Are United Miles Now Worth 1 Cent Each on New Discounted Awards?
Monday we learned some news about United award prices that was, on the surface, pretty great. Domestic United economy award flights now start at just 5,000 miles one-way for United elites and United credit card holders, and 6,000 miles each direction for everyone else. These award prices are down from the usual one-way domestic saver awards starting price of 10,000 or 12,500 miles.
United confirmed to TPG that this was not a sale or restricted to any particular list of cities, and indeed we found examples from 5,000 miles each way on the East Coast, West Coast and points in between. (We also found that a 1,000-mile discount for elites and cardholders remained constant in our tests.)
Aren't Cheaper Awards Good News?
So why isn't it great news that you can now fly from Houston to Las Vegas for as few as 5,000 miles when the award price used to start at 12,500 miles? Well, it is good news that the award now costs less, but when the flight price is $48, spending 12,500 miles would be a terrible deal. Although 5,000 miles is much less, it's still not a great deal either. TPG values United miles at 1.3 cents each, but at 5,000 miles for a $48 flight, you are right in the ballpark of only getting one cent per mile in value from your United miles. (And actually, once you factor in the $5.60 in taxes you'd need to pay on the award, your 5,000 miles are only getting you $42.70 in value, or just 0.85 cents per mile).
That less than one-cent-per-mile number turned out to be a recurring theme.
Discounted Awards Price Around One Cent Per Mile, Except When They Don't
TPG tested the one-way discounted award routes mentioned Monday in this article with randomly selected mid-May travel dates, and found a very common theme. When averaged together, the routes (with the exception of one dramatic outlier that was removed — more on that in a minute), provided a return of 0.93 cents per mile against the lowest price of a paid ticket for the same United flights. Note that those were the results for those with United elite status or a United credit card. Without either of those factors, the results provided an even smaller return per mile.
But really, it didn't take a spreadsheet to come to this conclusion. TPG readers were spotting the common pricing theme just by eyeballing search results yesterday. A $50 flight might cost 5,000 miles and a $90 flight might cost you around 9,000 miles if the route was one that is benefiting from new lower award prices. If this formula spread to all redemptions, a fixed one cent per mile valuation of United miles (or less) would be a dramatic blow to the program. But, some further searches revealed that's not quite the whole story.
In our line-up there was one big outlier, a flight from San Francisco to Denver that cost 8,500 miles but was pricing at $486. Now, this flight connected in Houston in the middle of the night to get from California to Colorado, so it's not the best idea regardless of price, but it wasn't the only unusual result we found.
In doing some additional searches for flights we actually wanted, we found results from Houston to San Diego for 5,500 United miles or $182 each way and from Houston to Las Vegas for 5,000 miles or $247 in cash. In both cases, those itineraries connected in Los Angeles. Those flights would provide 3.2 - 4.8 cents in value per redeemed mile, which is a very good return if you are okay flying through Los Angeles.
So, these new lower-priced routes are often providing about 1 cent in value against the lowest-priced tickets, except when they aren't. Connections may have something to do with that, but the story certainly isn't as simple as one mile = one cent.
The Basic-Economy Factor
There's another layer, too: the Basic Economy layer. The airline might apply basic-economy rules to the lowest-priced award ticket, thus restricting carry-on bags and advanced seat assignments. This is far from an unreasonable fear, since Delta SkyMiles has already done this and United has been known to adopt some of Delta's strategies a few months later.
We have reached out to United for comment on whether we should expect Basic Economy restrictions on the lowest-priced awards, but have not heard back at the time of publication. Update: United states that they are not applying Basic Economy restrictions to their lower cost award fares.
For now, United awards don't come with Basic Economy restrictions, so comparing the lowest award price to the lowest United cash price is not entirely apples to apples. Instead, a more fair comparison at this juncture is probably comparing award prices to the lowest non-Basic Economy fare.
Take this example — a nonstop flight from Newark to Ft. Lauderdale on May 4 has an award price of 5,500 miles + $5.60 in taxes. The cheapest cash price is $54. Factoring in taxes, that is a return of 0.8 cents per mile.
However, that $54 is for a Basic Economy fare. If you want an advanced seat assignment, ability to use your elite perks and a full-sized carry-on (all of which you'd enjoy on the discounted award above), the cheapest fare available to you is $91. If you compare the 5,500 mile award cost to that number, your return is a much healthier 1.54 cents in value.
Crunching numbers largely confirmed our suspicions that United's discounted awards are frequently returning at or below one cent per mile of value on redemptions when compared to the lowest cash price. However, this isn't always the case and there are outliers. Additionally, when compared to the cheapest economy price that isn't Basic Economy, the value proposition shifts, sometimes relatively dramatically to a rate that does make redeeming miles a good value.
We're still nervous about what strings may ultimately accompany these new lower award rates, but for now, find and book these newly more-affordable United award tickets when they align with your travel plans.