Several readers have written in, asking about Points.com’s newly-launched “Global Points Exchange,” which bills itself as a person-to-person frequent-flyer mile marketplace, letting you “trade the miles and points you have, for the miles and points you want.”

Questions are on the skeptical side — “Is this legitimate?” “Is this a ripoff?” “Is GPX legal?” — so let’s look under the hood.

For starters, yes, this is a legal service, despite the airlines’ rules against selling or bartering frequent flyer miles. Points.com has struck deals with each of the participating airlines, so this is an authorized setting for point exchange, not a back-alley deal or an eBay auction.

The principle is a good one: You’ve got miles in one airline’s account, and you want miles in another. So why not trade with someone who has what you want, and who wants what you’ve got to trade?

I’ll tell you why not: Fees!

GPX is plagued with outrageously high transaction costs, costing you as much to exchange your miles as you’d pay to buy those miles outright from the airline.

Is this any surprise? After all, it’s coming from Points.com, which has long converted miles between programs — with hefty devaluations along the way. And according to their latest financial guidance, people are falling for it. The company “transacted more than 10 billion miles and points” in 2007 alone.

The GPX program is currently in beta, and there aren’t a lot of offers on the bid or the ask. Only five airlines currently participate: Air Canada, Alaska, American, Frontier, and… (wait for it) Icelandair!

Fees vary tremendously depending on the airline, but none of them are small. The outgoing account determines the fee you pay. So exchanging 15,000 American AAdvantage miles into another airline currency will cost you $180.00, while exchanging 15,000 Air Canada Aeroplan miles will cost $300.00. PLUS the $6.95 processing fee (currently waived.) Extortionary.

No thanks, Points.com. Your GPX is DOA.

Related:
- The value of frequent flyer miles
- Reader mail: Can I transfer points from one airline to another?
- Travelocity soon to let you book travel using points and miles

A common question from readers of this blog is point conversion. How do you convert points from one airline to another? ATA and Southwest just made it a little easier.

In most cases, point conversion is a losing proposition, if it’s possible at all. (Try moving miles out of your Delta account! I dare you!)

As I’ve posted before, you’ll almost always lose points in a transfer, either through a clearinghouse like Points.com, or by moving balances from one account to another to another to another. (See Webflyer’s conversion guide to see what sort of hopscotch your points would need to play.)

So having an option for easy transfer is good news for ATA’s customers. The airline already works closely with Southwest by codesharing. Now, ATA customers can cash in 7,250 Travel Awards Points for 16 Southwest Rapid Rewards credits, which equates to one Southwest Airlines roundtrip. No partial conversions.

But is it a good deal? A roundtrip on ATA costs only 6,000 points.

In contrast, Southwest Rapid Rewards customers have been able to cash in their points on ATA for some time, at the same rate (16 credits) as redeeming points for an all-Southwest trip. (Flights to Hawaii cost double.)

So ATA customers are being charged a 20.83% premium. For that premium, they’re freeing their points from capacity controls — the “limited seats available” jargon which most airlines use for their frequent flyer programs, but which Southwest eschews. For some folks, that premium may still be worth paying.

Related:
- Reader mail: Can I transfer points from one airline to another?

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In fall 2006, Travelocity is rolling out a program that will allow you to book travel using points and miles from one or more loyalty programs. Initially limited to hotel bookings, the program has the potential to be a huge deal.

“Book with Points” will allow loyalty program members access to Travelocity’s online booking engine. They will use points or miles to book and purchase the travel reward, exactly as if they were purchasing their travel with cash rather than loyalty points and miles.

My first reaction is positive: Anything that makes it easier to actually use your miles is a step in the right direction. Details of the program haven’t been made public yet, but the Travelocity program will be run by Points.com.

Uh oh.

As I’ve posted before, Points.com is a great way to turn one dollar into 15 cents. The devaluation of points when you transfer between programs is brutal. So I am skeptical of this new joint offering with Travelocity. Hopefully Travelocity will put pressure on Points.com to give better value, but we’ll have to see. After all, the airlines and hotels have your points and won’t just give them away for free. Points.com takes a cut as the broker. And Travelocity’s roaming gnome will inevitably want a piece of the action. What’s going to be left?

(hat tip to Airfare Technology/FareCompare)
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Reader Anya writes in:

Hi, I’ve got some miles in my Delta and Continental accounts, but not enough for an award. Is there any way to combine these miles into my American Airlines account so I can have enough for a free ticket?

There are ways of converting miles from one airline to another, but not just transferring them directly, like you might move money from savings to checking. Delta, for example, is notorious for being the Roach Motel of mileage programs. Miles transfer in, they don’t transfer out.

You will almost always end up with fewer miles than you started. Frequent flyer accounts are proprietary currencies owned by the airlines that issue them. Any transfers or conversions are at their discretion.

There are two potential methods of moving miles:

1) Convert points from one account to another… to another…
Sometimes, you can move points from airlines to hotels or other services, and then back to an airline. Airline to airline is harder without an intermediate stop. You’ll have to open a number of other accounts, and there’s a time lag as your points move from program to program. Your options generally stink, because you lose a lot of value. 5000 Continental miles can be transferred to Amtrak, then transferred again to Hilton HHonors, and finally transferred to American Airlines. What’s left? 1500 miles. You lost 70% of the miles, but maybe that’s still worth it to you. If you’re looking for options, there’s a calculator and planner at Webflyer.com that offers conversion alternatives.

2) Points.com
Points.com recently merged with Milepoint.com. The combined firm exists to capitalize on people like you, Anya, whose mileage balances don’t add up to a ticket. Not every airline participates here, either, and (even better) they don’t let you know how what the conversion rates are until you’ve signed up AND registered your accounts with them. Then they’ll bombard you with junk mail on a nearly daily basis.

Neither option is particularly appealing, but if you’re desperate enough for that free ticket, maybe one will work for you.

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