Iberia moves to revenue-based earning tomorrow and British Airways will follow in 2023. British Airways announces the change with a blatantly untrue claim,
We congratulate our colleagues at Iberia for introducing this change and we look forward to joining them in 2023. More announcements will follow about what this change will mean for our Executive Club programme, which will unlock even more opportunities for our Members to earn Avios when they fly.
There is no universe in which linking points-earning from air travel to the cost of a ticket “unlock[s] even more opportunities for our Members to earn Avios when they fly.” It is neither necessary nor sufficient to support more and different earning opportunities. The two things are completely unrelated, but they’re making things up in a stretch to claim the move is positive for passengers.
Lufthansa moved to revenue-based earning in 2018 and so did Air France KLM. Both Miles & More and Flying Blue earn at a rate of 4 to 8 points per euro.
The Iberia program will offer earning of 5 to 8 points per €1 which is roughly equivalent, a little bit better than competitors for non-status members and a little less so for top elites, at current foreign exchange rates. When announced next year, BA’s earn rate should be similar.
Delta wasn’t first to do this – Air New Zealand moved to a revenue-based program 18 years ago, America West once had a revenue-based program, and Independence Air did as well. But Delta popularized it, moved Air France KLM Flying Blue in that direction, and United copied Delta and then American copied Delta as well (over objections from the AAdvantage team at the time!). Scott Kirby at American had been ready to pull the trigger at US Airways if the acquisition of American hadn’t gotten in the way first, and insisted on American making the move.
Distance flown may not be a perfect proxy for value a program wants to reward, but fare isn’t either.
- Fare isn’t the same as profitability (the customer who buys the last seat on the plane that would have been taken by someone else doesn’t produce economic profit, and fare doesn’t account for cost either, a $500 ticket on a short hop earns the same as a $500 transoceanic trip).
- A flyer may buy one expensive ticket with you because you are the only airline who flies non-stop on the route. Does it make sense to reward them? You’re essentially just lighting money on fire if they’re going to pick your airline anyway.
- A low fare passenger may fill empty seats and be pure profit.
A loyalty program needs to try to influence incremental business. You may reward a high spend customer but not get additional business from them than you would have gotten otherwise. But you might be able to move the needle with some of your other customer segments.
In the U.S. it hardly matters, airlines make less flying planes than selling miles to banks. Not so in the U.K. or Europe.
Crediting Iberia or British Airways flights to a frequent flyer partner may begin to make more sense on inexpensive tickets. Partner programs will generally award miles based on distance and fare class, as BA is shifting from. Check WhereToCredit.com to easily see earning options. Of course if you’re striving for status in the Iberia or BA programs, you’ll need to credit to that program, and may be willing to accept the tradeoff.
Customers buying more expensive tickets may come out ahead. Still, shifting away from the currency as a reward to one that’s a simple commercial rebate degrades the loyalty a currency can engender especially among less frequent customers who don’t have the status component of the program to drive them.
(HT: Head For Points)
Interesting article..
I wonder how this would affect the avios subscription plans that were recently announced.
Would these make them even better value?
You make some good points. But I already take it as a given that any change to a frequent flyer program is a downgrade.
Another airline claiming to enhance things for its customers. Beware.
The British Airways Dumpster Fire continues to burn.
Might this be part of a broader set of changes? For example, might BA provide for earning tier points from credit card spending as Virgin, AA, and Delta do (in their respective ways)? Perhaps we reserve judgment until we see the details.
I received the IB email that I’d earn only 5 avios per 1€ spent but EXCL taxes and fees! Meaning avios only purely based on basefare, not even fuel surcharge (YQ).
So for a 1€ basefare Europe to NYC you’d earn 5 Avios, oooookkkk
Even for a 20€ basefare you’d still earn only 100 Avios.
“A loyalty program needs to try to influence incremental business.” You would think, but I have not seen much evidence of that in a long time among any programs. I think they see their planes full and don’t think there is much point to providing more incentives.
And the result is more people just buying F or J. And it feels like having status anyway. To the extent there is incremental business, they see it as getting more people to buy up to the front of the plane. And that seems to be working.
It seems people are willing to share an opinion without even investigating. SkyPesos, SkyPesos. I would encourage critics to use BA’s mileage calculator tool to determine the number of Avios earned for a given route, cabin, and tier status. Then, do a simple calculation on fare (net of taxes and fees) multiplied by tier status multiplier. From Iberia, we can assume Blue = 5X, Bronze = 6X, Silver = 7X, and Gold = 8X. Assuming Silver status, doing the math for a number of routes in discounted business class, 1) long-haul international wins (in some cases quite substantially), 2) very short intra-Europe wins, and 3) mid-range intra-Europe loses. Frankly, anyone traveling from the US to the UK is going to be better off under the new system. But, clearly, some people gripe just to gripe.
Hey Gary,
Iberia’s Spanish Press Release says the change will happen at the end of the month, not Nov 1.
“A finales del próximo mes de noviembre, se acumularán Avios por cada euro de gasto, en lugar de por distancia recorrida, como ocurre en la actualidad.” which translates to “At the end of November, Avios will be accumulated for every euro spent, instead of for distance travelled, as is currently the case.”
https://grupo.iberia.com/news/31102022/iberia-plus-incorpora-una-nueva-manera-de-acumular-avios
I hate to fly a BA ticket. on awards there are “fuel” surcharges. There are extra prices for bags —sorry but you need to check a bag on a 14 day trip over the pond. when you get into T5 you have to play the “What gate do i rush to now” after traveling through 20 miles of escalators and hallways.
when Flying AA now everything seems to go BA. WTF does AA not fly into LHR any more?
Used to like BA but now can now just makes my trip a mind game.
So as a BA Chase card holder, I get 3 Avios per $ spent buying a ticket with BA for BA, Iberia and EI flights. For flying the actual flight, I get a third of that? Weird.
I’d actually get more Avios spending $100 on a random hotel with my card than $100 on a BA flight (2 Avios per $ vs 1).
I expect Tier Points will disappear too.
KC, you will receive 3 Avios for the credit card payment AND you will receive either 5, 6, 7, or 8 Avios for the flight itself (depending on your BA tier status). You will earn a combined 8, 9, 10, or 11 Avios per dollar spent.
Tier points will remain the same. But, don’t be surprised if BA grants tier points for credit card spend on top of tier points earned from flying. A la Virgin or AA.
tomri, AA’s chief commercial officer has made statements to the effect that AA will focus on its domestic routes and rely on its partners for international passenger load.
You do realize that publications like yours help the airlines figure out how people exploit edge cases that you so proudly publish and then “take care of the problem” . You are helping them figure out what to cut right and they don’t even have to pay you.
I supported the move to revenue-based at AA, because it was more fair to customers like me who fly a lot of shot hop flights but pay higher fares than many pay for long hauls. Most of my travel is between Pittsburgh and Philadelphia, and I know that I was paying more in fares than many who traveled less frequently but for longer distances. So, I fully support the revenue-based system, because it gives rewards based upon how much the fliers are contributing to the company, rather than on the arbitrary measure of distance flown regardless of revenue.
Every move to revenue-based accrual has been accompanied by a devaluation of the miles being accrued