Iberia drops Reward Flight Saver redemptions … will BA follow?

Iberia has clearly been taking PR lessons from someone.  At 2am in the morning on June 1st, it sent an innocuous newsletter out.  It was only released in Spanish (“Coja aire, respire y vuele lejos estas vacaciones‏”).  And, tucked away at the bottom, was the announcement that Reward Flight Saver redemptions have been scrapped – effective as of, erm, 2 hours ago.

Reward Flight Saver, for those who are not clear, is the scheme whereby British Airways and Iberia capped their taxes and fuel surcharges on short flights (all of Europe, in BA’s case, plus short hops elsewhere such as Bahrain-Doha).  The cap for BA is £30 / Euro 35 for Economy flights and £40 / Euro 45 for Business.

Reward Flight Saver was the smartest British Airways idea for a long-time.  Short-haul redemptions, which are laughably useless with most airlines, are suddenly a great deal.

(Lufthansa charges 35,000 miles – or 45,000 for a same-day return – plus over £100 of taxes for an Economy flight from London-Frankfurt.  It is beyond a joke, given that you can fly Business Class from London to Dubai on Lufthansa for 35,000 miles one-way.)

And, when short haul redemptions are a good deal, you encourage the ‘casual’ Avios collector.  These are the ones who are unlikely to earn 150,000 Avios for a First Class trip to San Francisco.  However, they are happy to get a British Airways Amex card to earn 9,000 Avios for a flight to Amsterdam, with taxes capped at £30.

Iberia

So what has Iberia done?

First, of course, you need to remember that Iberia is a financial basket case, losing vast amounts of money every day.  British Airways is profitable.  These changes are best seen in that context.

For Iberia and Vueling flights, you now pay:

All airport charges, plus a ‘contribution’ towards fuel costs of:

Zone 1   (up to 650 miles)
Economy €5 per sector
Business €10 per sector

Zone 2  (651 – 1,150 miles)
Economy €7.50 per sector
Business €15 per sector

Zone 3  (1,150 – 2,000 miles)
Economy €30 per sector
Business €40 per sector

For British Airways and other short-haul redemptions:

You pay the full amount of taxes and surcharges that would be paid on a cash ticket

What does this mean in reality?

As of May 31st (or indeed as of today if you book on ba.com), an Economy flight on Iberia from London to Madrid cost 15,000 Avios points plus £30 return.

Today, on an Iberia plane, an Iberia Plus member will pay 15,000 Avios points plus £58.70.

Today, on a British Airways plane, an Iberia Plus member will pay 15,000 Avios points plus £95.70.

£95.70 is, indeed, the same level of taxes charged by British Airways on a cash ticket.  However, for the date I checked in September, a cash ticket from London to Madrid is just £104.70!  The price breakdown is £9 fare + £95.70 taxes, total £104.70.

With Reward Flight Saver, this was not a great deal but you still got £74.70 of value for 15,000 Avios.  Now, you would be getting a laughable £9 of value for 15,000 Avios if you booked the BA flight! 

How does this affect BAEC or avios.com members?

It doesn’t, at the moment.

However, you now have the crazy system whereby Iberia Plus members can simply transfer their points across to British Airways Executive Club and make an identical redemption whilst paying less tax.  It seems odd that International Airlines Group (BA and Iberia’s parent) will let this anomaly exist for long.

This approach does not work for Vueling (you can only book Vueling redemptions on iberia.com with Iberia Plus Avios) but that only accounts for a very small number of redemptions.  I expect BAEC saw a rush of account opening by Spanish residents over the weekend.

(Want to earn more Avios? Click here to see our latest articles on earning and spending your points and click here to see our list of current Avios promotions.)

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Comments

  1. It does seem a rather weird decision to make Avios redemption rates so obviously different between the programmes. There needs to be a consistent earning and burning chart between the airlines.

    • Add in ‘constant cancellation’ as well … oneworld bookings, including BA, made via Iberia Plus are not refundable!

    • Lady London says:

      I think our worry is that we may be given the “opportunity”, ooops… enhancement…. of that very thing… consistency :-(

  2. Phillip says:

    There were already other differences as you’ve pointed out Raffles with redemptions on Iberia’s own metal in terms of fuel surcharges etc. Maybe BA wants to balance the movement of Avios between the two programmes? Or indeed just put another differentiator in the works between the two airlines?

    • Do you think lots of people move Avios from BA to IB then?

      • If they have any sense. Taxes are about 75% lower on Iberia long-haul flights booked via Iberia Plus compared to BAEC. Iberia Plus is also the only way to book Vueling redemptions.

  3. Tangey says:

    £9 London to Madrid fare sounds more like Ryan air than BA. must be losing a bundle on that, even assuming the fuel surcharge doesn’t all go on fuel

    • callum says:

      You don’t have to assume anything – it doesn’t all go on fuel… In fact, it has nothing whatsoever to do with their fuel costs. BA won’t be losing anything on that fare.

      • Fuel surcharges are £37. Fare is £9. Thats the total that BA gets for the return flight…£46.
        £23 per 750 mile sector including the cost of fuel,food and a couple of drinks sounds very tight to be make a profit.

        • That price is for a September flight. Only a handful of seats will go at that price, some will end up unused. BA isn’t selling the whole plane for that much.

          It is standard revenue management stuff. They know they can sell 5 seats at £500 the day before, 40 seats at £200 the week before, 40 seats at £150 a month before and then they just dump the remaining 20 at whatever they can get, in this case £100.

  4. guesswho2000 says:

    I’ve always found IB a bit odd for redemptions, my upcoming internal flights in South America worked out 9k Avios + approx £19 in taxes each through BAEC, but IB+ were offering the same flights for ~35k Avios + cash each.

  5. High airport charges at Madrid, in particular, have been cited by the Big Orange as its reason to shut its base there.
    Perhaps this announcement is IAG’s way of protesting?
    There are lots of unwelcome changes IAG could make to Avios – a fee to swap between schemes, or bring all the fuel surcharges in line with BA’s! – which would make it a deeply unattractive scheme to me who only flies on points earned on 100k a year on CCs and does two or three biz or 1st redemptions a year.
    But they would raise a substantial amount of extra cash from those who think avios will get them a cheap bucket and spade holiday.

  6. BritBronco says:

    The thing that is most alarming about this was the lack of notice. It makes me feel like they could remove the ability to make free transfers between BAEC and IB.com without any notice either.
    I am now considering whether to repatriate the 200k Avios I have sitting at IB.com. In the event of transfers being stopped would I rather have them all with BA or some with IB? So long as IB has lower YQs on long haul redemptions than BA.com it seems worth keeping some with IB

  7. Phillip says:

    I just noticed a note on Iberia Plus saying 0 Euros on service fees from November. Linked?

  8. Squillion says:

    Certainly got me worried here Raffles. If BA copy the same model in due course, it will hardly be worth our while collecting Avios for our European flights, which is all we use them for. We might as well just buy the tickets well in advance when they can still commonly be purchased for about £90 each way.

  9. Those of us here who descend from the Airmiles side of the family will see this as just another logical step in their obsolescence. At this rate Avios will be worthless in 24 months time. Another 12 months after that and the hardened collector will find that even the extra they pay in fare terms to use them over over airlines will not be worth the BA perks that they once thought so invaluable.

    Then B.A. is hardly helping. When the Manchester-Gatwick route was suddenly severed, most of the BA short-haul (i.e. Reward Flight Saver) network from the North at a stroke went with it. It is the latter-day equivalent of the Beeching cuts.

    The trends are forever downward for Airmiles collectors, Avios, BA and IAG as a whole. I can’t imagine there will be little left in three year’s time.

    Spend your Avios pile Raffles, while you still can.

    • I’m fine. You will able to pay for cash tickets with Avios later this year (not that I told you that) which will make it easy to clear them.

      • come again?!

      • Squillion says:

        Will that mean a lot more availability – but possibly at a higher price (in Avios) than the current tiered/ zonal system? I’m guessing that there might be a conversion rate Avios:GBP and you could therefore burn Avios to secure the flight of your choice.

        If the conversion rate were anything like the normal purchase price of Avios, we’d be laughing. Eg see https://www.avios.com/gb/en_gb/my-account/purchase-or-gift-avios?from=collectNav#purchase – it would make flights CHEAPER in Avios terms than currently.

        Hmmm, can’t see that being the way it’ll work, then ;-)

        • Hotel redemptions with Avios get you 0.58p, so I imagine it would be the same.

          • Squillion says:

            0.58p might not be so bad. My low season flights to our place in the sun are currently around £75 ;-) but normally about £90 if you get in early enough. Working on return flight for £150 that’d be 25862 Avios vs the current deal 15000 Avios + £30 RFS. Taking off the £30 RFS for comparison purposes gives £120/0.58p = 20690 Avios, ie it’s more expensive in Avios terms but not ruinously so.

            You might willingly trade a worse Avios ‘purchase price’ for better availability.

            Not so good at the more normal £90 each way.

            • You would also earn Avios for taking the flight, plus tier points, as it would be treated as a normal cash flight. Probably OnBusiness points as well if you can get those. This moves the break-even needle even further.

            • For those of us in the regions it’ll be dire. I chose avios for free flight connections. BA never really got its head around making the connection affordable when you pay with cash/

  10. trickster says:

    The MAN-LGW route was not suddenly axed. While it’s a shame it went, there was a decent amount of notice.
    Also, it doesn’t remove most of the short-haul RFS options from the North. There are far more options vai LHR than there were through LGW, apart from sunshine/beach destinations if that’s what you mean.

    I’ve done 5 RFS bookings to European cities over the last couple of years from Manchester – all through LHR.

    • The reason why MAN to LGW flights is that BA are using the aircraft for new routes out of Gatwick to compete with the orange one. plus since BA took over BMI they had too many flights to Manchester.

    • It was sudden to me. I have used it for 20+ years and only found out that it had stopped when I tried to book and I am signed up to every BAA and BAEC mailing list.

      That booking went to Easyjet direct to destination from Manchester. BA is on a retreat. It really, really does not deserve to use the name “British”. BEA, one of its forerunners had a much better idea. BA is on the last legs of retreating to high value customers from or to London.

      24 months at most before a big change,

      Tim.

  11. It would make the Avios (airmiles) side a waste of time if they did not have RFS, all the partners such as Tesco, Shell, LTSB etc would not be happy.

    On the BA side it would not please partners such as Amex, Tesco, Shell, BA estore, erewards, Lathwaites etc. RFS is a major USP for Amex ie £15 economy flights to Europe or £20 in Club Europe. For example I paid about half in terms of cash for a club europe flight than my mate did with Ryanair!

  12. AAH Member says:

    RFS has featured strongly in the Avios Advisory Hub discussions. I don’t think there are any plans to scrap it. But this IB+ move was a bit of a shocker.

  13. mike turnbull says:

    As one who was living/working in the US when AA first introduced an FFP scheme, I have to say that the best days of earning and burning have long since gone…massive bonuses…easy long haul redemptions…easy, free upgrades…free lounges…no taxes to pay….the list goes on and on. I am so grateful that I was able to take the family to so many places around the world compared to today. All I have left now is a million each on BA and AF/KL (Sky Team…the worlds worst), which should see me and my wife out !

    • But the miles were harder to earn. When I started in this game a decade ago, people were always shocked when I said that it was possible to get 100,000 miles a year without flying. You really had to work Tesco and other promos to do it, though.

      I would now revise that up to 250,000 being a tough but manageable annual target. 100,000 is a doddle today as long as you and your partner are credit card worthy.

  14. 100,000 a doddle?! Only if you spend a fair amount of money already! As a sad singleton who only spends £300-£500 on a credit card per month, I can’t get most of those credit card sign-up bonuses – I simply can’t hit the spending targets. Especially not with an Amex card, since my rare large expenditures all seem to be with companies who don’t take Amex.

    It’s unusual for me to fly twice a year, so I can’t rack up Avios that way. I don’t drive, so can’t earn them on petrol. That leaves me my normal credit card spend and Tesco. It took me about 5 years to save up enough airmiles for a return flight in economy to New York last year, which I claimed just before the scheme switched from Airmiles to Avios to avoid having to pay the taxes and surcharges.

    For people like me, getting rid of the RFS would make the scheme pretty much worthless. Even if I try churning low spend target credit cards and chasing down extra point offers it’s going to take me years to build up a big enough balance for a business class long-haul return, which is where the only value will lie if you have to pay full taxes and surcharges on short haul redemptions. For a lot of people it simply won’t be worth the effort – especially when there are cash-back cards out there offering more immediate returns.

    • I agree, it isn’t easy if you are only spending those sort of numbers on your credit card. However, as you know, if you can afford the long-haul taxes then you can probably afford the minimum spends (and vice versa).

      But, whilst Reward Flight Saver exists, you can take advantage of that – and you’d actually be getting a better ‘pence per Avios’ return than people who redeem for long-haul tickets.

      Aer Lingus and airberlin also offer ‘low tax’ alternatives. I have just booked another New York to Berlin ticket in Business class (one way) on airberlin for 40,000 Avios and £1.70.

  15. I’m clearly going to have to read up on your Aer Lingus/airberlin posts! Aer Lingus may really be worthwhile looking at, as they fly from my local airport to Dublin and it takes me an hour and a half to get to LHR anyway.

    Still, I maintain that most people on my end of the collection scale will not perceive Avios to be worth collecting without the Reward Flight Saver offer. Especially when you’ve been used to getting totally free flights under the old airmiles scheme.

    You’re right, by the way, I can’t afford the long-haul taxes in business class usually. I’ll be flying Club one-way for the very first time in October, having used Avios to upgrade a flight my work are paying for. Otherwise it’s economy all the way!

  16. Jane Easthope says:

    RFS price increases now announced on Avios.com:

    “If you book before 11 July 2013, the fee is £30pp in Economy Class and £40pp in Business Class. From this date, our prices are rising by a small amount to £35pp in Economy and £50pp in Business.

    For flights with Comair, from 1 July 2013 the fee will be £56 return in Economy and £64 in Business.

    Unfortunately the price rise is due to factors outside of our control, such as the continued increases in government and other airport taxes across Europe. We’ve kept the increase as small as possible, the table below shows you how we can continue to offer you big savings on flights.”

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