Yet another loyalty program trap: airline companion tickets

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In the last few weeks I've done a bit of a deep dive into the annual free night certificates offered by various co-branded hotel credit cards (IHG (and here), Marriott, Hyatt), with the general theme that a single annual free night certificate has to be looked at in the framework of your overall miles, points, and travel strategy.

For example, a $75 Hyatt free night certificate can either save you 8,000 Ultimate Rewards points if redeemed as part of a short Category 2 stay (good deal!), or cost you tens of thousands of Ultimate Rewards points if you let its presence in your account convince you to spend your vacation at a Category 4 Hyatt property rather than, for example, a Club Carlson property where your last night (or every other night, depending on your credit card portfolio) is free.

In other words, it's not enough to say the Hyatt Visa Signature credit card gives a free night when you pay the $75 annual fee. That "free" night might be very cheap or very expensive, depending on your travel plans and overall miles and points strategy.

Are airline companion tickets too good to be true?

Many airline co-branded credit cards offer an annual companion ticket, which are (with a few important exceptions) valid for economy travel in the continental United States and Canada, on flights operated by the issuing airline (excluding their partners and, in US Airways' case, their own sister airline American).

Here's a quick glance at some of those companion tickets:

  • Barclaycard US Airways MasterCard (for new and current cardholders in 2015 only): $99 plus taxes and fees for each of up to two companions traveling with the cardholder, when the cardholder purchases an economy ticket fare of $250 or more. Valid in the continental United States and Canada. $89 annual fee. You must pay with your US Airways MasterCard.
  • Barclaycard American Airlines Aviator Silver MasterCard (beginning in the second quarter of 2015): $99 plus taxes and fees for each of up to two companions traveling with the cardholder, when the cardholder purchases a ticket for $250 or more. The cardholder must spend $30,000 each cardmember year to receive the companion tickets. $195 annual fee.
  • Bank of America Alaska Airlines Visa Signature: $121 for one companion to travel with the cardholder, when the cardholder purchases any economy ticket. Valid systemwide on flights operated by Alaska Airlines. $75 annual fee. The primary cardholder must be traveling or the ticket must be booked with a card in the primary cardholder's name.
  • American Express Delta Platinum (economy) and Reserve (economy or first): pay only the taxes and fees for your companion when purchasing a ticket in eligible fare classes. Valid in the continental United States and Canada, except for residents of Hawaii, who can originate there. $195 (Platinum) or $450 (Reserve) annual fee. The terms and conditions state that the ticket must be paid for with your American Express Delta Platinum or Reserve card, although a reader reported that he was able to use a different American Express card.
  • Chase British Airways Visa: you pay only the taxes, fees, and fuel surcharges for a second award ticket in any class of service booked entirely on British Airways-operated flights, originating in the United States. $95 annual fee. The primary cardholder must be traveling.

Who are companion tickets right for?

I often write that there are only two reasons to even consider using travel-rewards-earning credit cards, rather than earning a straight 2% cash back using a card like the Fidelity Investment Rewards American Express:

  • You travel for work and have reimbursable business expenses;
  • Or you manufacture spend furiously.

That's because even if you (not unreasonably) value Membership Rewards, Ultimate Rewards, or Citi ThankYou points at more than 1 cent each, you have to earn a huge number of them to "make up" the $95, $175, or $450 annual fees incurred by premium rewards-earning credit cards.

The same logic applies to companion tickets. If you're reimbursed by your business or employer for your travel expenses, then the annual fees of these credit cards really might be cheap methods for bringing a travel companion on a domestic trip with you.

That's because when the cost of the revenue ticket is taken out of the equation, the credit card annual fees may be a relatively small fraction of the cost of paying for a second revenue ticket: $217 (Delta Platinum) is 25% of a $868 ticket, $210 (US Airways) is 25% of a $840 ticket, $196 (Alaska) is 25% of a $784 ticket. While those hypothetical prices are currently high for leisure fares (I haven't paid $784 for a domestic ticket in years), if your travel companion wants to come with you on a route heavy with business travelers, they're not inconceivable.

The problem with companion tickets

With that out of the way we can come to the crux of the problem: companion tickets are a bad deal because they require you to purchase a revenue ticket directly from the airline.

And if you're a travel hacker, that's vanishingly unlikely to be the cheapest method of buying tickets — even revenue tickets. Leaving award tickets completely aside, here are a handful of straightforward methods for buying revenue tickets on the cheap:

  • Redeem US Bank Flexpoints at up to 2 cents each, earned at up to 3 Flexpoints per dollar spent on charity. Maximum discount: 83.3%.
  • Redeem Citi ThankYou points at up to 1.6 cents each on American Airlines or US Airways flights, earned at up to 3 ThankYou points per dollar spent at gas stations. Maximum discount: 83.7%.
  • Redeem Chase Ultimate Rewards points at up to 1.25 cents each, earned at up to 5 Ultimate Rewards points per dollar spent at office supply stores. Maximum discount: 46.3%.

Compare that to a revenue ticket purchased directly from the airline, and a companion ticket paid for with your annual fee plus any required taxes, fees, or co-pays. Even the unusually high prices I cited above (with savings of 75% on the companion ticket compared to revenue fares) produce savings of just 37.5% when you're forced to buy the first ticket at retail price.

Exceptions worth considering

While the Bank of America Alaska Airlines companion ticket and the British Airways Travel Together ticket do have to be booked directly with their respective airlines (over the phone, in both cases), the terms and conditions of the tickets do not require them to be booked with the corresponding credit card. That means you can use a Barclaycard Arrival+ card to pay for both tickets, potentially securing a discount comparable to what you'd get booking using a more lucrative points currency.

Personally I prefer to use my Arrival+ miles for non-chain hotels and taxi and Uber rides, but if you're earning them cheaply enough, an Alaska Airlines or British Airways companion ticket might make sense — again, depending on your own miles and points strategy.