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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • Frequent Flier Mile Merger Arbitrage* 7 comments
    Dec 5, 2013 2:49 PM | about stocks: AAL

    Plan A: Do not fly commercial. More on that here.

    Plan B: At least get cheap upgrades with miles. Today, you can get cheap miles by sharing US Airways (LCC) miles. You can purchase miles at $0.0114 cents per mile. This can help build up a war chest of US Airways miles which can be used on American Airlines and their partners after the merger with AMR Corp (AAMRQ) closes and their frequent flier programs consolidate. Also, you might consider getting a US Airways credit card before the deal closes in order to get additional miles for as little as $0.002. Combined with American Airlines cards, this will allow you to build up a substantial number of miles.

    *Cliff Asness recently wrote,

    The word "arbitrage" in academia means "certain profits," whereas in practical investing, arbitrage often means "a trade we kind of like.

    I am using the word in its practical investing usage.

    Stocks: AAL
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Comments (5)
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  • jaginger
    , contributor
    Comments (803) | Send Message
    Can you buy straight from USAir at $0.0114 per mile? That's the cheapest I've seen outside of credit card deals and pudding promotions and the like.
    5 Dec 2013, 02:54 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10617) | Send Message
    Author’s reply » Follow the hyperlink above for details. There were times to buy and get a match; now you can share and get a match. It is the price per mile implied by the matches.
    5 Dec 2013, 02:57 PM Reply Like
  • jaginger
    , contributor
    Comments (803) | Send Message
    Ah, got it. You've gotta have a bank of miles to start with, give them to someone else, and they get the bonus as well. I need to fly 30k on USAir real quick!
    5 Dec 2013, 03:01 PM Reply Like
  • AsicsRunner
    , contributor
    Comments (19) | Send Message
    Airline miles are almost worthless unless you plan a trip 9 months in advance. Have you tried to get a seat with them lately?


    The best thing they are good for is Road & Track subscriptions!
    5 Dec 2013, 03:45 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10617) | Send Message
    Author’s reply » My opinion is that they are worth more than the prices described above. This idea might be more useful for people who purchase ahead about a year, use them for upgrades, have an assistant to help with the bother of using them, have flexible schedules, and enjoy the modest amount of complexity necessary to optimize travel logistics.
    5 Dec 2013, 03:51 PM Reply Like
  • Borbastic
    , contributor
    Comments (264) | Send Message
    That depends. Delta are worthless. British airways miles are a great deal .... as long as you use them to fly on AA in the US! My favorite is United; great availability if you fly on a weekday and low fees for international.
    6 Dec 2013, 10:13 AM Reply Like
  • The Investment Doctor
    , contributor
    Comments (2695) | Send Message
    Too bad non-US citizens can't apply for a credit card. I fly a lot (about 100kmiles a year), but my mileage balance would look so much better if I could add miles earned by credit card purchases to it.
    8 Dec 2013, 06:10 AM Reply Like
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