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.
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)