With airfares up 300% is it time to cash in your miles?

As airlines continue to announce more capacity cuts and more new fees, we all knew airfare prices would increase. And, have they ever! Oh mai!

Tom Parsons' at BestFares.com reports that airfares are up as much as 338% from fares purchased last year. Click on the link below and you'll see a table of year over year fare increases, and I warn you, it's pretty shocking stuff!

Increased fare levels have spurred more travelers to cash in some of those frequent flier miles they've been accumulating over the years. Northwest Airlines says frequent flier redemptions are up about 10%. - mostly due to the introduction of a new program, PerkChoice, where frequent fliers can pay for their tickets using both cash and miles. Pretty cool!

If you want to learn more about maxing out the benefits of any frequent flier program you have miles in, visit specialist websites like WebFlyer, FlyerTalk or InsideFlyer. Those sites are all mileage programs all the time.

My personal rule of thumb of choosing if I pay cash or redeem miles is to use the following formula (and after I determine how poor I am that month):

IS [# of miles required / ticket price] GREATER THAN $0.02??
EXAMPLE: [25,000 miles / $550 ticket price] = $0.022
A PRETTY GOOD MILEAGE DEAL

So, why greater than 2 cents you ask? Well, it's not-so-secret insider knowledge that frequent flier miles "cost" an airline around penny each. If you can redeem them at a rate of 2 cents/mile - OR MORE - you should feel good that you've yourself a pretty good deal. In the above example, you took $550 of value for $250 cost. Get it?

If you are redeeming at $0.01/mile - in the above case if the fare is $250 or less - you are doing the airlines a favor by burning your miles - and you don't want to do that, do you?

So now you see as airfares go up, your miles become more valuable. Well, that is until the airlines raise their mileage redemption levels and/or restrict those seats. And, you guessed it, as beleaguered American Airlines is already doing just that, and I suspect in time, the others will follow. They always do.

In closing, there's a bit of silver lining in Tom Parsons' report. He predicts the fares will remain high through the peak summer travel season and then hopefully regulate a bit when demand softens in the fall.

If you don't want to part with your hard-earned cash or use your precious miles you may just want to wait until fall to travel.

More fliers are cashing in their miles [Star Tribune]
Major airlines raise hub airfares up to 338% [BestFares.com]
InsideFlyer [website]
FlyerTalk [website]
American AAdvantage raises awards [WebFlyer]