Some thoughts behind why PremierMiles were devalued

Yesterday, I put out the sad news about PremierMiles conversion changing from 1:1 to 2:1 and also the relatively minor devaluation of using PremierMiles as cash for booking tickets.

I have a feeling I should lay out an educated guess about why conversion options are being hit more than the use as cash. This, is all a result of inflation over the years, as well as the foreign exchange movements over the years.

First, about the inflation. I know inflation does not directly impact the price at which conversions should happen, and loyalty programs regularly adjust their redemption rates to account for inflation. However, maybe the price at which the loyalty programs sell to banks and other establishments also changes over a period of time. Citi may have found it difficult to keep the rate same over a period of time and pay from their pocket. I also guess that the conversion rate changes account for inflation over the coming years as well.

Secondly, about the Foreign exchange movements. Have a look at the USDINR movement over the past 3 years approximately. There is a 30% appreciation here, and most other western world currencies will show similar trends of strengthening against the Rupee.


When a company such as Citi pays for your mileage conversions in India, most of the companies they are dealing with are based abroad, such as Delta and British Airways. Hence, their costs to buy the same number of miles go up, not down because they are spending more Indian Rupees to get the miles into your accounts. At some point of time, they’d have reached the tipping point to have raised the conversion ratios.

Thirdly, why does the use as cash go up only 10% while use for conversion go up 100%? My thoughts are linked to the explanation above and a bit of conspiracy theory as well.

When you are using the points for cash (0.45 paise per PM), Citi is paying an Indian vendor ( to help you with your bookings, that too in INR. So, the currency appreciation does not play a part. My conspiracy theory also says that maybe a 100% hike is being made to dissuade customers from converting to miles and promote the use as cash. But then, that is just the way I think of this situation and maybe not Citi’s viewpoint.

In all fairness, I don’t blame them for the whole conversion inflation, but I sure think they could have done a small devaluation than such a large one, like a 1.5 PM = 1 airmile.

Anything I miss here? And what do you guys think?

Join over 4000 people who check-in daily to find out about the best in travel.
Free emails (once-a-day) | RSS Feeds | Facebook Updates | Twitter | Instagram

About Ajay

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe. Ajay is a frequent contributor and commentator on the media as well, including ET Now, BBC, CNBC TV18, NDTV, Conde Nast Traveller and many other outlets.

More articles by Ajay »


  1. Hi! Looking at a comparison between prestige and premier miles now, prestige points have better value than premier miles in relation to redemption across airlines. For hotels they have the same value, except for taj. Here premier miles has an advantage, which was there earlier as well. 10 pm = 1 taj pt. 10 pm = expenses of rs. 250. However, 5 prestige points = 1 taj point and 5 prestige points = expenses of rs 500 in domestic market or rs. 250 overseas. Anyone know why premier miles has an advantage over prestige here?

  2. @AJ I agree with the reasons you have presented but Citi could have done a step increase rather than one big jolt. In what scenario would you continue to use the PM card post Feb 1?
    @V I don’t think conversion to Prestige would have been a motive to devalue PM. 75% of the PM card holders I know are either ineligible or have been declined Prestige upgrade. If they really wanted more fee they would have allowed upgrade for all PM card holders irrespective of credit limit or income criteria.

  3. @AJ What you are saying is absolutely correct but seeing so many readers of this blog and flyertalk are converting from premiermiles to prestige I feel that getting people to upgrade would be one of citi’s motive in devaluing premiermiles. Point is lot of people who had premiermiles were eligible for prestige but they were not taking it at 20k fees since they used to find premiermiles as better value proposition. Now with these devaluation it just motivates those set of people to shift to prestige.

    Also, there is a pattern here. First citi had referral program almost throughout the year to get as much people into premiermiles, citi rewards and indian oil card. Then they devalued rewards and now premiermiles.

    With so many people shifting to prestige, eventually it will become expensive for citi to keep benefits of prestige as well. I won’t be surprised if they devalue prestige come Jan 1, 2016.

  4. I believe the reason that they devalued cash redemptions are that they have way too big list of partners where we can get accelerated points. For instance, any mobile bought for INR 40k at shopclues/Paytm will fetch you 4000 points (equi INR 2000 Rs)…that was very generous as compared to other cards. But I am feeling the same pinch of this devaluation and may shift my primary usage to AI SBI card.

    Comments Welcome.

    • @Vinay, the accelerated points are paid for by the people who offer it at their stores, not just Citi on their own. Otherwise don’t you think they’d just increase the earn rate across the board.

  5. Hi
    Have intentionally not disosed my details, with reasons you would come to know.
    Our company had started discussions with JP for buying miles to reward our customers,while in the beginning they offered rates in the bracket of ₹0.8-0.85, with adequate volumes (really big numbers, millions in buys every month) they said rates would go down to ₹0.6-0.65, and that’s just an Indian company.

    So if we consider rupee devaluation hypothesis with numbers I have mentioned above, I think it simply does not make business sense to b giving away free miles worth ₹2.5 for every ₹100 spent on regular spends and double that on travel and extra Nike partners (eg flipkart amazon). I wonder who fits these bills.

    My guess is PM has been a strategy to aquite premium Indian customers, and then upwelling them. But because the strategy was co stung but too much, they discontinued it. We should not be forgetting that above numbers are just basic without rupee deflation, and thus would work much higher.

    Any how PM earlier & now Prestige is something I am totally enjoying with huge mileage warning opportunity and the amazing travel benefits.


  6. Regardless of the reason, such changes need to be done in small doses. It’s like Diesel hike by Rs.0.5 every month. I am of course not suggesting devaluation every month, but may be Citi could have done over 2-3 6-month blocks.

    I am still thinking whether to convert to Prestige card since I have just about 1L PMs, so wont get a huge upfront benefit. In addition I do also feel the fee is too high for benefits offered by Prestige card.

  7. I believe they have garnered a large enough customer base to tweak the policies. Consumers holding Premier Miles card won’t discontinue the card because of the policy, but will definitely tweak their spending. Citi will still continue to make Rs.3,000/- as annual fees from these same customers.
    It’s simple economics really.

  8. The real depreciation of PM has been in the partner conversion. To know why Citi has done it, it would be good to know how that partner conversion works e.g. when 1PM gets converted to 1 Air India FF mile, how much does Citi pay to Air India? If the rates are similar (probably with slight discount) to those at which AI sells miles to retail customers, it would be extremely costly and the business model wouldn’t make sense.
    Have worked on a loyalty program situation few years back, the only way it makes money if 30% or more miles that never gets used. Possibly because of high conversion rates into partners (I always used to convert PM into AI miles and used it when its real value was ~Rs. 0.9-1.1), Citi had to devalue it.

  9. I personally feel that they would have known by now that this product is restricting sale of their superior product (read Prestige) which would give them higher benefits. Companies does at times kill their best products in order to promote sales of other products. May be I am completely wrong…but this may be one of the reasons.

    • @Amit the prestige comes with a much higher barrier and is a much harder card to get so i dont think that is the reason.

  10. They could have stuck with the existing redemptions atleast for the desi airlines if forex fluctuations were the case.

  11. @AJ yes, wouldn’t the cost to buy those miles from the airlines be varied too?
    What I am getting at is that, May be, it was getting expensive for Citi to transfer(buy) the PM to Cathay (for example) vs not so expensive to transfer to Etihad

    So Instead of creating groups of partners, like 1-to-1 when you transfer to Etihad, etc. and 2-to-1 when you transfer to Cathay etc. for example, they chose to gut them all !
    Just my 2 PM IMO! 🙂

  12. May be the value of each mile is quite varied.
    A basic comparison between etihad and cathay
    Abu Dhabi to Chicago return on Etihad, distance flown 7245×2 Miles, Miles required for redemption: 132151
    Hong Kong to SFO return on Cathay, distance flown 6910×2, Miles required for redemption: 60000

    Such varied value.. Unless I am missing something.

    • @bluecrabs i mean the cost of buying those miles from the airlines, not the cost as a customer to redeem them

Leave a Reply

Your email address will not be published.