Types of award ticket pricing (and how you may be able to save lots of miles and points)

When I wrote the recent JetBlue post, I wanted to compare our redemption cost to that of other airlines. Then I realized I have never posted a stand-alone article about the different types of award ticket pricing, so I pulled that section and decided to write a whole post about it.

The best airline program to use to book an award ticket depends on the route you’re trying to book. Each type of award pricing model has pros and cons. It is very important to understand how award pricing works if you want to redeem your points and miles for max value!

I’ll discuss this further a little later, but keep in mind that you won’t have the option to redeem with different airline programs if you’re using an airline co-branded credit card. That’s because airline co-branded cards only earn airline miles for that airline. You cannot transfer those miles to other programs. Instead, I highly recommend focusing on credit cards that earn transferable points such as Chase Ultimate Rewards and American Express Membership Rewards. Click here for more info about the different types of travel credit cards and award currencies.


There are 3-ish types of award ticket pricing

Most frequent flyer/airline loyalty programs I discuss on this blog fall into one of 3 categories:

  1. Region/Zone based
  2. Distance-based
  3. Fare-based

And then there’s Delta who is just kind of rogue. This is often referred to as “dynamic pricing”

Note that some programs may have a different way of pricing partner awards. For example, JetBlue has a partnership with Hawaiian Airlines. This means you can use JetBlue TrueBlue points to book award flights operated by Hawaiian Airlines, but redemption costs are calculated differently. If you use JetBlue points to book a JetBlue flight, the redemption cost is going to be fare-based. But if you use JetBlue points to book a Hawaiinan Airlines flight, your redemption cost is zone-based.

Zone based/Region Based

Examples of frequent flyer programs that are zone-based:

  • American Airlines AAdvantage
  • United Mileage Plus
  • Alaska Airlines Mileage Plan

Zone based means that the entire world is divided into different regions.  In a zone-based program, any flight between 2 zones costs a fixed amount of miles.   Every airline program determines its own definition of regions.

  • For example, one program may name a zone North America and include the Caribbean as the same zone as the continental US.
  • This means Miami to Dallas (North America to North America)would require the same amount of miles as Miami to the Caribbean (also North America to North America) .
  • Then there are programs that will place the continental US in its own zone and the Caribbean in its own zone.
  • In this case, a flight between Miami and Dallas (continental US to continental US) would probably require a different amount than a flight between Miami and the Caribbean (continental US to Caribbean).

Also, each zone-based program determines its own redemption costs. The amount of miles American Airlines AAdvantage requires for any given route will most likely vary from the amount of miles required by Alaska Airlines Mileage Plan for the same route. Sometimes the difference is slight, but sometimes it is is significant.

Distance-Based

On some routes, you can get 2 tickets to Mexico for the price of 1 by using British Airways avios to book American Airlines flights (as opposed to using AAdvantage miles).

Examples of distance based programs:

  • British Airways Executive Club
  • Iberia Plus

A distance-based program requires a certain amount of miles based on the distance of the trip. Each distance based program has its own distance bands/tiers and redemption costs for each band/tier. Greater distance requires more miles.

British Airways and Iberia certainly aren’t the only programs with distance based award pricing, but they are the two I use the most. This post compares the two programs and gives examples of when one is better than the other.

Fare-Based

Examples of fare-based award ticket pricing:

  • Southwest Rapid Rewards
  • JetBlue TrueBlue

Fare-based means that the number of miles or points required for an award ticket reflects the current fare price of a revenue ticket.

  • Cheaper tickets=lower amount of points required
  • More expensive tickets=higher amount of points required

Comparing the 3 types of award pricing

If you don’t have time to read the whole post right now, just look at the difference between using AA miles vs. British Airways avios vs. JetBlue points. Then bookmark this and come back to it when you can read it. Understanding how different programs price award tickets is very important if you want to maximize your miles and points!

Lowest possible miles/points/avios required for flights between Orlando and Nassau:

  • American Airlines AAdvantage (zone-based):
    • 12,500 AAdvantage miles each way
    • 25,000 AAdvantage miles roundtrip
  • British Airways Executive Club (distance-based):
    • 15,000 avios each way
    • 30,000 avios roundtrip
  • JetBlue TrueBlue (fare-based):
    • 3,500 points each way
    • 7,000 points roundtrip
    • note that this amount could potentially get even lower if the fare is lower. These are just the lowest amounts I could find on this JetBlue route.
Would you rather spend 7,000 points or 25,000-30,000 points/miles?

JetBlue is obviously the winner for this particular route, but fare-based pricing does have some problems. AAdvantage and BA Executive Club aren’t great for this MCO-NAS route, but there are definitely times when zone and distance programs are going to be the better option.

The best type of award pricing ultimately depends on the route you want to book. It’s a little more complicated than that, though. 1 or more of these factors will help determine which type of award ticket pricing is best.

  • Nonstop flights vs connecting flights
  • Paid fare
  • Distance

I will discuss each type of pricing model with more examples of when each may or may not be the most ideal. Since I’ve already gathered the screenshots, I’ll be using flights to the Bahamas for these examples.

Zone/Region based: American Airlines

Spoiler alert: AAdvantage is probably not the best program for Caribbean flights if you’re based in Orlando

All 48 continental US states are considered one region in the AAdvantage program. The Caribbean is a separate zone. American Airlines requires 12,500 or 15,000 miles each way (off-peak and peak, respectively) for a ‘Milesaaver’ economy award ticket from the continental US to the Caribbean.

Regardless of the amount of segments or from which continental US city you’re departing, a MilesAAver ticket to Nassau requires either 12,500 or 15,000 AAdvantage miles each way.

Connecting flights price the same as nonstop flights when using AAdvantage miles

There are no nonstop AA flights between Orlando and Nassau; you would most likely connect in Miami. With AAdvantage miles, this does not change the amount of miles required.

Orlando to Nassau roundtrip milesAAver roundtrip ticket booked with AAdvantage miles: 30,000 miles

The number to pay attention to here is 15,000 miles each way for flights between Orlando and Nassau. Those fees are government taxes and fees on the return flight that are mandated by the Bahamian government. They’re unavoidable regardless of the airline, so let’s just focus on the points for now.

Miami to Nassau roundtrip MilesAAver roundtrip ticket booked with AAdvantage miles: also 30,000 miles

Miami to Nassau is also 15,000 miles each way.
Distance doesn’t matter with AAdvantage

Redemption cost is calculated based on which zones your departure and destination are designated.

Miami to Nassau is about 184 miles in distance. Chicago to Nassau is 1311 miles in distance. This is a significant difference, but if you’re using American Airlines AAdvantage miles to book, it doesn’t matter. Because Chicago and Miami are both in the same zone (continental US), the continental USCaribbean pricing applies to both routes.

Chicago to Nassau requires the same amount of AAdvantage miles as Miami to Nassau.
Benefits of a zone-based chart like AAdvantage:
  • The redemption amount between any two zones is the same regardless of distance
  • Adding a connection doesn’t require more miles*. This is great for people who do not live in an AA hub city.
  • Even if the fare is high, the amount of miles required will not change. A roundtrip ticket to the Bahamas on a route with a paid fare of $400 requires 25,000 or 30,000 miles each way. The exact same route with a paid fare of $800 also requires 25,000 or 30,000 miles.

*This isn’t always the case with other programs, even those that are zone-based. Some programs may still calculate per segment. For example, Virgin Atlantic has a zone chart, but adding a connecting segment adds the cost of that segment to your total amount of miles required.

Distance based: British Airways Executive Club

A distance-based program requires a certain amount of miles based on the distance of the route. Each distance-based program has its own distance tiers and redemption costs. Also, each program has its own way of calculating the total distance that will ultimately determine your redemption cost.

Remember, you can use British Airways Avios to book flights operated by American Airlines. British Airways requires 7,500 avios (their name for miles) for any nonstop AA operated flight within North America less than 1150 miles in distance.

Miami to Nassau is about 184 miles. The redemption cost would be 7,500 avios each way or 15,000 roundtrip. This is better than AAdvantage’s cost of 25,000-30,000 miles.

Roundtrip AA nonstop flights between Miami and Nassau booked with British Airways

For nonstop American Airlines flights within North America, British Airways will generally have a lower cost than AAdvantage even if the flight is longer than 1150 miles in distance.

Chicago to Nassau is 1311 miles in distance. According to British Airways Executive Club’s chart, segments that are 1,151-2,000 miles in distance are 10,000 avios. This means a roundtrip ticket on nonstop flights between Chiacgo and Nassau would require 20,000 avios. If you use British Airways to book AA flights to Nassau, Chicago requires more avios than Miami, but both routes are still better than what AAdvantage requires (25,000 or 30,000 miles for either of these routes).

It’s not always this simple, though. This is due to the way British Airways calculates the total.

Short geographical distance doesn’t always mean a lower amount of avios required even though British Airways Executive Club has a distance based pricing model.

Note that every distance based program calculates totals differently. For example, Iberia may give you a different redemption cost than British Airways for the exact same AA flight. Click here for more info.

British Airways calculates the total cost by adding the redemption cost of each segment. Each segment is calculated based on the distance. Then the amount of avios for each segment is added together to get your total. Translation: a route with a connecting flight requires more avios.

There are no nonstop AA flights between Orlando and Nassau. If you wanted to use British Airways Avios to book an American Airlines flight from Orlando to Nassau, you would have to connect in Miami.

For a roundtrip flight, you would add the total of these segments (all segments are under 1150 miles in distance):

  • MCO-MIA (7500 Avios)
  • MIA-NAS (7500 Avios)
  • NAS-MIA (7500 Avios)
  • MIA-MCO (7500 Avios)

Your total would be 30,000 Avios.

Even though Orlando is much closer to the Bahamas than Chicago, an Orlando-Nassau roundtrip ticket is going to require more Avios than a Chicago-Nassau roundtrip with nonstop flights.

Benefits of a distance-based chart like British Airways:
  • The redemption amount may be significantly less than the amount required in a zone-based program.
    • For example, Miami to Nassau nonstop AA flights can be booked for half the amount of avios (15,000 avios roundtrip) that AAdvantage requires for a milesAAver ticket on the exact same flight (25,000 or 30,000 AAdvantage miles roundtrip).
    • The Chicago-Nassau nonstop route is also a good example. AAdvantage requires 25,000 or 30,000 AAdvantage miles roundtrip, but British Airways requires 20,000 Avios roundtrip for this exact same flight.
  • Like zone based programs, even if the fare is high, the amount of miles required will not change. A ticket to the Bahamas on a Chicago-Nassau roundtrip ticket with nonstop AA flights that has a paid fare of $500 requires 20,000 each way. A ticket to the Bahamas on the same route but with a paid fare of $800 also requires 20,000 avios each way.

The biggest challenge both distance-based and zone-based programs is going to be finding availability at the saver level.

Airlines like American Airlines have what we call capacity-controlled inventory on award seats. This means that only a certain number of saver level seats (which are the only award tickets you should be looking at anyway) are released on any given flight. Just because a paid seat is available, it doesn’t mean you will be able to book that seat with AAdvantage miles. At least not at the milesAAver level. Click here for more information about that.

On the other hand, fare-based loyalty programs usually do not limit the amount of seats that can be booked with points.

Fare-Based: JetBlue TrueBlue

Availability is a huge advantage of fare-based pricing

If a seat is available for a paid ticket, you should be able to book that seat with points. But as you’ll see below, just because a JetBlue ticket is bookable with points, it’s not always going to be the best value. As you’ll see below, a higher fare is going to mean more points.

In a fare based program, the amount of points required usually correlates with the price of a paid ticket.

Our nonstop flights between Orlando and Nassau happened to be a very low fare. This resulted in a low cost on points! Cash tickets would have been about $248 roundtrip each.

Instead, we redeemed 7,000 points and paid $112 in fees per ticket.

How much are JetBlue points worth?

It doesn’t seem that Southwest or JetBlue uses a formula that assigns an exact value to a point, though. For example, our JetBlue points were worth almost 2 cents per point when we booked Orlando to Nassau. That isn’t always the case. Later in this post, there is an example of a JetBlue redemption in which points are only worth 1.3 cents each when compared to the fare.

Now is a good time to mention the fees

The fees you see on these Bahamas flights are government taxes and fees. They are not fuel surcharges*. In other words, booking with another airline wouldn’t save you from having to pay these fees. These are mandatory taxes and fees collected by the Bahamian government. If you look at the AA and BA screenshots, you’ll notice the same fees.

*Fuel surcharges may be avoidable by booking an award ticket with an alternate program, but government fees like these are required no matter what airline program you use to book. Click here for more details.

Despite the fees, if you look at the cpp value we got after subtracting the fees, our JetBlue redemption value was close to 2 cents per point.

Paid roundtrip fare: $248

  •  $248-$112=$136
  • Are 7,000 points worth $136?
  • 136/7000=0.0194
  • 0.0194 X 100=1.94 cents per point

Click here for more information about calculating the value of a mile or point.

The only time I care to redeem points or miles for a route with a cheap fare is if the airline has fare-based pricing

Pretend you’re trying to book a ticket from Miami to Nassau.

You have AAdvantage miles. You also have Chase Ultimate Rewards points and Amex Membership Rewards points. Both of these can be transferred to British Airways to book an American Airlines flight. Both of these can also be transferred to JetBlue, although Chase’s transfer ratio is better.

American Airlines flies nonstop between Miami and Nassau. JetBlue doesn’t fly out of Miami, but they fly out of Fort Lauderdale. There are nonstop JetBlue flights between FLL and NAS. You check both airlines. (I’m looking at a one-ways to keep this as simple as possible.)

American Airlines

You find milesAAver availability*.

*Remember, you really only want to book AA award tickets when you can get milesAAVer (as opposed to AAnytime tickets). If you want to book AA with a partner such as British Airways, you will only be able to do so if AA has milesAAver availability.

You can either A) book with 12,500-15,000 AAdvantage miles or B) book with 7,500 British Airways avios transferred from Ultimate Rewards or Membership Rewards.

Next, you check the paid fares. It’s $76. Here are 3 options for booking this American Airlines flight:

  • Pay $76 cash
  • Redeem 12,500-15,000 AAdvantage miles
  • Redeem 7,500 British Airways avios

I definitely wouldn’t want to redeem 12.5-15k AAdvantage miles for a $76 ticket. Thats a terrible cents per point value. British Airways would give you a better cents per point value, but I still wouldn’t do it. I would pay $76 cash (and by cash I mean pay for it with my credit card) in this scenario. Or you can use the Chase Ultimate Rewards redemption portal.

JetBlue

You don’t need to worry about availability because if a paid seat is available, you should be able to book it with JetBlue points. You find a $76 ticket. The cost in points for the ticket is 3,500 points.

Options:

  • Use 3,500 TrueBlue points or transfer 3,500 Chase Ultimate Rewards to JetBlue (you can also transfer Amex MR but the rate would be 250:200 rather than 1:1)
  • Book with $76 cash

3,500 points for a $76 ticket is a value of about 2 cents per point. This is important because 2 cents per point is my general threshold for transferring Ultimate Rewards to a partner.

Usually, when a ticket is that cheap, I’ll just pay cash for it. But since JetBlue’s system correlates the low fare with a low amount of points required, it makes sense to use points.

Comparing both flights:

  • JetBlue FLL-NAS
    • Pay $76
    • Redeem 3,500 Ultimate Rewards (transfer to JetBlue TrueBlue)
  • American Airlines MIA-NAS
    • Pay $76
    • Redeem 7,500 Ultimate Rewards (transfer to British Airways Excecutive Club)
    • Redeem at least 12,500 AAdvantage miles (it would be 15,000 on a peak date)
    • Redeem ~5,000-6,000 Ultimate Rewards (depending on if you have the Preferred or Reserve card) in the redemption portal. Click here for more info about the redemption portal.

Yeah, I’ll take the 3,500 Ultimate Rewards option!

The downside of fare-based award ticket pricing

What happens when those $76 fares aren’t available? In a fare based program like JetBlue, a more expensive ticket is going to require more points.

This is a one way nonstop flight from FLL-NAS for $169.

If you want to use TrueBlue points to book this ticket, this price in points is going to be higher than that of the $76 ticket.

This is a sidenote but since I mentioned it earlier I want to explain:

Not only are more points required, but a disproportionately higher amount are required compared to the $76 ticket. Remember how I said you can’t always predict the value of JetBlue points? This is a good example.

3,500 points for a $76 ticket is about 2 cents per point. If this $169 ticket was available for redemption at a rate of 2 cents per point, it should only require ~8,400 points. 12,800 points for a $169 ticket is only a value of 1.3 cents per point. For that reason alone, I would either pay cash or find another flight. In other words, 12,800 points are worth more to me than $169.

The downside of fare-based award pricing is the upside of zone-based and distance-based program

Last minute tickets and peak travel times (such as travel around holidays) are most likely going to result in a higher paid fare. This is when fare-based pricing isn’t going to be ideal. When fares are higher, airline programs with fixed award ticket pricing are usually going to be the best way to maximize your points IF you can find availability.

I’ll use the same AA route as the previous section. This time, the MIA-NAS ticket is $169, the same price as the JetBlue ticket. That ticket is available to book as a milesAAver ticket. Using the same methods of booking described in the previous section, here are the options:

  • Pay $169 cash
  • Redeem 12,500-15,000 AAdvantage miles
  • Redeem 7,500 British Airways avios

Even though the cash price changed, the redemption cost using AAdvantage miles or British Airways avios to book does not change. The $76 ticket and the $169 ticket still require the same amounts of miles or avios. On the other hand, the JetBlue flight fare increase results in a higher amount of points required.

In this scenario, I would consider transferring 7,500 Ultimate Rewards or Membership Rewards to British Airways to book the AA ticket. Redeeming 7,500 points for a ticket that costs $169 results in a redemption value of over 2 cents per point.

NOTE: I can also redeem ~11,000-13,500 Chase Ultimate Rewards points in the redemption portal for a $169 ticket, but I don’t want to over-complicate this post since its still not a great option in this scenario. Click here for more info about the Chase redemption portal.


Potential dilemmas

Your city (Chicago) has nonstop AA flights, but none are available at the milesAAver level. There is a milesAAver flight from Chicago (ORD) to Nassau with a conenction in Miami available, though.

  • If you wanted to book with AAdvantage miles (zone-based), the ORD-MIA-NAS route is going to price the same as the ORD-NAS. Total:12,500-15,000 each way.
  • If you wanted to book the AA flight with British Airways Avios, the MIA connections adds another segment resulting in an additional redemption cost of 7,500 avios each way. Total: 17,500 each way (10,000 ORD-MIA plus 7,500 MIA-NAS)

Then there’s JetBlue. A connecting flight with a fare-based system may or may not be a better redemption value than a connecting flight on American Airlines. This will depend on the paid fare.

This JetBlue flight between Chicago and Orlando with a connection in Fort Lauderdale is $159 one way and the cost in points is 9,300. I’d rather use 9,300 JetBlue points than 12.5k-15k AAdvantage miles or 17.5K BA avios.

This brings up a good example of another potential dilemma, though.

How much are you willing to redeem for convenience?

If AA does have availability on nonstop ORD-NAS, you can book with 10,000 avios (or 12,00-15,000 AAdvantage miles).

Now you have 2 good options:

  • Nonstop ORD-NAS operated by AA booked with 10,000 British Airways avios
  • ORD-NAS with a connection in Fort Lauderdale on JetBlue for 9,300 JetBlue points.

10,000 avios is 700 more points than what JetBlue would require, BUT, I personally would rather fork over an additional 700 points for the convenience of a nonstop flight. Actually, depending on the route, I might be willing to redeem a few thousand more points if it meant getting a nonstop flight.

This brings me to another very important topic: the importance of diversifying your award currency!

Stop collecting airline miles only

If you only collect one airline’s miles, you are subject to their award chart and this conversation doesn’t matter. I suggest earning transferable points such as Amex Membership Rewards and Chase Ultimate Rewards because when you’re ready to redeem, you can choose the airline partner that results in the best redemption price. Then after confirming availability, you can transfer the MR or UR to that partner to book.

Since Ultimate Rewards transfer 1:1 to both JetBlue and British Airways (plus 7 other airlines), I can transfer to whichever program I decide makes the most sense.

The common argument to this is that you live in a hub city, therefore, you need to collect that airline’s miles.

I am going to use American Airlines AAdvantage as an example. Being in Dallas, American Airlines seems like the obvious credit card choice since we are a hub city. While I totally understand the thought process behind this, you should give yourself more options! You can do this by opening and using credit cards that earn Chase Ultimate Rewards and Amex Membership Rewards.

If you get an American Airlines AAdvantage credit card, you earn AAdvantage miles. You can redeem them for American Airlines flights and partner flights. I am in no way trying to say that AAdvantage miles are useless. They are great for certain routes. But you are limiting yourself.

If you collect Ultimate Rewards or Amex Membership Rewards, you can transfer to whichever airline partner results in the lowest amount of points. American Airlines is not a direct partner of Amex MR or Chase UR, but each has partners that you can use to book American Airlines flights. You do not necessarily need AAdvantage miles to book American Airlines flights.

Final Thoughts

Start earning Chase Ultimate Rewards and Amex Membership Rewards. Then when you’re ready to redeem, you can stretch your miles and points by using the airline program that results in the lowest redemption cost!

If you’re a beginner, start with this list of Chase cards. This also explains why beginners should focus on Chase cards.

If you aren’t a beginner or you want to see other current credit card offers, check this list.

Learn to stretch your miles. It helps when you’re planning family vacations!




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One thought on “Types of award ticket pricing (and how you may be able to save lots of miles and points)

  1. Pingback: JetBlue TrueBlue Deserves Some Attention • The Miles Genie

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