What Airlines Are Hawking

For travelers swimming in a sea of airline miles and hotel points or just frustrated that they can't redeem them for a desired flight, there's an alternative: Get a face lift.

Plastic surgery, or hair transplantation, paid for with frequent flier miles? Those are just a few of the bizarre things airlines are offering for purchase with frequent flier miles. Scott McCartney has details.

Plastic surgery, big-screen TVs, iPods, lawn tractors, diamond necklaces, VIP passes to sporting events, casino gaming chips, dinner with the New York Yankees and designer handbags. The catalog of merchandise that can be purchased with miles is growing rapidly and becoming at times oddly creative.

But beware: Airlines charge customers radically different prices, depending on their status and credit card.

David Yu, who travels so much he has platinum status in Delta Air Line's frequent-flier program, figured he'd be the one to get the best prices. Using miles, he's bought a computer printer for his college-age daughter, a handbag for his wife and TV speakers for himself.

"I've got miles to burn so I consider it free," he said.

But when he told a co-worker he was thinking of spending 42,600 miles on the Bose headphones, she said she had just purchased the same product from Delta for 34,100 miles. They compared offerings on side-by-side computers, each logging in with their Delta frequent-flier number. Her price was 20% lower than Mr. Yu's, even though she's not an elite-level frequent flier with Delta and has fewer miles in her account.

"I don't think that's right," said Mr. Yu. "In my opinion, this is an insidious way to take the miles back."

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Delta says it doesn't price merchandise based on the number of miles in a customer's account or past buying history. Instead, elite-level frequent fliers like Mr. Yu get a big discount—the regular price of the Bose headphones at Delta is 68,100 miles. But Delta gives an even bigger discount to holders of its co-branded American Express credit card—like Mr. Yu's co-worker, Katie Palasek, who has a gold card.

"We differentiate the exchange rate based on customer type," said Jeff Robertson, Delta's vice president over the SkyMiles program. A diamond-level frequent flier, Delta's highest level, with a fancy American Express SkyMiles card can get triple the buying power out of each mile than a regular frequent flier without the co-branded credit card, he said.

United and American also charge lower prices to customers who have elite status with the airline or pay for co-branded airline credit cards. In addition, elite-level road warriors are plied with lots of bonus miles and points, making merchandise redemptions even cheaper.

"The more valuable the program member, the better the redemption rate," said Krishnan Saranathan, managing director of United's Mileage Plus program.

The primary lures of the programs—free airline tickets and hotel rooms—still vastly outweigh merchandise redemptions, programs say. And overall, the programs still offer the best value for miles and points.

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Roland

A digital mini grand piano in United's program goes for 1,117,000 miles.

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to come

Paul Terrault and his son Joseph went to a Formula One race in Montreal using 290,000 Hilton HHonors points in an auction.

But as airlines sell more miles to partners like credit-card companies, they have more financial incentive to get customers to redeem miles. Selling merchandise gobbles up miles without opening up more airline seats or hotel rooms for award.

Mr. Robertson says Delta now offers 6,000 merchandise items and more than 30 different gift cards at its marketplace. Customers tend to buy travel-related items the most, such as the Bose headsets. When airfares are low, merchandise gets more popular, he said. When airfares are on the rise, as they are now, using miles for tickets gets more attractive.

The frequent-flier mile has been devalued over the years and lost some of its luster after people couldn't get free tickets to Hawaii or Europe. But auctioning off experiences you can't buy with cash—like throwing out the first pitch at a Major League Baseball game, VIP passes to "Saturday Night Live" tapings, the Kentucky Derby, major music awards or dinner with celebrity chefs—has restored some of the cachet.

Auctions create the most interest. Delta had 55,000 customers sign up immediately for alerts when it first announced its auction program. This spring, the airline is auctioning a spring training package that includes dinner with New York Yankee manager Joe Girardi and pitcher Joba Chamberlain, and a trip to China to build homes with Habitat for Humanity.

"Auctions are a way to continue the aspirational thing," said Maya Leibman, president of American's AAdvantage program, which last year sold three packages to the Kentucky Derby, including passes to special clubs and invitation-only dinners, for a total of 1.6 million miles.

Using miles to buy merchandise has also been growing in popularity with customers who either want to conserve cash during the recession or who simply travel so much that the last thing they want to use their fat loyalty accounts for is more travel. The programs also help customers burn up miles before they expire in dormant accounts.

Hilton HHonors merchandise redemptions have been up 50% in the past six months, largely driven by holiday gift-buying. United Continental Holdings Inc., parent of United and Continental airlines, says using miles for merchandise exceeded hotel and car-rental redemptions last year.

"People are scrambling for all the buying power they can get. We're seeing things really go through the roof," said Jeff Diskin, senior vice president of global customer marketing for Hilton Worldwide.

Some merchandise and service deals offer extraordinary value for your miles; others have exchange rates so unfavorable you get less than half a penny of purchasing power per mile. At United's marketplace, a 10-inch Sony digital picture frame costs 25,000 miles. The same frame, with memory card, is widely available for less than $150. Those 25,000 miles could claim a discounted round-trip domestic ticket on United, usually worth at least $300, or twice as much.

Finland's Finnair offers a face lift for 4.6 million miles and hair transplantation and breast augmentation at the same price, 3.2 million "Plus" program miles. But after a year of the program with Nordstrom Hospital, sales of the cosmetic surgery have been, well, flat and will be phased out.

The airline's most popular items: theater and movie tickets, and Finnish glass work, tablecloths and towels, said Maija Maarni, manager of partnerships. The program recently added driving-school lessons, which "have performed really well," she said.

Paul Terrault runs his own metals-trading company and spends more than 100 nights a year on the road. Winning an auction for 290,000 Hilton HHonors points—a trip with VIP perks to a Formula One race in Montreal with his son in June—hooked him on the program.

"No one gets access like that," he said of getting into the hospitality suite and Hilton-sponsored garage. "I'm a jeans, gym shoes and Harley T-shirt guy, and they treat you like a million bucks."

When another Formula One trip, to Brazil, went up for auction, Mr. Terrault grabbed that, too, for 420,000 points.

Write to Scott McCartney at middleseat@wsj.com