Frequent flyer programmes started as a retention tool: fly with us repeatedly and we'll give you free flights. Simple, and it worked.
They've become something quite different. For several major airlines the loyalty programme is a substantial business in its own right, and during periods of financial stress these programmes have been valued at figures comparable to or exceeding the airline operations they're attached to.
Understanding that changes how you should think about the points in your account.
Where the money comes from
The core mechanism: airlines sell miles to third parties, principally banks issuing co-branded credit cards.
When you spend on such a card, the bank buys miles from the airline and credits them to you. That's a cash sale for the airline at a price per mile, and the airline recognises revenue immediately while the obligation to provide a seat sits in the future.
Miles are also sold to hotels, car hire firms, retailers and others.
The result is that a large proportion of miles issued are never earned by flying. Which means the programme's economics are driven by card spending, not by air travel, and the airline's incentives follow the money.
Why devaluations happen
If you've held points for a while you'll have noticed that award prices rise over time. That isn't accidental and it isn't quite inflation.
Miles are a liability. Every outstanding mile represents a future obligation. Reducing what a mile is worth reduces the liability, at essentially no cost, without any customer being told a price has changed in the way they'd notice for a cash product.
There's no regulatory constraint on this in most jurisdictions, and programme terms typically reserve the right to change award charts at any time, usually without notice.
The practical consequence is the single most important rule: points are a depreciating asset. Hoarding them for a future aspirational trip is a bet against a counterparty who controls the exchange rate and has a clear incentive to move it against you.
Dynamic pricing
The larger structural change. Programmes have moved from fixed award charts — where a route cost a stated number of miles — to dynamic pricing, where the miles required track the cash fare.
The stated justification is more availability: no more blackout dates, seats always bookable with points.
The effect is to convert miles into a fixed-value currency, roughly equivalent to a discount on cash prices. Which eliminates the main way people extracted outsized value — booking expensive premium cabins at a fixed award price, where the value per mile could be many times the ordinary rate.
Under dynamic pricing, that arbitrage largely disappears. Points become a cashback scheme with extra steps.
Where value still exists
Not everywhere has converted, and the remaining opportunities are worth knowing.
Partner airline bookings. Alliances and partnerships mean you can often use one airline's currency to book another's flights, and partner awards are frequently still priced from a fixed chart even where the home programme has gone dynamic. This is where most of the remaining outsized value sits.
Programmes based in smaller markets sometimes maintain more generous charts and can be accessed by transferring from flexible card points.
Premium cabin redemptions remain the best use where fixed pricing survives, simply because the cash prices are so high relative to the mile cost.
And upgrades, in some programmes, still offer reasonable value — though many have moved to requiring cash plus miles, which erodes it.
Elite status, honestly assessed
Status confers benefits that vary enormously in real value.
Genuinely valuable: lounge access if you travel frequently at inconvenient times, free checked bags if you'd otherwise pay, and priority rebooking during disruption, which is the benefit people underrate most and appreciate most when it matters.
Less valuable than it appears: upgrade priority, which in practice depends on how many higher-status members are on your flight, and on many routes is close to zero.
The genuine cost is behavioural. Chasing status changes purchasing decisions — booking a worse itinerary or a more expensive fare on your chosen airline to protect a tier. Programmes are explicitly designed to produce that, and for many travellers the cost of the distorted choices exceeds the value of the benefits.
How I'd approach it
Treat points as a currency to spend rather than save. Earn and burn within a year or two.
Know roughly what a point is worth to you in cash terms, and use that as a benchmark. If a redemption gives you less value than the cash equivalent, pay cash and keep the points for something better.
Prefer flexible currencies — bank points transferable to multiple programmes — over airline-specific ones, because they hedge against a single programme devaluing.
And don't let the programme choose your flights. The value of any status or points is almost always smaller than the value of a convenient itinerary at a reasonable price, and the moment you're routing through a hub you don't want in order to protect a tier, the programme has won.
The expiry mechanics
A detail that costs people real money. Most programmes expire points after a period of account inactivity, and the definition of activity varies enormously.
In some schemes any earning or spending resets the clock, which means a single small transaction through a shopping portal preserves a balance indefinitely. In others only flight activity counts.
Large balances are lost this way regularly, generally by people who accumulated points during a period of frequent travel and then stopped. A calendar reminder set to the expiry period, and one small qualifying transaction, is all that is required.
It is worth checking the specific terms for each programme you hold a balance in, because the rules differ and the airline has no obligation to remind you.