The cost of reward travel on U.S. airlines has soared since 2019, reducing the value of frequent flyer points, according to an analysis by consulting firm IdeaWorks.
In a study published April 2, Ideaworks found that the average daily minimum price for airline tickets purchased with points or miles rose 28% in March 2024 compared to March 2019. This exceeds inflation by 7 percentage points.
The rate of increase in compensation prices is also outpacing the overall inflation rate for domestic airfares. Domestic ticket prices in 2023 are up 9% compared to 2019, and have lagged inflation by 10 percentage points over that period, according to data released by Cirium last week.
Jay Sorenson, president of IdeaWorks, wrote that the primary reason for the increase in inflation in reward travel is the high utilization of co-branded airline credit cards by consumers. This “created more demand and caused airlines to increase compensation prices.”
In conducting a reward travel pricing analysis, IdeaWorks analyzed 600 booking queries from American, Delta, United, Southwest, Alaska, and JetBlue websites using city pairs that were in each airline's top market based on passenger traffic. Inquiries for award travel from June to October were made in early March. The results of this study are based on the lowest daily reward fares offered by each airline.
As in 2019, Southwest offers the lowest reward prices among the six airlines IdeaWorks evaluated, with the lowest daily one-way fare at an average of 14,484 points. Nonetheless, this was double the South West average five years ago.
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American Airlines offers the second lowest redemption costs with the cheapest reward fares at an average of 17,820 points. American also bucked the overall trend and cut its coverage prices by 25% during the period. United has the highest redemption rate, with an average one-way cost of 30,460 points.
The study included flights ranging from 251 miles to 2,500 miles.
IdeaWorks pointed to Southwest's network focus on medium- and short-haul flights as an advantage.
Nonetheless, Sorenson wrote, “Put simply, consumers can enjoy the benefits of reward travel faster on Southwest.”
But Southwest is no longer the leader when it comes to the reward value of each frequent flyer point.
AAdvantage points are now worth 1.4 cents each for lowest-fare flight rewards, double their value in 2019, according to IdeaWorks. Southwest Rapid Rewards points are the next best option at 1.2 cents. United MileagePlus points have the lowest value among the six airlines, at 0.7 cents.
However, while Rapid Reward points are each worth less than AAdvantage points, Southwest overcomes this gap by offering more reward value on flight purchases than American and other airlines.
According to IdeaWorks research, Rapids Rewards members earn 6.7% reward value when they purchase the cheapest base airfare. United came in second place on that metric with 3.3%. Delta is last with a rewards value of just 0.4%.
A key driver of these numbers, Sorenson noted, is the policy of several airlines to offer lower rewards for purchasing basic economy fares. For example, Alaska Airlines customers who purchase basic economy fares will earn points at 30% of the economy fare. Instead of earning 5 points for economy class bookings, AAdvantage members only receive 2 points per dollar for basic economy bookings. And Delta doesn't award SkyMiles points on basic economy fares.
Southwest doesn't sell basic economy fares and awards 6 points per dollar spent on its lowest fare product, Wanna Get Away.
Meanwhile, United grants the same 5 miles to basic economy purchases as it does to economy tickets.
Award tables for flight purchases tend to be complex, with airlines often multiplying bonuses based on fare class, the customer's loyalty status, and whether the purchase is made with a co-branded credit card. Airlines that offer low reward value on basic fares don't necessarily offer low reward value on premium fares.
*This story originally appeared in Travel Weekly, an associate brand of Northstar Travel Group.