What is the Value of Miles from the Virgin Atlantic Flying Club Program?

Flying Club is the name of Virgin Atlantic’s frequent flyer program.  One of the challenges of valuing miles from this program is that mileage requirements for free flights vary by specific departure location, requiring a more city-to-city analysis.  If you just want to learn more about the program, read our post, Summary of the Virgin Atlantic Flying Club Program.  For example, as of the time of writing this post, it costs 50,000 miles (standard rate) to fly from LAX to Heathrow, but only 45,000 miles if you fly out of New York.  Most other airlines have a simpler system where is costs, for example, the same amount of miles to fly from anywhere in North America to anywhere in Europe.

For those who like to get right to the point, PlasticIQ has estimated that miles earned on Virgin Atlantic are worth around $0.0124, but keep reading if you want to know how we arrived at that estimate.

Key Assumptions in Valuing Virgin Atlantic’s Flying Club Miles

As in all of PlasticIQ’s analyses, there are some critical assumptions we must make:

• Virgin Atlantic is a London-centric airline–all flights route through London. Thus, Asian routes make absolutely no sense from the US, since you are essentially flying the wrong way for a good part of the trip. For the market price of tickets, we rely on PIQ’s Detailed Analysis of Flight Costs.
• Virgin Atlantic has a very unusual (and unfortunate) tax structure tied to fuel surcharges, which we treat separately below, and which greatly impairs the value of Flying Club Miles when used to fly in VA itself and not their partners.
• Virgin Atlantic also flies to some other locations that PlasticIQ normally doesn’t include in it’s analysis, such as Cape Town (South Africa), and Dehli (India), to name a few. We observed that the schedules for these flights are generally far less convenient (ie more time in the air or on transfers) than if you went on the open market. Given that these are generally more “exotic” routes and also taking into account the scheduling issue, PIQ has decided to exclude these routes from our analysis.
• This leaves us analyzing only one destination—London!  However, Virgin Atlantic also has 16 Flying Club airline partners which significantly extend the reach and value of the Flying Club program.  Specifically, we analyze 4 of their major partners, including US Air, Singapore Air, Continental, and ANA.

Fuel Surcharge Significantly Reduces Value of Awards on Virgin Atlantic

Virgin Atlantic has extremely high fuel surcharges, as the table below illustrates.  Note that of their partner airlines that PIQ examined, only Singapore Airlines also has onerous fuel surcharges not covered by the award ticket.

As you can see, Virgin’s combined taxes and fuel surcharges are about $200 higher than those of other major airlines for flights from the US to London…But, you say, this shouldn’t matter, since you’re getting the ticket for free from an award anyway, right? Wrong! Written into the fine print of many frequent flyer programs is the fact that you, the redeemer, are responsible for all taxes and fuel surcharges. So all of a sudden a supposedly near-free reward ticket from NYC to LHR is going to cost you ~$350. Ouch! Talk about devaluing the worth of the program.

Example of Virgin Atlantic’s Aggressive Tax Structure: Flying NYC to London (LHR)

Airline	Tax
AA	$127
Delta	$125
Continental	$125
Virgin Atlantic	$347

So How Much Are Flying Club Miles Actually Worth?

Firstly, let’s analyze just the value of using Flying Club miles on Virgin Atlantic itself.  We’ll then extend the analysis to the 4 major partner airlines (and one hotel chain, since VA miles can be transferred to certain hotel loyalty programs) for a reasonably complete picture!

Estimating the Monetary Value of Virgin Atlantic’s Flying Club Miles (Economy Class, RT)

From	To	Mkt ticket price (w/o VA taxes & fuel surcharge)	Miles Req’d	Travel % Allocation	$ Value/Mile Weighted
Los Angeles(LAX)	London(LHR)	$481	50,000	33%	$0.0032
NYC(NYC)	London(LHR)	$243	45,000	33%	$0.0018
Chicago(ORD)	London(LHR)	$387	50,000	33%	$0.0026
Total Pre-Penalty					$0.0076
Total Post-Penalty					$0.0072

Valuing Virgin Atlantic Miles on Flying Club Partners

Now that we have an idea of what a mile might be worth when redeemed on Virgin Atlantic itself , it’s time to view the holistic picture and include at least some partner valuations.  To make a final determination on the value of Virgin Atlantic miles, we then take a weighted average of the top 3 most highly valued partner miles.

How Much Are Flying Club Partner Miles Worth On Partner Airlines (Economy Class/RT)

Partner	Program	$ val/mile (post-penalty)	Allocation	Contribution
Virgin Atlantic	N/A	$0.0072	0%	$0.000
ANA	High season	$0.0104	33%	$0.0035
Continental	SaverPass	$0.0111	33%	$0.0037
US Airways	MileSaver	$0.0100	33%	$0.0033
Hilton Hotels	HHonors (1:1 exch)	$0.0043	0%	$0.000
Weighted Avg Partner Value			100%	$0.0105

PlasticIQ’s Final Assessment on the Value of Virgin Atlantic Miles

Thus, you can see that while Virgin Atlantic’s Flying Club miles are only valued at around $0.0072 on a standalone basis, the key turns out to be also estimating the value of Flying Club miles when used to redeem awards on partner airlines.  Once taking this into account, we estimate the fair value of Virgin miles to be around $0.0105.  Also note that as this value is completely dependent on being able to find available partner awards (not always a foregone conclusion), you may want to apply an additional discount to PlasticIQ’s calculated value to reflect this.

Check out PlasticIQ’s Frequent Flyer Mileage Valuation Comparison to see how the Virgin Atlantic Flying Club Program stacks up against other frequent flyer programs.

Tags: travel, Travel cards, Value of points

This entry was posted on Sunday, August 23rd, 2009 at 9:08 am and is filed under Airline Rewards Programs, Rewards Programs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.