Dynamic pricing vs. fuel surcharges — which is the lesser of two evils?

Redeeming airline factors and miles was once so easy.

When you had a vacation spot in thoughts, you checked the award chart of your favourite program to see what number of factors or miles this system charged. Supplied there was availability, you can e-book the flight for that fastened worth plus a small amount of money to cowl necessary authorities taxes and airport charges.

Nevertheless, this worth proposition turned extra advanced over time. When international gasoline costs rose, some applications added fuel surcharges to redemptions, arguing that offering these award seats was costly (gasoline normally being an airline’s greatest expense).

In principle, this was unwelcome however not unreasonable. The issue was that when gasoline costs dropped, the surcharges didn’t. Many applications have now renamed these gasoline surcharges “carrier-imposed surcharges,” as they bear no correlation with gasoline costs.

Nonetheless, many airways didn’t impose gasoline surcharges. You may e-book a long-haul flight for as little as $5 in charges and taxes plus the factors and miles, which was an incredible deal.

Then, the key U.S. airline applications began slowly however certainly eradicating their award charts and switching to dynamic pricing. They reasoned that money costs fluctuate relying on demand, so redemption ranges ought to, too. Throughout off-peak durations, members may nonetheless redeem their factors and miles on the lowest ranges, however when demand for seats elevated, so did the quantity of factors and miles required.

In case you have invaluable transferable credit card points, you typically have to decide on between applications with fastened award charts however excessive surcharges and applications with low or no surcharges and dynamic pricing.

So, which is finally the higher technique to go?

Associated: How much will your vacation really cost? The scourge of dynamic pricing is spreading like wildfire

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Enterprise class to Europe

Let’s first have a look at your choices to e-book business-class flights from New York to London in Could 2025. You may switch your bank card factors to a program with dynamic pricing, like Delta SkyMiles, which does not cost gasoline surcharges. Gasoline surcharges to this vacation spot are increased due to the UK’s Air Passenger Obligation tax.

Whereas the money required is simply $376.60, you may want a whopping 475,000 SkyMiles per particular person round-trip.

Alternatively, you can switch your bank card factors to a program that has a set award chart however provides surcharges, resembling Virgin Atlantic Flying Club, this system for Delta Air Strains’ SkyTeam associate Virgin Atlantic.

Virgin Atlantic provides an eye-watering $2,000 as a carrier-imposed surcharge. Nevertheless, you may solely must half with 95,000 Virgin Atlantic factors, in contrast with the greater than 475,000 SkyMiles choice above on the identical round-trip New York-to-London choice.

So, which is the higher choice? Let’s estimate every price utilizing TPG’s September 2024 valuations.

• Redeeming Delta miles: 475,000 multiplied by 1.2 cents plus $376.50 equals $6,076.50
• Redeeming Virgin factors: 95,000 multiplied by 1.4 cents plus $2,450.90 equals $3,780.90

On this case, reserving with Virgin Atlantic Flying Membership would offer a lot better worth. Though an enormous surcharge is required, it requires a fraction of the factors.

This redemption continues to be expensive, so it is price checking the money fares on the identical dates. With Delta providing nonstop business-class flights for $3,555.40 round-trip, paying money may make extra sense since additionally, you will earn SkyMiles for this money fare.

Let’s take a look at one other instance. American Airlines AAdvantage presently makes use of dynamic pricing for flights operated by American Airways however has retained an award chart for associate airways (passing on the surcharges the place the working service would cost its members the surcharges).

Let’s take a look at a one-way business-class redemption from Denver Worldwide Airport (DEN) to Paris-Charles de Gaulle Airport (CDG) in April 2025. As there aren’t any nonstop choices bookable by means of AAdvantage, you can select to fly British Airways by way of London or American Airways by way of Dallas. The British Airways choice is priced utilizing an award chart, so fewer miles are required, however the surcharges are higher; the American-operated choice is priced dynamically however with out surcharges, so extra miles however much less money are required.

Right here is the price of every, utilizing TPG’s September 2024 valuations.

• Redeeming AAdvantage miles flying American Airways: 248,000 multiplied by 1.6 cents plus $5.60 equals $3,973.60
• Redeeming AAdvantage miles flying British Airways: 57,500 multiplied by 1.6 cents plus $752.60 equals $1,672.60

Once more, on this instance, it might be a a lot better deal to decide on the surcharges choice, as you will not be utilizing almost as many miles. This could be a wonderful redemption, with one-way money fares ranging from $3,800 on the identical dates.

Premium financial system to Dubai

With United Airlines’ nonstop service from Newark Liberty Worldwide Airport (EWR) to Dubai Worldwide Airport (DXB) now operational, let’s examine the price of flying the route in premium financial system in January 2025, a wonderful time to go to sunny Dubai. You may e-book by means of United MileagePlus for 233,100 miles plus a low $58.90 in charges and taxes, as United doesn’t cost surcharges.

Alternatively, you can e-book by means of a program with a set award chart, like British Airways Executive Club. This program expenses fewer Avios (170,000) however provides 610 British kilos ($854) in taxes, charges and surcharges for the same route that isn’t direct.

Utilizing TPG’s September 2024 valuations once more, right here is the associated fee between the 2 redemption choices:

• Redeeming United miles: 223,100 multiplied by 1.35 plus $58.90 equals $3,070.75
• Redeeming British Airways Avios: 170,000 multiplied by 1.4 plus $718 equals $3,098

On this occasion, each choices are equal, noting that the United flight might be preferable, as it’s nonstop. However once more, test the money fares, as there’s the choice of flying on the nonstop United flight in premium financial system and flying again on a mix of Swiss and United by way of Zurich Airport (ZRH) for underneath $2,000 round-trip.

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Associated: Why transferable points are worth more than other rewards