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Abstract

Frequent flyer programs of airlines have gradually evolved into a multi-billion dollar business over the years. Valuing frequent flyer program miles accurately and fairly has its practical implications both for airlines and members of frequent flyer programs. As a ground-breaking academic study dedicated to airline loyalty programs, this study aims to build a conceptual framework to guide the valuation of miles. Through comparing required miles for different award types with their equivalent cash prices, this study has successfully addressed the purchasing power of AAdvantage miles of American Airlines when they are used for award redemption. Not only can this study be used to assist frequent flyer program members to maximize the utility of their miles assets, it also has the potential of becoming the theoretical foundation to build an industry-wide benchmark for valuing miles. Findings of this study could be significant and meaningful to multiple stakeholders, including consumers, airlines and their business partners, investors, financial institutions and taxation departments.

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