No, it’s not allowed.

But what is the “this” in “My friend purchased a plane ticket with this…”?

“If you mean the air miles used to purchase your friend’s plane ticket originally belong to the travel agent, yes it is allowed. For many airlines, the dirt cheap air tickets do not earn air miles too, not every ticket is entitled to air miles. For travel agents, using their own air miles to book a ticket for a customer at a low price is one of their ways to make a profit and there is nothing wrong with it.”

This is completely wrong. By taking money and then using his or her miles to book the ticket, the travel agent is selling awards, which is explicitly in violation of the terms and conditions of nearly every single frequent flier program operating throughout the world today. Not only is this practice bad for the seller — the airline may choose a number of penalties for the account holder, including the forfeiture of miles or the closure of the account altogether — but the buyer of the ticket can be penalized as well.

The airline, under the terms of the frequent flier program, usually has the right to terminate the award ticket if they determine that it has been sold in violation of the program’s rules. This means that your friend, if it’s discovered that he purchased an award ticket, may either not get to go on his trip at all, or if they discover it when he’s trying to come home, he may be forced to buy a walkup one-way ticket back home, which could be extremely expensive.

(If either of these things occur, then your friend will only have recourse against the travel agent in trying to get his money back — the airline’s terms are clear that the ticket can be unilaterally cancelled.)

It doesn’t matter whether the ticket would or would not have earned miles based on the fare code — when a person buys a ticket from a travel agent, I venture that they’d have a reasonable expectation that they were buying a revenue ticket, and not just buying an award that runs a risk of being cancelled from under them if the airline questions where the award came from. For that reason, I’d highly suggest that your friend speak to this agent and ask for a refund — barring that, I’d personally consider filing a chargeback with the credit card company, if a card was used, based on misrepresenation of the item purchased.