Nutmeg Avios

How much money does Avios make and how many are sold each year?

When IAG published its last set of financial results, it promised to give a presentation to City analysts in early 2016 about how Avios works and – more relevantly – about a change in accounting policy regarding Avios income and liabilities.

That presentation took place last week.  You can download it here (30 page PDF document).

Avios banner

Having spent 16 years of my life reading and writing such presentations, it washes over me but, if you are not a City person, you may find bits of it confusing.  Here are a few interesting points that I picked out.  I have not covered the technical accounting changes but they are explained in the presentation if you are interested.

Enough Avios seats are redeemed each day to fill the equivalent of 86 short-haul departures

1 million Avios points are issued every 5 minutes

101 billion Avios points were issued in 2015

There are 7.7 million Avios accounts across all partner airlines

Avios Group Ltd made a profit of roughly £135 million last year, representing a margin of roughly 20%.  A quick bit of maths means that revenue was around £675 million.  This means that Avios were sold, mainly to BA and Iberia, for an average of 0.67p each.  I know what most external partners pay for their points (I always ask when I meet them!) and it is noticeably more than this, even for Amex, so the net cost to BA and Iberia will probably be nearer 0.5p.

Royal Air Maroc is going to adopt Avios as its reward currency this year.  I would expect this to be in the Flybe / Meridiana mould (ie no ability to use Combine My Avios) but it should mean that Royal Air Maroc seats are available via for Avios redemption.  The airline is already an Iberia partner.  As well as opening new options to Morocco for UK tourists, it will offer additional options to Johannesburg, Accra and Algiers amongst other places.

The Avios ‘platform’ is now being actively sold to airlines as an alternative to building their own bespoke loyalty platform.  This is route that Flybe, Meridiana and RAM have taken.

One of the strengths of these new partnerships is to build the value of Avios outside the UK.  At Paris Orly, for example, BA only operates two services per day. However, 16% of flights from Orly can be booked with Avios.

As I said, it is all interesting stuff and worth a read if you have 10 minutes spare today.

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  1. Enigma368 says:

    .7p is what I and many people value an avios at. I think your valuation is close to .7p too. Interesting that Amex actually pay more for avios than many people value it at.

  2. zsalya says:

    I see “Over time the standalone platforms will be migrated to the Avios platform”
    Will this mean only one account per person, and only one source for availability?

    • No, it is about all IT migrating to Avios I think

    • That’s what it appears to mean. I hope not.

      The thing is the “Avios platform” is only available in UK and ZA (interestingly if you go to it now has more country options but they just lead to the “standalone platforms” of which Aer Club is going to become one) and BA and IB probably want to keep their own rules for redemptions, e.g. IB doesn’t have RFS.

  3. zsalya says:

    I think Slide 22 is showing scheduling of aircraft.
    What is the yellow?
    I wondered about daytime v nightime, but that doesn’t seem to match the shown times (even though they would be based on a common timezone)

  4. zsalya says:

    p18 If only they did mean complimentary airlines!

  5. “At Paris Orly, for example, IAG only operates two services per day (OpenSkies to New York)”

    ??? There are a lot of IAG services per day from Orly.

    Vueling is owned by IAG and serves well over a dozen destinations from Orly. Not to mention all the BA, IB and EC routes.

    • Yeah, the presentation addresses this:

      – Our biggest airline (BA) for Parisian customers offers 2 destination from Paris Orly
      – Incorporating IAG airlines, the number of destinations served from Paris Orly increases to 27
      – Incorporating our remaining airline partners increases this further to 36 destinations

    • Raffles says:


  6. Mikeact says:

    But why is the SA Avios operation still treated as a stand alone business ?

  7. Scallder says:

    From what I take from those slides:
    1. They want to issue an extra 21 billion Avios in 2018 over 2015, an increase of 21% which would infer a lot more competition for reward seats.
    2. BA’s load factor of c78% on its short haul routes means that there should be a lot more capacity available to use Avios around Europe – it would seem silly for BA to not open this up to get a liability off their Balance Sheet and possibly keep customers happier due to more redemption opportunities.

    I really wish that BA having made a €1.9bn operating profit after exceptional items would do something to improve Club World to even bring it into line with a middle of the road business product, let alone compete with the ME3, but I can’t imagine that happening at any point in my lifetime…

    • Frenske says:

      You forgot about the ability to use Avios to part-pay for flights.

    • The_Real_A says:

      Its also about revenue management, and preventing people who would pay for a seat from redeeming. If all the excess capacity was available then this would hit revenue fares. What we need to find is a mechanism that ensures demand is additional rather than cannibalisation. A friend that works at a loyalty consultancy is involved on big data algorithm to do just this, but not in the airline industry.

      I can see things such as personal reward availability that is not available to other people become much more prevalent moving forwards.

      • My simplistic proposal, which I know Avios has considered in the past, is opening I for redemption. This makes some sort of sense – Club World I-class fares are cheap enough that you wouldn’t be getting outsize value (probably not more than 1.25p per point and often much less). And, if that is the case, why not open them up? It would be relatively revenue neutral. You could restrict this to BAEC members if you didn’t want oneworld partners snaffling the seats.

        Writing algorithms is stupid because it separates the transaction itself from the person behind the Avios. Frankly, so what if BA could sell a seat for £100 more than the ‘cash and liability reduction’ of releasing it for Avios? The owner of those Avios is a customer who has given BA a lot of business and may be willing to give them a lot more if (s)he knows they can redeem without difficulty.

        If you ran a shop and you’d reserved an item for your best long-term customer but a stranger walked in off the street and offered you an extra 10% for it, would you sell it to him? Algorithm says yes, common sense says no.

        What we need is an airline to follow the lead of Starwood and Hyatt and say “if we have a room left for sale for cash, you can have it for a reward”. That is unlikely to happen but even meeting half way would be helpful.

        • Callum says:

          Your algorithm may say yes, it doesn’t have to though… It seems much more sensible to produce tweakable algorithms than to rely on a group of people using their common sense – which almost inevitably won’t all match.

          Nor do I see much business sense in giving away all your empty capacity as reward seats. Why would I buy an expensive last minute ticket if they’re just going to release it for redemptions?

  8. Scottnothing says:

    What I take from the slides is that Avios need some new people in their strategy / investor relations / corporate writing team. This slide deck is not very well put together. If IAG’s ultimate aim is to develop Avios as a stand-alone business and potentially spin it out as a separate company, they need to up their game. “The glue that connects customers for IAG airlines” … some of the worst corporate writing I have read in years.

    • Par for the course, in fact it has less management-speak than most similar presentations!

      • They also no doubt charged vast sums of money for writing a whole lot of corporate double-speak too!

  9. Nice read indeed. However, really surprised by 2 things.

    1) 101 bn avios and 7.7 mil customers = approx. 13K avios per customer..that is much higher than what I expected !! Granted there would the cc churners and golds flying business but this ratio is very high compared to US airlines. For ex: AA issues around 200-250 bn miles and their customer base is more than 10 times of avios for sure.

    2) 7.7 mil across all airlines is a very small number !! As per the presentation 1 million reside in France and Africa and if we say another 1.2 million in rest of the world excluding UK & Spain
    that’s roughly 5.5 million for population of 100 million (UK & Spain) for national carriers BA, Iberia and Vueling. When you consider that Tesco, Nector, Boots themselves have 10million+ members in UK, 5.5 million does seem very small when you consider Avios has tie ups with all major retailers and you can gain points by shopping online or tesco transfers.

    My conclusions:
    Avios members are definitely more engaged and seem to be more profitable for Avios then some of the bigger airline schemes

    Rob should be hired by Avios as an expert consultant on how to increase penetration of the Avios scheme by making more people aware of its benefits:) [Though I doubt those will be the most profitable members as they would know how to get maximum buck for their avios]

    • Gavin has my number if he needs it. Unfortunately, the failure of BA to support a regional structure makes Avios fairly irrelevant to a lot of people outside the M25. Casual collectors would not earn enough for long haul premium flights and, unsurprisingly, find a direct easyJet flight from their local airport to be more convenient than changing in Heathrow for short-haul (and paying double Avios for the privilege due to the connection). The only real benefit is ‘part pay with Avios’ to discount long haul cash tickets or the non-cash redemptions which don’t get you great value.

      If anything, the fact that there are 4m Avios accounts in the UK is actually an impressive achievement compared to, say, 19m Clubcard accounts.

      • Mikeact says:

        I wonder how many are actually ‘new’ Avios members, compared to the ‘old’ Airmiles members that were integrated?

      • Good point, Rob – at times those of us who have been collecting for ages forget that!

    • Callum says:

      Everyone eats, the vast majority don’t regularly fly on full service carriers.

    • I am surprised by the near 50% increase in members, but only 20% increase in avios issuance (their predictions/hope) Clearly they are hoping for people to only get a tiny amount of avios.(4.9k each) It then leads me to wonder how many expire each year without being used?

  10. Wally1976 says:

    OT – haven’t had a proper look at the details yet but on there’s an offer of 5000 clubcard points for switching energy to Eon. I think it’s in addition to the points you already get from Eon. Not sure if the eligible tariffs are competitive or if current Eon customers can get it.

    • Yes, this looks quite interesting – will be digging into it for Shopper Points over the weekend and will run the article here as well if it seems a good deal.

    • Genghis says:

      There was some discussion about it on shopper points yesterday. Current Eon customers are eligible. However, for me it was quite a bit more expensive (£140 or so for the year) and Liz mentioned it was significantly more expensive (c. £500 pa).

      • Terrible tariff for me anyway. As much as I would like and need the avios, I have switched to a cheaper deal

      • My quote is £413.95 more expensive!

        • Depending on your circumstances you could sign up get the £50 cc points and then exit swiftly for £60 cash exit fee. Not the best deal ever, bulgur for some would make sense.

    • EOn confirmed yesterday it is open to existing customers. THe new tariff is cheaper than their standard rate but is much higher than the V19 deal I switched to in Jan – £46 per month more expensive. Unfortunately it is a non starter!

  11. Scottnothing says:

    Also off-topic, just noticed the BAPP annual fee has been hiked to £195 (up £45)! Wonder if this will also result in an increase for existing cardholders or just new applicants.

    • Scottnothing says:

      Just saw this has been flagged on your other post/thread for today. My bad. 🙂

  12. John Lugo says:

    I am pleased that raffles has mentioned the loss of the BA regional connections above, I find this a difficulty having lived in Manchester all my life. Until recently I used all my efforts building up Virgin miles mainly because Virgin flies directly to Orlando and until recently I had a property there and was a frequent traveller. I find the BA 2-4-1 voucher more valuable than the VA upgrade and I am writing this to you now from my suite in the Venetian Las Vegas using my first BA redemption in CW both ways returning from Los Angeles. I plan to use up my Virgin miles on UC trips preferably from Manchester if and when new services come on and concentrate on collecting Avios and hope the BA regional service comes back. I would loudly applaud Virgin if the matched BA 2-4-1 deal.