailers but better when booking flights to earn miles) (only I have aeroplan since only I really fly. The card can’t be shared for flying to earn more as it is your sign in)
    Spend $1-3 to earn 1 point
    That equivalent to 0.5% cash back
    With flights it is a better payout Up to 2% cash back when going to NYC in the summer

    Flying within Canada with points I spend 130points per dollar saved
    Flying to HK for CNY with points I spend 70-80points per dollar saved
    Flying to HK for NOT-CNY with points I spend 50ish points per dollar saved
    Flying to London with points I spend 58 ish points per dollar saved
    Gift Card to Pottery Barn, Birks, Esso I spend 120-130 points per dollar
    Merchandise I spend 160-? points per dollar
    Flying to NYC with points I spend 50-60 ish points per dollar saved

  4. I think Air Miles are better used when flying outside of the country. Our liquor stores in Manitoba aggressively promote Air Miles so when I was planning socials/parties I was the guy buying the booze. It was awesome! I’m still cashing in those miles!

    I also like Air Miles because whenever I need a flight, I usually have enough miles to do it which takes the extra expense off my wallet ;)

  5. I manage to rack up a lot of Aeroplan miles by putting business expenses on my credit card. I’ve found that the best way to get a good bang for the buck is to travel business class on points and take full advantage of the stopover and open-jaws privileges that Aeroplan allows. My wife and I recently travelled to Germany and Spain; I think the cost was about 160,000 points for the two of us. When I looked up the cost of the same ticket paying regular fare, it worked out to more than $8,000 apiece, if memory serves correctly. If my figures are right (and I’m reasonably sure they are), that works out to an ROI (as a previous poster called it) of about 10%. Some of the “travel on any airline, any time” credit cards I’ve seen limit the total of the free portion of the ticket to $1,200. Travelling business class, Aeroplan does provide good value, although seats are becoming increasingly difficult to book.

    • Thanks for sharing Aeroplan guy. I’ve got some Aeroplan points from flying but don’t seem to accumulate points too fast because I don’t collect Aerorplan points any other way.

  6. Calculating the ROI is al well in good if you can use the miles the way you want. I have collected over 200,000 Aeroplan miles by credit card and travel and I am having a hard time redeeming to get a worthwhile ROI. If I could actually book two flights from Halifax to Phoenix for 60,000 points as advertised it would be great. But in order to get there in 24 hours and not have to take 4 connections they want me to use all my points. I am not talking last minute either, this is trying to book more than 6 months in advance. If I splurge and try and fly business class for 100,000 points they will never give me business class the whole way. I think Aeroplan is a complete scam.

    I switched to the Aventura credit card and find better value, but now I never have the option to fly business.

    • My wife and I usually travel to Europe every 2-3 years. We both use the BMO mastercard which for a fee of some $100.00 a year provides us one air mile per each $15.00 spent and a 25% reduction in the number of air miles needed per flight.I find this an excellent reward promotion but with one exception – don’t use cash to top up if you have insuficient miles needed for the flight. Better to keep the miles in your account and pay cash for the whole flight.

  7. I have found the redemption value of points for travel to be highly variable. A point can have a very low monetary value depending on the destination. I went to Texas in January and got very good value. If I had flown to New Orleans, the next state over, not a good deal at all. That said, going to Buenos Aires last January was a complete nightmare. It was possible to go to Buenos Aires on Airmiles, but not return (no matter the date chosen) unless you purchased a hotel package of 4 days. Annoyed I flew to BA on Airmiles and returned on Aeroplan. My spouse purchased a seat sale.

  8. You say WestJet costs “…$3810.06 ($1992 for flight and $822.06 for taxes).” Which number is correct? If it is the lower amounts in brackets then your airmiles are worth 10-cents which is consistent with other rewards.

    • Thanks for pointing out the typo. $822.06 is correct but it does not affect the calculation because the $3810.06 figure is correct and the $1334.16 Air Miles wants to charge me for taxes is also correct.

  9. There may be a flaw in your low season calc above. You used the lower Airmiles required, but likely the cash price would be lower (than the high season price)as well.

    • That might be correct but I did not price the low season cost of flights. My guess is low season prices would not drop by 15% to 20%. I could be wrong but I think flying in low season is advantageous from a mathematical perspective.

      I appreciate your comments
      Jim

  10. We thought we received excellent value for the redemption of Air Miles towards two tickets to Chile until we showed up at the airport on the date of our departure (as supported by a Virtually There itinerary received several days beforehand) and they had no record of our booking on a flight which was completely booked. Perhaps the stress factor should also be built into your calculations?

    • Wow, that is such an awful outcome. I am really sorry to hear that. I’m glad you let people know. I have never had that problem so it’s tough to build that into any calculations. Anyone else have that problem?
      Jim

  11. Ok deal, except for paying $512.10 (extra taxes) in ‘surcharge’ for using your airmiles. This basically diminishes the value of your airmiles by ~3 cents ($512.10 / 14850).

  12. For the past 15 years, I’ve flown at least twice a year with AirMiles and haven’t had a single ticketing problem with the flights booked-problems with weather, but not with ticketing!

    • I have used Air Miles for years with brief moments of success. That said it is a real crap shoot in my opinion.
      We live in an area where you must fly to Vancouver to fly elsewhere. That said, there is rarely tickets available for the trip you require. I tried to book a trip to Vancouver on multiple days during the days any between 20th and 30 th of the month. Nothing available at all to Vancouver, not at anytime at all.
      When I did a mock booking to Toronto from the same city there were seats available. The point is that if you must go through Vancouver to get to Toronto how can there be any seats to Toronto if there are none on the same day to Vancouver? There are no direct flights, you must transfer in Vancouver so that means I can use 3200 points to make the trip to Toronto but can’t use 950 to go to Vancouver on the3 exact same day
      Smells like legal fraud to me, just saying’.

  13. Airmiles “Dream Rewards” basically for travel outside Canada, in my experience it’s a sham. Booking Winnipeg to Phoenix, immediately one gets an Airmiles quote for the trip. In addition the applet can give an option to select a special rate for travel on a promotional rate if booked before a given date and departure dates between a given range of dates. Well! The booking dates fell into my itinerary, so we are somewhat elated that we have more than enough Airmiles to pay for the trip, so, I proceed to the next part of the applet, “search for flights”. Surprise, “no flights available for the dates chosen”. So, back to the beginning, change dates; again “no flights available”. Hey! I’m booking two weeks in advance, with in the promotional dates window, and I try over and over again for all dates up to three weeks out, and then finally I get a flight. Wow! Four hours work in this and I get a flight. Price some high season rate of 3975 and I can select that promo rate. SuperWoW! I have enough miles to book both my son and my grandson to Phoenix.

    Search for a flight, Winnipeg to Phoenix on Expedia, for dates that are more convenient for my son. Price, tax in $421.00 per seat. Now! with Airmiles, the taxes alone $410 or so plus the Airmiles per seat. At the next higher price on Expedia $560 all in the saving in a mere $120 and I can’t travel on the dates I need, because no flights available. So, we try booking to “an alternate airport”. For example I tried booking to San Diego. 3975 Airmiles, promo available. Running the gauntlet of “no flights available” date change after date change. Finally a flight. Surprise yet to come. You guessed it the price for taxes, plus airmiles, almost equals the cash price if bought outright with no Airmiles. Then tried booking to Chicago, same results “no flights available”, repeat again and again. Then tried a booking to Denver. Same issue. Got a hold of the online chat help person. A good hearted soul who did her best. But, the system is sabotaging every option this poor girl can suggest. How can she help when the complete cash price of the ticket is almost the same as the taxes charged by Airmiles?

    So, that dream now dashed and at least eight hours spent at this, I try to book another “dream rewards” flight, Regina to Mumbai for a September flight. Should be no problem considering I am booking months in advance. No surprise this time. Yes, the quote says I have enough Airmiles, so, proceed to search for flights. I’m not surprised now at the response this time; you guessed it: “no flights available on dates you have selected”. So, we change the dates, the months, and finally, after an hour of hacking at this thing, surprise, a flight is available. It’s available but the return is restricted to a short window from the arrival date. I want a three month stay not just a couple of weeks. Hey! This is my “dream rewards” trip that I have been saving ten years for. Don’t I get to go when I want to go and/or return on the dates I want?

    The answer is an unequivocal “no”. I get to go when they tell me I can go and I must return when they tell me I can. And furthermore, the taxes add up to over $700 plus 8475 miles “low season departure”. That’s for a flight that cash price total on dates I want, is $1626.00 all taxes in and I can get the flight when I want to go and return on the dates I select. So, using a previous posts calculations; what is the value of Airmiles? $.01 per airmile to about $.10 at the best. Now, if you thought this was the end of the story, I didn’t give up. Now wouldn’t a trip to Bali in Indonesia be a great idea for a September “dream trip”?
    Well! You guessed it “Sorry airmiles does not offer..” So, lets look at if we leave from Vancouver, or Toronto, or if we go to Singapore or Japan. Isn’t this supposed to be MY “dream rewards” trip. Conclusion after hours of working with this; is this is a scam? Good for purchasing some little bauble you really don’t need. But, for travel. What is your time worth and what is your peace of mind worth?

    Didn’t stop there though, I emailed the airmiles site asking them to generate a travel itinerary for any date in September leaving from any Western airport in Canada. Now that shouldn’t be a tough job for the designers of this dumb applet?

    The response was a prompt, probably computer generated response directing me to try everything I’ve already spent hours doing. Plus, they suggest I sign up for Facebook. I’ve responded, maybe a human will show some life here and kick in a good solution.

  14. Best to get a president’s choice black mastercard and get free groceries every month, with no yearly fee.
    I can do my own shopping for tickets. Thank you very much.

    All point programs are pyramid schemes. Only the ones at the very top benefit.

  15. I don’t know if this analysis is entirely accurate. To be fair what you would need to do is not just compare your other purchases but also compare other flights and the time spent, mental math, and potential for your points to be inflated away.

    Here is an example. I take various flights at different times and always seek the cheapest flight. I never end up on the same carrier and very often save several hundred dollars on oversees flights relative to if I stuck with one carrier (I travel a lot for pleasure and shift between Europe and Asia). Thus I might get a lot of points for flying with a certain airline, but 1. there is a chance I will never really use those points/miles, 2. they can easily be inflated away by the carrier 3. when I use them, I may have to use them on a more expensive flight thus reducing their value 4. time value of money

    This suggests that perhaps a best case scenario is 10% (referring to another comment) if you can easily be consistent with your carrier (consistently fly on a carriers cheap routes) but for most of us, that’s much less likely and perhaps even negative.

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