The other day I had a “when to use miles” discussion with a business friend, someone who travels regularly and considers himself a “road warrier.” He was trying to figure out whether or not his last mileage redemption was a good deal.

Here are the facts: He was traveling coast-to-coast on business, flying First Class, and wanted to take his wife. His secretary came up with three different options for her:

1. Buy a First Class ticket for $1,800.
2. Buy an economy ticket and use miles to upgrade (30,000 miles, round-trip, plus shell out about $600).
3. Cash in 90,000 miles for an unrestricted First Class award ticket.

The wife figured that miles are free so why pay for a ticket? She went for option three.

His question to me was: What was my return on the 90,000 miles?

First, we calculated the value of his 90,000 miles for this ticket using a simple formula: cost of ticket ÷ miles used = value of a mile. In this case, $1,800 ÷ 90,000 miles = 2¢.

He knew this was not great since miles are worth 2.75¢-3¢ —at least that’s what most airlines sell them for. Buy United miles and the cost is about 2.75¢. Your return should at least be equal to the replacement cost.

Next we weighed using miles to upgrade versus paying for a ticket. This is a two-step calculation. First, you find out the money saved by upgrading as follows: paid fare minus upgradeable fare = savings, or $1,800 (First Class fare) minus $600 (upgradeable economy fare) = $1,200 (savings). Now calculate the value of a mile: savings ÷ miles required = value of a mile, or $1,200 (savings) ÷ 30,000 (miles required) = 4¢ (value of a mile).

That’s a good deal, even better when you consider that his wife would have also earned 5,500 miles on her economy ticket.

The Lesson: Miles have a value—and you get more value (most times) for your miles with an upgrade than with a free award ticket.