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

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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.

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 ba.com 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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Comments (36)

  • VP says:

    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]

    • Rob says:

      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?

      • Alan says:

        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.

    • steve says:

      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?

  • Wally1976 says:

    OT – haven’t had a proper look at the details yet but on http://www.tesco.com/clubcard 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.

    • Rob says:

      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).

      • Gavin says:

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

      • mark2 says:

        My quote is £413.95 more expensive!

        • Ed says:

          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.

    • Liz says:

      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!

  • Scottnothing says:

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

  • 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.

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