Is the Frequent Flyer Mile Market Declining?

By: Mileage Geek
Categories: Air Miles, airline frequent flyer programs, Airline Miles

These days, earning air miles is as easy as it has ever been. If someone wants to load up on miles to take free flights or get upgrades for first or business class seats, all they have to do is sign up for mileage program or get a credit card with mileage rewards and buy their favorite goods and services.

The concern is that there are too many miles available and not enough are being used.

During a study in 2004, it was found that people around the world had close to 11 trillion frequent-flyer miles in their accounts. Of course, every mile does not equal a dollar. Instead, the airlines sell the miles to the credit cards for two cents per mile, and then when users apply them to their next flight or upgrade, they are getting roughly one to 10 cents per mile.

If you cut that number in half and say that each mile is worth only five cents, that still means that the frequent-flyer market is worth $700 billion. It sounds like a lot doesn’t it? You’d be right. That means that these miles are worth more than every form of modern currency that is currently being used around the world.

Keep in mind that those numbers were from 10 years ago. Today, air miles are even easier to obtain with airlines offering promotions that give triple-mile bonuses for flights during certain months of the year and credit cards that offer 30 points per dollar spent .

The problem is that there may be too many available air miles and customers are not taking advantage of them. As of that survey in 2004, the number of unused miles had grown by 20 percent.

Let’s put it this way. If all of the airlines stopped giving away frequent flyer miles right now, it would still take 25 years to use all of the available miles.

Just like with paper money, when there is too much supply and not enough demand, it can lead to a devaluation of these miles. Now, some airlines are requiring customers to supply more air miles for free trips then they used to, or the airlines are making mileage points harder to use when customers try to redeem them.

Now, just like with our cash economy, offering more miles then customers use can cause a decline in their value. Just like America cannot continue to print money or continue borrowing from the rest of the world or it loses its value.

Does this mean that the frequent flyer mile market is going to crash? Probably not. Although there are issues with the excess of miles, just like the excess of printed money, officials have a special interest in keeping the mileage market intact.

These officials are constantly flying across the world, attending meetings and leading summits. When they travel to these destinations, they use air mile to lessen the price of their trip. So, if their first-class trips to these exotic places are at risk, then they will stop at nothing to ensure that the frequent flyer market stays protected and intact.

For the rest of us, it is important to remember just how helpful air miles can be for affordable vacations and premium upgrades. Use them wisely and save the mileage market.