Free trips to Hawaii. Wine fridges. Even telescopes. They're all among the wide range of offerings that a determined member of an airline frequent-flier plan -- those folks who rack up points flying to Sacramento at midnight and use their mileage cards to buy packs of chewing gum -- can earn. But just in case that's not enough, there's one more option now: cold, hard cash.

Well, almost. Faced with their own tough economic times (see the latest on American Airlines' Chapter 11 proceedings), airlines are charting a new flight path to keep people flocking to their loyalty programs -- and to their high-fee mileage credit cards. In the process, they've created a new type of currency by allowing miles to be converted into virtual cash via PayPal. Rather than limiting fliers to whatever they pick out of the airlines' catalog, the new programs allow members to use miles (in lieu of dollars) to make purchases at a host of big-name retail sites on the Web -- or even to transfer the funds into their own bank account. So far, American Airlines, US Airways and others offer the service through mileage manager Points.com, and United Continental is expected to launch a program soon.

There are, of course, catches. Converting your miles to cash dilutes their value, say experts; Randy Petersen, founder of FlyerTalk.com estimates they typically lose about two-thirds of their value (the airlines normally don't reveal the details of their conversion rates). What's more, some experts say companies tend to give better rates to "elite" members -- a distinction that can be earned only by flying.

The airlines, for their part, have said members benefit from having more options for cashing in miles. And industry insiders note that airlines' capacity cuts (the total number of available seats on major U.S. carriers fell 7 percent from the first half of 2007 to the same period in 2011) have prompted them to reduce the number of available reward tickets. On Continental flights, for example, the amount of reward-seat redemptions as a share of total miles flown fell from more than 8 percent in 2008 to under 6 percent in 2010. By offering new redemption options, the companies hope to not only keep customers happy but also get those accumulated miles off the books, says Rick Seaney, CEO of travel site FareCompare. This has become tougher recently, he says, as the growth of airline credit cards has led to bigger stockpiles of miles.

Still, experts say the best bet remains that elusive award ticket. To clinch a flight, FrequentFlier.com publisher Tim Winship suggests traveling in off-peak seasons or actually getting a booking agent on the phone (though you'll likely pay a fee to do so). And don't waste miles on a ticket under $450 -- says Seaney: "The best use of your miles is that once-in-a-lifetime trip."