The Case for Mileage Running

Getting ready to mileage run!

Hello from the Centurion Lounge at San Francisco International Airport, which has been my temporary home for three of the past four Tuesday nights before a series of mileage runs to Dallas!

Yep, you read that correctly (although despite the fancy shoes, mileage running has nothing to do with actual running).

I write a lot about how I approach travel hacking, which is largely based on evaluating the (opportunity) costs of taking advantage of a particular hack and comparing it to the rewards I reap from it. So it may come as a surprise to hear that I have (not once, not twice, but thrice) opted to pay money to take an overnight flight to Dallas only to turn right around once I get there and arrive in San Francisco before it’s time to head into work.

Mileage running is one of the oldest hacks in the book, precisely because it neither involves looking sideways at rules nor relying on a particularly friendly customer service representative to help you get something your were (probably not) otherwise entitled to. Quite simply, you pay for a flight, take it, and then receive the rewards of redeemable miles (RDMs) or status that you earn from flying a certain distance with the airline. In the ideal case, the cost you pay for the flight is incredibly small (perhaps due to a sale) relative to the reward you receive, although some people see benefit in running even when the marginal cost is high.

Although mileage running for RDMs has begun to disappear with the introduction of revenue-based mileage earning, there are a few airlines and programs for which it is alive and well. Alaska Airlines Mileage Plan (AS) is one of those programs, and it just so happens that it is one in which I hold status.

My status (MVP Gold) offers me complimentary upgrades on Alaska Airlines as well as extra legroom seats on American Airlines (and to a lesser extent, Delta). Critically, however, it also offers an 100% bonus on RDMs earned for a given flight. Combine this with the fact that I can earn 1 AS mile per mile flown with American (because they are partners), and you end up with me going to Dallas three times without actually exiting security.

But why? Math, of course.

For whatever reason, American has continued to offer tickets between San Francisco and Dallas for a round trip price of $100.60. After factoring in credit card rewards, the net cost to me is around $95.

SFO-DFW is 1,464 miles each way

For my $95, I get a lovely bed economy class seat to sleep in for three hours at a time, as well as the 5,856 RDMs per round trip I fly. That works out to me ‘buying’ miles at a cost of 1.62 cents a piece.

As it turns out, this is cheaper than I can possibly purchase Alaska Airlines miles, whether it be indirectly through credit card spending or directly during one of their frequent mileage purchasing sales. However, just because it’s cheap(er) doesn’t make it worthwhile. How am I actually using the miles?

For business class tickets on Alaska’s partners. This is the key piece. If I turned around and redeemed the miles I earned from my flight for economy tickets, I would be pretty hard pressed to get a better ratio than 1.5 or 1.6 cents per point. In that case, I’d be better of keeping my cash, because the cash would be strictly better than the miles. However, when redeeming for business class tickets, I typically get 4 to 5 cents of value per point I’m earning from my runs to Dallas.

Does that mean I’m ‘earning’ over $150 per flight I fly ($250 of value less the $95 I pay)?

Not even remotely, because I would never pay the full cash cost of a business class ticket. What I’m earning is a bit more subtle — the opportunity to purchase a business class ticket at a discount. The lower the purchase price of my miles, the greater the discount. In my case, assuming I got 4 cents of ‘value’ from my miles, that discount would be around 60% (1 – 1.6/4). So in exchange for the reduced flexibility of my $95 (because they are being ‘banked’ as Alaska miles), I get to fly business class when visiting my sister in Europe. I still retain the option to redeem for coach, of course, but then my choice to spend time on a plane (and lose sleep) would be as crazy as my friends try to convince me it is*.

Speaking of which, I should load up on booze before heading out of here, so gotta run 😉

Happy hacking!

*Except when I convince them to join me as well 😛