Dynamic pricing versus fuel surcharges — which is the lesser evil for your next redemption?

Using airline points and miles was once a straightforward process.

With a destination in mind, you would check your preferred program's award chart to find out how many points or miles were required. If there was availability, you could easily book the flight for that set price plus a small fee for government taxes and airport charges.

However, this value proposition has become more complicated over time. As global fuel prices increased, some programs introduced fuel surcharges on redemptions, claiming that providing these award seats was costly (fuel typically being an airline's largest expense).

In theory, this was an unwelcome but justifiable change. The issue arose when fuel prices fell, yet the surcharges remained unchanged. Many programs have since rebranded these fuel surcharges as "carrier-imposed surcharges," which have no direct link to fuel costs.

Nonetheless, many airlines opted not to implement fuel surcharges. You could secure a long-haul flight for just $5 in fees and taxes, plus the required points and miles, which was an excellent deal.

Eventually, major U.S. airline programs began gradually eliminating their award charts and transitioning to dynamic pricing. They argued that cash prices vary based on demand, so redemption rates should reflect that as well. During off-peak times, members could still redeem points and miles at the lowest tiers, but as demand surged, so did the points and miles needed.

If you possess valuable transferable credit card points, you often face a choice between programs with fixed award charts and high surcharges or those with low or no surcharges and dynamic pricing.

So, which option is ultimately the better choice?

Business class flights to Europe

Let’s explore your options for booking business-class tickets from New York to London in May 2025. You can transfer your credit card points to a program with dynamic pricing, such as Delta SkyMiles, which does not impose fuel surcharges. The fuel surcharges for this route are elevated due to the United Kingdom's Air Passenger Duty tax.

While the cash price is only $376.60, you’ll need an impressive 475,000 SkyMiles per person for a round trip.

Alternatively, you can transfer your credit card points to a program with a fixed award chart that includes surcharges, such as Virgin Atlantic Flying Club, which is associated with Delta Air Lines' SkyTeam partner, Virgin Atlantic.

Virgin Atlantic imposes a hefty $2,000 as a carrier-imposed surcharge. However, you’ll only need to use 95,000 Virgin points, compared to the over 475,000 SkyMiles required for the same round-trip from New York to London.

So, which option is superior? Let’s evaluate each cost using TPG's September 2024 valuations.

• Using Delta miles: 475,000 times 1.2 cents plus $376.50 equals $6,076.50
• Using Virgin points: 95,000 times 1.4 cents plus $2,450.90 equals $3,780.90

In this scenario, booking through Virgin Atlantic Flying Club offers significantly better value. While the surcharge is substantial, it requires only a small fraction of the points.

This redemption is still quite expensive, so it’s advisable to compare the cash fares for the same dates. With Delta providing nonstop business-class flights for $3,555.40 round-trip, opting for cash could be more beneficial since you'll also earn SkyMiles on this fare.

Now, let’s consider another example. American Airlines AAdvantage currently employs dynamic pricing for flights operated by American Airlines but maintains an award chart for partner airlines, passing on any surcharges that the operating carrier would apply to its members.

Let’s examine a one-way business-class redemption from Denver International Airport (DEN) to Paris-Charles de Gaulle Airport (CDG) in April 2025. Since there are no nonstop flights available through AAdvantage, you could opt to fly British Airways via London or American Airlines via Dallas. The British Airways option uses an award chart, requiring fewer miles but higher surcharges; the American-operated choice is priced dynamically without surcharges, requiring more miles but less cash outlay.

Here are the costs for each option, based on TPG's September 2024 valuations.

• Using AAdvantage miles for flights on American Airlines: 248,000 times 1.6 cents plus $5.60 totals $3,973.60
• Using AAdvantage miles for flights on British Airways: 57,500 times 1.6 cents plus $752.60 totals $1,672.60

In this instance, selecting the option with surcharges would be a far better deal, as it requires significantly fewer miles. This would be a great redemption, with one-way cash fares starting at $3,800 on those same dates.

Premium economy flights to Dubai

With United Airlines' nonstop service now running from Newark Liberty International Airport (EWR) to Dubai International Airport (DXB), let’s compare the cost of flying premium economy in January 2025—an ideal time to experience sunny Dubai. You can book through United MileagePlus for 233,100 miles plus a mere $58.90 in fees and taxes, as United imposes no surcharges.

Alternatively, you might consider booking through a program with a fixed award chart, such as British Airways Executive Club. This program requires fewer Avios (170,000) but adds 610 British pounds ($854) in taxes, fees, and surcharges for a comparable route that isn’t direct.

Referring to TPG's September 2024 valuations once more, here’s the cost comparison for the two redemption options:

• Using United miles: 223,100 times 1.35 plus $58.90 totals $3,070.75
• Using British Airways Avios: 170,000 times 1.4 plus $718 equals $3,098

In this case, both options are nearly equivalent, with the United flight likely being more desirable since it’s nonstop. However, it's wise to also check cash fares, as you can fly on the nonstop United flight in premium economy and return on a combination of Swiss and United via Zurich Airport (ZRH) for under $2,000 round-trip.

How to earn transferable points

Transfer partners vary between card issuers, but here are some of our top card choices that offer substantial welcome bonuses, which you can convert to some or all of the programs mentioned earlier:

• American Express® Gold Card: Earn 60,000 bonus points after spending $6,000 in the first six months of card membership. Additionally, get 20% back in statement credits on eligible restaurant purchases (up to $100) within the first six months. Terms apply.
• The Platinum Card® from American Express: Earn 80,000 Membership Rewards points after you spend $8,000 in the first six months. Check if you're targeted for a higher welcome offer through CardMatch (offer subject to change). Terms apply.
• The Business Platinum Card® from American Express: Earn 150,000 bonus points after spending $20,000 on eligible purchases in the first three months of card membership.
• Capital One Venture Rewards Credit Card: Earn 75,000 bonus miles after spending $4,000 in the first three months from account opening.
• Capital One Venture X Rewards Credit Card: Earn 75,000 bonus miles after spending $4,000 in the first three months from account opening.
• Chase Sapphire Preferred® Card: Earn 60,000 Ultimate Rewards points after spending $4,000 in the first three months of account opening, plus a $300 statement credit on Chase Travel℠ purchases within the first year.
• Ink Business Preferred® Credit Card: Earn 90,000 bonus points after spending $8,000 in the first three months from account opening.

Bottom line

The great advantage and disadvantage of dynamic pricing is its extreme daily fluctuations. If you travel during off-peak seasons (like to Europe in winter), these dynamic prices might resemble the previous award chart prices. When combined with low fees and taxes, this can be an excellent opportunity to redeem your points and miles.

If you wish to travel during peak demand, opting for a program with fixed award charts may be more advantageous. This ensures you will pay a reasonable number of points and miles, even if the surcharges are steep. If uncertain, calculate the value using our point and mile valuations, as demonstrated above.

As always, it's wise to verify award availability before transferring credit card points to any program, since these transfers are irreversible if you can't secure an award through your selected program. Additionally, explore cash fares, as you might discover a suitable cash option instead.