Should You Make Speculative American Airlines Bookings By Monday to Beat the Devaluation?

MileValue is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as CreditCards.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.

Note: Some of the offers mentioned below may have changed or are no longer be available. You can view current offers here.

Emilio commented:

With this devaluation coming in [one week], do you recommend booking some flights speculatively and then change later for a date that works better? South America and Australia sound nice, but making everything work is difficult. So, how hard would you say is it to change dates, particularly for next year?
Thanks!

I have written before about how to lock in pre-devaluation prices for trips with uncertain dates in 2016 or early 2017, so I won’t rehash that here. Check out the full analysis in How to Lock in Pre-Devaluation American Airlines Prices for Awards Booked in 2017.

Instead I will focus on the question: should you book an award speculatively today if you might end up needing to cancel it?

We can confidently say that the more miles you save, the more likely you will want to fly the award, and the higher you value American Airlines miles, the more likely that you should book a speculative award.

In fact, the answer is a simple math problem. You should speculatively book if the expected cost of booking is below the expected benefit.

Expected cost: cancellation fee times percent chance of cancellation

The cancellation fee for American Airlines awards is $150 for the first passenger and $25 extra for each additional passenger on the same reservation. This is the price for one way or roundtrip awards, so booking as one roundtrip instead of two one ways will save you cancellation fees.

The percent chance that you will need to cancel an award is something you have to estimate.

Note that the fact that the cost of canceling multi-person awards is so much lower per person means that if you are traveling as a couple or as a family, you have a lower cost to book speculative awards all other things equal.

Expected benefit: miles saved times value of miles times percent chance of taking the trip

The miles saved are how many fewer miles the award costs today versus its cost on March 22.

The value of the miles is how highly you value American Airlines miles starting on March 22. On that new award chart, American Airlines miles are worth 1.5 cents each to me. They may be worth a different amount to you.

The percent chance that you will take the trip is something you have to estimate (and is 100% minus the chance of cancellation.)

Examples of Two Speculative Awards I Am Considering Booking

#1 Buenos Aires to USA

In mid-May, I might want to travel from Buenos Aires to an American city in Business Class, though I don’t quite know which one.

If I book now and choose the wrong destination city, canceling the award or changing the destination later would incur a $150 fee. (Buying a domestic economy ticket to get from the end of my award to where I really want to go would probably also be at least $150.)

There is award space I could book now to Los Angeles for 50,000 miles, and Los Angeles is the most likely city where I’ll want to go.

Business Class between Southern South America and the Unites States goes up to 57,500 miles one way if booked March 22 or later.

I’d say my odds of wanting to fly to Los Angeles when May rolls around are about 30%. (That means a 70% chance I’d have to change the destination or cancel.)

I value American Airlines miles post-March 22 at 1.5 cents each.

So here’s the math.

Expected cost: $150 cancellation fee * 0.7 chance of cancellation = $105

Expected benefit: 7,500 miles * 1.5 cents per mile * 0.3 chance of flying award = $33.75

I should not book this award speculatively because the expected cost is more than the expected benefit.

#2 San Francisco to Bangkok

I love Southeast Asia in the dry season, I really love Cathay Pacific First Class, and these awards are going from 67,500 American Airlines miles one way to 110,000 American Airlines miles one way.

I found award space in First Class from San Francisco to Bangkok for February 2017, the dry season!

I can book this now for 67,500 American Airlines miles before its price jumps to 110,000 miles one way next week.

I’d say my odds of wanting to fly this route next February are about 25% just because a lot can happen between now and then. (That means a 75% chance I’d have to change or cancel.)

I value American Airlines miles post-March 22 at 1.5 cents each.

So here’s the math.

Expected cost: $150 cancellation fee * 0.75 chance of cancellation = $112.5

Expected benefit: 42,500 miles * 1.5 cents per mile * 0.25 chance of flying award = $159.38

I should book this award speculatively because the expected benefit is more than the expected cost. But they’re really close. Instead of saving 42,500 American Airlines miles by booking an award I am sure to fly, I’m only getting about $47 in expected benefit minus expected cost from the early booking, mainly because the odds of my wanting to fly the award in 2017 are so low.

Bottom Line

Should you book speculatively before the American Airlines devaluation next Tuesday? Do the math.

The answer is more likely to be “YES!” if you are thinking about a route with a bigger price increase, more likely to actually fly it, value American Airlines more, and the larger your traveling party is.