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Hamlet Ivanov
Hamlet Ivanov

Us Dividend Miles Buy



Ultimately selling miles to consumers is a fantastic business model, especially with the global alliances (partner redemptions are generally pretty low cost), and with airlines increasingly switching to dynamic award pricing. This is big and profitable business for airlines.




us dividend miles buy


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Rather oddly, earlier this year American AAdvantage seemed to radically change its approach to selling miles. In January 2022, American increased the cost to purchase miles by 19%, from 2.95 cents to 3.5 cents per mile (pre-tax), before any promotion discounts or bonuses.


Those of us who are road warriors and/or avgeeks have a pretty good idea of the value of miles. But the average person probably doesn't. So "35% off" may simply look like a deal to those who have never considered purchasing miles before. If...


Those of us who are road warriors and/or avgeeks have a pretty good idea of the value of miles. But the average person probably doesn't. So "35% off" may simply look like a deal to those who have never considered purchasing miles before. If that's the case, AA is just charging what the market will bear.


@ Willem -- So American doesn't want to sell miles at a profitable rate because the airline sold miles at a potentially unprofitable rate? Please help me understand that logic, because it's not my understanding of how business usually works?


@Lucky....AA is still selling miles at 2.4cpp, but your article is asking why AA is not offering any promos or discounts on buying miles and it could be because they lost so much money on the SimplyMiles deal in December that they are taking the year to recoup the costs and dont have any incentive to offer frequent discounts/promos anymore? Also perhaps a reason why they raised the price of miles right after that promo? I dunno, just a theory.


@Ben....Wonder if this is due to the SimplyMiles fiasco last December? How many miles were sold at a rate that was WAY below market price? Tens and tens of millions? You and Gary alone bought over 10 million combined and thats only two people. Since it was open to everyone for so many days, I wonder how many more people got in on this and bought millions.


The key thing in assessing a points/miles sale (viz. from the perspective of the issuer) is how much time passes between getting the cash for the points/miles and a redemption (and what is the likely cost of that redemption) and what is the issuer's cost of capital (in AAL's case, it's a double-digit percentage: the balance sheet is an absolute shambles thanks mostly to Doug).


For credit card miles, that period is almost certainly multiple years: the typical card accumulates less than 25k miles per year, and arguably there's basically always more new miles being issued to credit cards than credit card miles being redeemed (so you can make a reasonable case that the period is closer to infinite).


* probably accounting for a majority of the point purchase transactions is the "I'm 5-10-20k miles short for the redemption I want, so I'll buy miles" case. Delta, United, and other airlines have introduced "miles + cash" awards that essentially bundle a mile sale with a redemption to cover this situation as they deemphasize direct sale of miles.* then you have the "I see a sweet-spot redemption and will buy the miles now" crowd.* and then there's the speculative purchase (probably only a good idea if trying to hit a card spending target, generally)


All three of those are typically a shorter time horizon than credit card miles, and the former two may be exceptionally short (e.g. if there's a partner which mostly opens up award inventory when fairly close-in). The latter two may be somewhat price sensitive (the first is rather price insensitive), but are also not that indicative of a long stream of cash-flow (the buyer in the first has been accumulating miles, presumably).


Delta miles could be acquired at 1.1 cent per mile with some effort. United miles could be acquired at 1.9 cent per miles with zero effort. AA miles not so much so. The best option as of late for AA mile was via Marriott; but alas, the end of the 5K bonus.


With regard to the supposed problem of unredeemed miles on the balance sheet, Qantas had the same, if not worse, problem with FF points stacking up during the pandemic lockdowns when flying anywhere was inpossible. One solution to relieve the pressure was to offer a number of 'points-only' flights in all classes (at a fairly inflated rate I might add) from Australian ports to selected international destinations. This created great excitement and sold out...


With regard to the supposed problem of unredeemed miles on the balance sheet, Qantas had the same, if not worse, problem with FF points stacking up during the pandemic lockdowns when flying anywhere was inpossible.One solution to relieve the pressure was to offer a number of 'points-only' flights in all classes (at a fairly inflated rate I might add) from Australian ports to selected international destinations. This created great excitement and sold out in no time.Millions and millions of points were wiped off the books at a time when many people were still hesitant about resuming flying, and planes were nowhere near full.Even now this type of thing could still be an idea for US airlines awash with bloated mileage accounts. Something to please the members rather than alienate them as they are doing now.


To answer the question posed by the article, it seems like American is heavily emphasizing its preferred partners as way to earn American Airlines miles. Even within partners, it trailed, then ended, the ability to transfer Thank You points to AAdvantage. There are no signs of that coming back. And the Marriott/AAdvantage link has also been devalued. Bottom line - if you want American miles, the best way is to fly the airline (even here, they devalued flying for lower level elites or non-elites), spend on the card, or spend on preferred partners. Shortcuts like buying miles (and immediately redeeming them for partner redemptions, not doing anything to reinforce the profitability of flying or partnerships) or transferring from Marriott/Thank You Points have been discouraged.


Why sell miles when flights are full. Just returned from 5 weeks vacation and each flight on each carrier was full, Iceland air, Qatar, Malta, Lufthansa, BA, Salam Airways. Finnair. Domestic on AA, each flight taken overbooked.


@ Alex -- Because American Airlines sells miles, not selling tickets. American's Q3 cost per air seat mile was higher than the carrier's revenue per air seat mile. Meanwhile the airline continues to make billions of dollars on the AAdvantage program.


That's absolutely the BEST time for them to sell miles -- they get the revenue from the sale, and the chance that the miles will actually be redeemed is lower. Best of all for them is if they sell the miles and the purchaser allows them to expire. That's free money for the company.


@ Bob -- Why, though? Why would American rather sell miles for (probably around) one cent each and have those qualify as Loyalty Points, rather than 70-100% more, and not have those qualify as Loyalty Points?


I'm in a similar boat - have just over 1 million, and that after justing spending 160,000 to fly to Tokyo in F on JAL. No longer worth it to fly AA metal to Europe - plus, AA tries to put you on BA metal with the surcharges. I'm trying to plan more trips to Asia just to put a dent in my pile of miles.


AA historically sells miles aggressively when they're desperate for cash (Financial Crisis, Covid). The logic being that they would get cash from the sale immediately, and deal with the financial liability later - it's effectively a loan.


@ Pat -- But the cost at which American sells miles during promotions isn't less than the liability they carry. Keep in mind American is selling miles to credit card companies for way, way less than consumers are being charged.


I believe American isn't selling its miles as cheaply to its credit card issuers as its main domestic competitors to theirs. Citi, for example, hasn't allowed conversion of its points to AA miles (other than for a very brief period last year) because of the cost of conversion.


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In other words, you could buy US Airways miles at 0.7 cents each. And get the stickers for free. Which is, coincidentally, exactly what they were worth. The company soon went out of business, but as far as I know, everyone got their miles.


I proceeded to book them on xxx-IAD-FRA-EDI-(stopover)-BRU-BKK-DPS-(destination)-SIN-ICN-(overnight)-ORD-xxx on a combination of United, Lufthansa, Thai, Singapore, and Asiana. All for 90,000 miles each in business class. Dad had a blast flying around the world. 041b061a72


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