Transfering Airline Miles

We here at It's A Magical World! like to remain responsive to our readers' concerns. So, as part of an ongoing Q&A series, we'll answer the following question submitted by a loyal reader. (Names and details have been changed to protect the innocent.)

My co-worker basically commutes (two to three times a month?) from JFK to VIE on Austrian Airlines. He has accumulated around a million Austrian frequent flyer miles. I posed the following question to him: How would you like to convert your Austrian Miles to cash? He agreed to consider it. We both have Austrian frequent flyer accounts. My interest remains in optimizing the liquidity of the transaction.

1) What is the best way (least expensive) to book a ticket in my name with his miles? If the best way is to transfer the miles, so be it. If the best way is to somehow log onto his account and book the ticket in my name, that may be feasible.

My frequent-flier experience is based on my long-standing membership with United's Mileage Plus program. While Mileage Plus is representative of most traditional U.S.-based airlines' programs, I don't know for sure whether European programs play by the same rules. I will answer this question assuming that they do. Keep in mind that Lufthansa, Austrian, Swiss, LOT, and their respective subsidiaries are all part of the same frequent-flier program, called Miles & More. All those airlines are members of the Star Alliance, as is United, which I believe means they share a common redemption schedule.

The best way to book a ticket in your name is to have your co-worker book the ticket with his miles, from his account. (Whether he does it himself or you log on using his password is a matter for the two of you to discuss.) Anybody can book a ticket for anybody else without additional fees (beyond the usual taxes), though in some cases, the airline may require additional documentation to verify that the transaction is consensual. (Such measures are increasingly unnecessary, since they were imposed in the era of paper certificates rather than password-protected online accounts.) When you transfer miles between accounts, you are hit with a flat transaction fee (US$35 on United) and a per mile transfer fee (US$0.01 per mile). There might also be a cap on the number of miles that can be transferred.

2) I will obviously pay all fees associated with the transaction. What would you consider to be appropriate compensation in excess of the fees? 1 USD per 1,000 miles? 1 EUR per 1,000 miles? A certain percentage (50%? 75%?) of the current Austrian price for that itinerary? These were the ranges which I was thinking, but let me know if you believe otherwise. In his case, the miles are clearly extraneous, so I can probably get a great deal.

Keep in mind that according to the terms of airline frequent flier programs, the sale or barter of miles or rewards, outside of processes facilitated by the airline, is a violation and may subject your miles to forfeiture. It is much easier for airlines to police these practices, however, when miles or tickets are sold via eBay or online message boards. When the sale is between colleagues, rather than an arm's-length transaction on the open market, the airline will be much harder pressed to find out whether something fishy is going on.

That being said, airlines generally value miles at something like US$0.027 per mile. Assuming that Austrian uses the same redemption structure as United, it costs 50,000 miles for a transatlantic ticket, which, by the airline's valuation system, is about US$1350. By my experience, however, a transatlantic flight would average about US$750, which works out to US$0.015 per mile.

I guess the moral of the story is that the value of frequent flier miles is highly subjective. I recommend that you and your co-worker work out a flat fee in advance, on either a per-mile or a per-flight basis. A flat fee system is more equitable than paying a percentage of the offered price of the flight you wish to take. Your flight will cost 50,000 miles regardless of whether the airline is selling it for US$400 or US$1,400 at that given time.

3) Should there be other things for me to think about (i.e. blackout dates, hard to use miles, etc.)?

Most airline programs institute either blackout dates or capacity controls on certain flights. You should check with your airline in advance to get a sense of what these policies are. Keep in mind that whoever owns the miles bears the burden of the capacity controls. To illustrate my point, here's an extreme example: Assume there are no dates within the next year with desirable flight availability and that all your miles will expire at the end of that year (miles generally don't expire as long as there is activity on the account). If you've purchased the miles yourself and are unable to use them, you've lost what you spent. If your co-worker still holds them, you don't pay him a dime until you've found a flight that you know you'll be able to book, and if there aren't any such flights, you aren't out any money. Therefore, assuming that your co-worker's stash of miles will remain filled and accessible to you indefinitely, you should leave them in his name, even if there weren't any transfer fees obsessed.

Good luck and happy flying! Hope you use those miles to come visit me once in a while!