My Thoughts On The United Devaluation

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I rushed to break the news and compile a chart of the pain in the wee-hours this morning about the United devaluation.  Here are some more thoughts that I have:

1. A devaluation was expected. The shocking part is the split partner chart and the massive increase in partner awards rates, especially in First Class.

It’s been a long time since a serious inflation for the Continental/United programs.
Inflation happens for a couple reasons:
-First of all as the value of a dollar goes down the cost to buy airplane tickets goes up. Just as the value of a dollar sitting in a bank account goes down on a daily basis, so must the miles sitting in your account. Except that it would be ludicrous to have it change daily so we’re hit with these devaluations every few years.
-Second of all we’ve seen credit card bonuses increase and with more miles chasing fewer seats something has to give.

But let’s take the Tel Aviv route for example.
In September 2008 Continental raised the cost of an award ticket to Israel from 70K coach/100K business to 90K coach/120K business. In October 2009 Continental joined the Star Alliance and actually lowered rates to 75K coach/115K business.
When Continental/United synchronized their charts the flight went up to 80K coach/120K business where it’s been for a while.
With these changes the cost to fly in coach goes up to 85K, still lower than it was 5 years ago.

For business it goes up to 140K round-trip on United and 160K on partners. This hurts. The 20K increase is something I can live with, but the 40K partner increase seems too high.  It stinks to have to deal with a separate United chart and partner chart.  If you want to fly United First and tag on a short flight on a partner it can make more sense to book a separate ticket rather than subject your whole ticket to partner rates.
For first class you’ll now need an eye-popping 280K round-trip on partners. This is just an insane 86.7% increase. The first class partner award increases are really hard to fathom.

Other uncool changes that were buried in the footnotes:
-You’ll need an extra 10K miles to fly to Alaska round-trip, which is being broken out of the US49 category for the first time.
-A Round-The-World award which lets you fly to multiple cities for as long as you want goes way up as well. And that’s on top of a huge increase from the old Continental chart in 2011.

2. It’s not a matter of if American and USAirways will devalue, it’s a matter of when.
Their charts look silly compared to United’s new chart. If you have miles with those programs the time to start planning for a nice trip is now.
Don’t shift from accumulating United miles to American/USAirways miles just because their charts look way better right now as you will be disappointed.  Transfer Starpoints to those programs on an as-needed basis.
At least you know that the United chart will probably be free from devaluations for the next few years. That can’t be said for American, Delta, and USAirways.

3. Cash-back cards need to be looked at more seriously.
Sure your dollars are also devalued, albeit more stealthily. But you can invest those dollars to hedge against inflation. You can’t do the same with your miles.
The Barclaycard Arrival Plus™ World Elite MasterCard® earns 2.11% miles back on everything with no foreign exchange fees. It also has a sweet 50,000 point signup bonus.
You get 2 miles per dollar everywhere and a 5% point rebate every time you redeem your points. People have been changing those points into cold hard cash by booking a refundable travel reservation. At that point they redeem their points to get cash for them for it before refunding the travel reservation. 2.11% back is pretty much as good as it gets for cash.

If you redeem for an international coach ticket you’ll usually do better with this card than with a mileage card. Last-minute coach tickets, short-haul coach tickets, one-way coach tickets, business class tickets, and first class tickets are still much better with real airline miles than with cash. But can you really justify burning 280K miles to fly First Class to Israel on a partner airline? Business class may be the sweet spot of the future.

4. Transferable currencies are a hedge against devaluations.
If you’re only earning miles on a United card you’ve been hosed today. Those miles are stuck there and come February they’re worth less.
But if you have a Chase Ultimate Rewards cards at least you have other excellent options. I’ll go over them in the coming days.

Starwood Starpoints are really shining brightly today. They have dozens of transfer partners so even when one devalues there are tons of other options.  And they give a 25% bonus for each 20K transferred. Plus unlike with other transferable currencies, your points stay alive even if you close your Starwood Preferred Guest® Credit Card from American Express.

Membership Rewards also allows you to transfer to several programs, though they’re not partners with “exciting” partners like Alaska, American, or USAirways like Starwood is. And they don’t offer good hotel options like both Chase and Starwood have. Still it’s always nice to have transferable points.

It definitely pays to diversify.

5. We don’t have to take this sitting down!
-Retweet my Tweet here and send your own tweets to @United with the hashtag: #UnitedUnfriendly
The more you post the quicker mainstream media will pick up on this story. Let’s get it trending!

-Express your displeasure to Chase (Twitter: @Chase, @Chase Support) about these changes. Chase buys billions of dollars of United miles and isn’t likely to be happy that they’ve been devalued. They’re especially not going to be happy to lose customers to cards like the Starwood AMEX. If anyone has the power to put pressure on United it’s Chase.

-Contact United CEO Jeff Smisek and let him know how these changes will affect your travel patterns and credit card spending. He can be reached at jeff.smisek@united.com

-If you feel that an 87% increase is just flat-out unfair you can also file a complaint with the US DOT.  Sure United is free to do what they want, but this devaluation simply doesn’t happen if Continental and United were still competing.  Delta and Northwest miles have gone from being worthwhile to being worthless thanks to their merger. Let the DOT know that you feel an 87% increase in the cost of some awards is unfair to consumers and that you want to see the DOT keep fighting the American-USAirways merger in court.  If that merger goes through you can be sure we’ll be seeing more painful changes like this one.

What are your thoughts? How will these changes affect what cards you spend on or where you accumulate miles? Sound off in the comments!

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45 Comments on "My Thoughts On The United Devaluation"

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Eric

Does that mean jfk tlv on lh first if going to be 280k – those were my favorite flights.

Dan

@Eric:
Correct. That’s the biggest loss in these changes.
And USAirways officially won’t even book Lufthansa First Class, so there’s not even a good hedge against that flight.

Al

@Dan, since the award seats are capacity controlled by the airline, what difference does it make that more miles are in circulation? They control the number of seats which can be used by redeeming the miles.

Anonymous

Does this mean the the united miles will be sold for less than the current 1.7

Dan

@Al:
United has no control over partner award seats availability. And these are the awards that went way up in business and especially in first class.

@Anonymous:
No idea.

Mileswhore

Dan, would you consider contacting some of the major media? NY Times travel? Boston Globe? CNN? Foxnews? Maybe some of the consumer reporters? You have tremendous influence, as do some of the major bloggers.

Brilliant

Guys, everyone should please send out a tweet(s)
We really have to get this going.. We cant accept this nonsense

brisker dude

Dan,

Just to clarify, if i have points on SP and amex rewards, i should not transfer them until I am ready to use them?

How long does a transfer take?

chaim

@Anonymous: Where do you get a whopping 1.7 from? or are u mixing up the chase ultimate rewards?

ABK

@Dan, does booking on UA flight operated by partner ariline constitute UA or Partner booking? This kills Israel travel from midwest (where so many flights are via Europe on partners).

Sh

This is why I always try to chap er iyn

Mileswhore

make sure you tweet the major news organizations and let them know..they might pick it up

-CNN
-FOXnews
-NY TIMES

mike

this just gives more evidence to DoJ to block aa us merger united should of waited till trial is finished

momofboys

Doesn’t help any that united did not release a single seat in the whole May from ewr -> tlv

dave

if I book on the united web site on a swiss air flight do I pay ” partner ” price?

AJK

Also, where do you see that US cannot *officially* book LH F?

Mitch

I use my United Airlines Chase card alot just to use the miles for trips to Israel for me and the family(coach), should I apply for Barclay or Starpoint card? I tweeted to everyone.

Dan

@brisker dude:
Transfers from those cards are instant.

@ABK:
Partner.

@momofboys:
Book on a partner while it’s still cheap.

@dave:
Partner.

@AJK:
Hopefully that’s just referring to the elimination of the domestic 10K stopover option.
Guess we’ll find out.

@AJK:
Footnote 1: http://www.usairways.com/en-US/Resources/_downloads/dividendmiles/partnerawardtravel.pdf

@Mitch:
Coach travel isn’t really affected too much. But it’s always good to have a diverse card portfolio.

ABC

“A devaluation was expected.” by whom?
The $ cost of a coach seat NA->SE asia has not changed. But the award cost goes up 23%. Has Chase printed that many UR points?

dov

can one book now and change the travel dates?
are there change fees for prior to start of travel?

Hamburg

The solution is aeroplan points

Dan

@dov:
Unknown at this point. Hopefully that will be clarified.
Non-elites pay $75 for date changes.

@Hamburg:
Hardly:
http://www.dansdeals.com/archives/32201

Big Boy

Hey Dan,
If this will change there mind it will be a defeat that will rival the Fairmont story!
Thank you for all the good work.

DR

Hi,
I totally agree with your devaluation but I am not sure about your recommendation with cash-back cards.
With my Delta Gold Card and Skymiles in general, I get tickets worst case on a 1.75% ratio which is indeed less than the Barclays card BUT earning miles is lot easier than earning points on Barclays Card for two main reasons: 1) When I fly, I earn miles regardless if I paid & 2) There is always the online skymiles shopping website.
Clearly, my 1.75% is much higher given I get miles in other ways than credit card. Believe it bumps up the ratio by 50% to 2.6% and again on worst case basis and regardless of the status of the FF program. Therefore, for now, I am not inclined to change to a cash/points card.

Dan

@Big Boy:
:)

@DR:

Huh? So earn miles when you fly. Why does that compel you to have a Delta credit card? You’re throwing good rewards after bad. And 1.75 is a ridiculously high rate for the Delta program

And why would you earn miles on a Delta card over the SPG card which transfers with a 25% bonus to Delta (though you’d have to be crazy to make that transfer).

But why would you want to earn Delta Skypesos over Starpoints or 2.2% cash?

Most people would gladly unload all their Delta miles for 2.2% cash. So why would you want a currency that never has availability and doesn’t even allow for first class award redemption?

JB

Dan,

Can you do a run down on some MRewards transfer partners like ANA? Or UR partner Korean?

Also maybe its time to get serious about AviancaTaca Lifemiles. Get a lifemiles?

Aay B.

Looks like the tweet trend is going viral. Let’s keep it this way and yes add @CNN , @FoxNews and @NYTimes. Way To Go!!

DR

@Dan: Agreed on Starpoints, I may have to do that. Really depends on your situation re Skymiles, I travel a lot to France especially in summertime.
Only US airline to direct flight to Nice. With kids, that’s a big +. All-in-all dear Dan, depends on usage of your miles!

Dan

@JB:
Yup, on the agenda.

@Aay B.:
Nice!

@DR:
YMMV :D

Adam

I always fly coach so it doesn’t seem to affect me very much

Mendel

I have the Barclay Arrival World MasterCard but i find it very hard to redeem. So many of my travels for some reason doesn’t show up as travel. I use a lot more the capital one that give 2% cash back easy. Please explain how i can do the refundable ticket Idea with the Barclay Arrival? How do i know whats refundable?

Thanks

Peter

I dunno, on this news I’ve been searching for a good trip to burn 310-370k miles and I’ve searched probably 100 routes by now. Never once- not once! did I see any First Class available even at the standard (double) rate. So imho, if it’s never available who cares what price they put it at. Maybe at the new price they will actually show some availability. Not a good deal but maybe a good way to do something special like a suite or something. Remains to be seen…

seamd

@Dan

I usually wholeheartedly agree with everything you write, but I disagree that inflation should negatively effect the value of miles. That is an airline “explanation.” The miles are obtained after the seats are purchased with inflated dollars. We are already paying more for each mile by paying more for the seat. With inflation the cost of things goes up, and miles are supposed to be a thing, not a currency. By devaluing the miles, then we should get more credited miles for every flown mile. The airlines know they are printing currency, and they just want to be able to print more.

Please be gentle when you explain why my thinking may be incorrect!

Sadly, the people this hurts the most are those who don’t have the benefit of your mile earning knowledge and save for months and sometimes years for that one domestic coach trip.

We need another lawsuit like in the 1980s/90s(?), with threats of congressional action, to help enable a real “Passenger Bill of Rights” like was done to (if my memory is correct) American and Delta. Remember when there were 2 sets of miles on those airlines? Pre and post lawsuit. Congress believed the airlines could police their own reward programs.

Thank you for all your amazing work. Kol tuv and Shabbat sholom.

jim

Dan

can you please post what to write to US dot & United CEO

My limited english is not good enough to write a formal letter.

tivoboy

you or anyone can tweet and email all you want, they are NOT going to change this back. Just accept it, COdbaUA does not care anymore, they are after the revenue $$ and reducing any offerings to legacy flyer. Money talks and million milers walk. UA brought in 4x the ancillary fees of the next higher airline last year. They have gotten fabulous at this. IF you want to buy stocks, but UA and DAL, both of them are in the don’t ask, don’t care camps. AA and US are still trying to work out their merger. It’s the way of the world, the price of everything goes up. I’ve been telling people for years, SPEND THOSE MILES, TAKE THOSE TRIPS, they are only going to get more $$$

Marni

Dan,

Can u explain this in more detail: “People have been changing those points into cold hard cash by booking a refundable travel reservation. At that point they redeem their points to get cash for them for it before refunding the travel reservation. 2.22% cash back is pretty much as good as it gets for cash.”

When you refund the ticket, wouldn’t you have a negative pts balance (ie. wouldn’t you owe them back pts?)

dovid

can we expect a silver lining of better award availability now

yaakov

does this mean i should sell out my united points before it goes down? will the points go down in price?

netlevy

@Marni: Dan i agree with Marni, can you please explain?

Dan

@Mendel:
Just click refundable when booking an airline ticket. Or book a refundable hotel room where they charge in advance.
Not hard at all.

@seamd:
You’re right for miles earned by flying. But most miles are earned via credit card spend. Thus inflation applies.

@Marni:
No the refund just taes back the points you eared from that ticket-leaving you right where you were before.

Let’s say you have 100,000 points. You buy a $1,000 refundable ticket and use the 100,000 points to get a $1,000 check against the $1,000 ticket. You cancel the ticket and get back the $1,000 before you even pay for it.
You’ve come out ahead by $1,000 and have used up your point balance and are now at 0. Plus you actually get a 10% refund, so you’ll actually now have 10,000 points.

harry

I don’t like it either. But that’s life everything goes up. Rent groceries etc… and BH income too. So as miles bonuses. BTW AA and US if they go trough the merger ticket prices will increase with a nice few bucks. they with be the only airline owning over 1500 planes. and so will their miles go..

TF

So what’s the best strategy for mileage tickets CLE to TLV going forward?

berish

has this campaign ended? we got to continue harassing them!

chabadrox

@Dan this is a little tangential, but…do you think ppl shud rush to get rid of their chase u.r. points because of this devaluation or, hold onto them to get the 7% annual point dividend? the 7% wud make up for the devaluation, but the rep i spoke to at chase said it only applies to points earned through spending, not signup bonuses, or points transferred to account…makes the 7% dividend much less lucrative…ur thoughts?

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