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Flying Blue goes to full revenue based earning? – and why BA Executive Club shouldn’t follow

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Flying Blue, the Air France / KLM loyalty scheme, appears to be moving to full revenue-based miles earning from 1st May 2018.

They haven’t announced this yet.  Whether by accident or design, however, the ‘Miles Calculator’ on the Flying Blue site now shows this for flights after next May:

Assuming this is correct, you will earn 4 Flying Blue miles for every €1 you spend.  This is irrespective of cabin.

Status bonus will apply – an extra 2 miles per €1 for Silver, 3 for Gold and 4 for Platinum.

What we don’t know is how the ‘spend’ will be defined.  It is very likely that it will be based on your spending excluding taxes and charges.  A €100 fare from the UK is likely to have a base fare of only €35 or so after stripping out APD and airport charges, which would generate 140 base miles.

Why I don’t have a big problem with revenue-based MILEAGE EARNING

This isn’t totally radical.  If Flying Blue does do it, it won’t be the first.

The three major US airlines have moved to a similar structure over the last two years.

No major European carrier has tried it, unless you count Aer Lingus and Flybe as ‘major’.  The British Airways On Business small business scheme is also revenue based on the earning side.

That said, many European airlines have ‘revenue based earning’ in all but name.  British Airways is one of them.

There are currently NINE tiers of Avios earning when you fly British Airways.  25% / 50% / 100% of miles flown in Economy, 100% / 150% in World Traveller Plus, 150% / 250% in Club World and 250% / 300% in First.  The bandings are based on the flexibility of the ticket you buy.  This is very close to a revenue-based earning model.

Flying Blue revenue based earning

Flying Blue redemptions are unlikely to move to a revenue based model

I think we can say that with total certainty, even if earning becomes revenue based.  Even the US carriers haven’t dared try that.

Will status earning now be based purely on spend?

This will be the main worry for Flying Blue members.  At present, a lot of people earn Flying Blue status based on the number of sectors they fly rather than the number of status miles they earn:

15 flights for Silver (or 25,000 Level miles)

30 flights for Gold (or 40,000 Level miles)

60 flights for Platinum (or 70,000 Level miles)

If this went away, and status was based entirely on spend, it would disenfranchise people who take lots of short-haul flights.  This would be the equivalent of British Airways abandoning tier points and basing status purely on spending.

Flying Blue revenue based earning

Why I DO have a problem with revenue-based STATUS

We are already in a situation on British Airways where earning miles is closely linked to the amount spent.  If BA did move to a pure revenue model for Avios, it would not be a huge change.

The bigger issue is over status, and whether the only people who should have status are those who spend the most.

This, for me, is the key question.

The airline ticket market is unlike most businesses.  The people who pay the bills are mainly employers, the people who receive the benefits are mainly employees.

Let’s take two people:

Person A works for a large investment bank that gets a 50% rebate on its BA ticket spend at the end of the year, as long as employees are made to fly BA wherever possible.  Person A travels on a £2,000 Club World ticket but £1,000 of that is rebated to the bank later.  The employee has no choice but to fly BA.  However, he would still earn £2,000-worth of status points despite a) only paying £1,000 for the ticket and b) being told to fly BA.

Person B runs as a small business and is on the same flight but in World Traveller Plus.  He has paid £1,250 for his ticket with no year end rebate.  This person is able to pick any airline he wants, flight by flight.  He will only earn £1,250-worth of status points.

It makes little sense.  That said, it made little sense to slash the number of tier points earned on cheap British Airways tickets when the Avios scheme was restructured in 2015, but it happened anyway.

In the US, the big three airlines now require you (waived by Delta and United if you are not US resident) to hit a $ spending threshold in order to earn status.

There is another way of looking at the merits of rewarding high spenders.  Imagine that flight A was sold out weeks ago and the last few tickets went for £5,000 each.  Someone who paid £5,000 for a ticket generated NO incremental revenue for BA because that same ticket could have been sold many times over.  However, if the same flight a week later sells for £1,000 and is 30% empty, anyone who can be tempted to take that flight is genuinely driving extra revenue for the airline – but gets only 20% of the rewards under a revenue based structure.

Getting an extra bum on a seat in an empty plane, at a low ticket price, is more valuable overall than getting a bum on a seat on a service that is guaranteed to sell out.

What are the barriers to revenue based earning?

Oddly, moving to revenue based earning is NOT necessarily easier for the airline than using a mileage based chart.

Here are a few reasons why:

As I mentioned above, massive rebates to big corporate customers distort the actual price paid for a ticket which usually bears no resemblance to the headline price

Tickets involving multiple airlines involve an allocation of spending between multiple parties

Tickets issued by other airlines (eg a BA ticket issued by American, or by anyone which means you do not have a 125- ticket number) do not carry fare information and cannot earn miles based on the amount spent

Currency swings mean that a flight bought in a non-home currency one month will earn a different number of miles to one bought the previous month

Stripping out taxes and charges means that a £100 flight to City A will not earn the same number of miles as a £100 flight to City B

Consolidated ‘flight and hotel’ or ‘flight and car’ packages would need to be broken out into individual components

You cannot give miles for partner flights based on the amount spent, because the partner airline does not provide that information

Specifically for British Airways, the move to promote ‘lifetime Tier Points’ as a metric means that it is difficult to change the tier point system

Basing your miles based on the distance flown and ticket fare class is actually easier by comparison.

Conclusion

‘Revenue-based earning’ has been a growing trend over recent years outside Europe, and may now be coming here.  Contrary to what you might at first think, it is more complex and more cumbersome to adminster and understand than the current ‘distance and fare class’ system.

There is no evidence that I have seen that it ‘works’, and the fact that the three main US airlines have copied each other is more a sign of their lack of nerve and original thinking than anything else.  Running such a system with Aer Lingus or Flybe, both mainly point-to-point airlines outside of the big alliances, is not the same.


Earning Flying Blue miles from credit cards

How to earn Flying Blue miles from UK credit cards (November 2020)

Air France and KLM do not have a UK Flying Blue credit card.  However, you can earn Flying Blue miles by converting Membership Rewards points earned from selected UK American Express cardsThese are:

Membership Rewards points convert at 1:1 into Flying Blue miles which is an attractive rate.  The cards above all earn 1 Membership Rewards point per £1 spent on your card, which converts to 1 Flying Blue mile. The Gold card earns double points (2 per £1) on all flights you charge to it.

Comments (44)

  • vlcnc says:

    One Mile At a Time had a post about this a few days ago and said it was an error on the website and they switched it back on the calculator – I haven’t checked this but thought I would add to the information I have read out there here.

    • Rob says:

      That’s not an error. It needs major programming to set up the website to show that.

      • vlcnc says:

        So this has been confirmed to you directly Rob? The implication from the OMAAT post was it was for testing purposes and was triggered live by mistake.

        • Rob says:

          No. I hadn’t read the OMAAT piece, I was just speculating on what would count as an ‘error’ given that it was clearly properly coded and set to go live on 1st May.

  • ADS says:

    makes you wonder will Aer Lingus ever join Oneworld !

    another reason not to like revenue based ff programmes … they’re boring … and reduce the amount we can read / write about them !!

  • BlackBerryAddict says:

    I’m also very sceptical of the 50% discount for all tickets, and I do not think that is the norm in today’s world. An 8 figure spend on tickets would mean 10,000 tickets at £1,000 each – that’s around 200 per week or 30 per day – half the business class cabin – every day on a long haul service. But even 10,000 passengers would only be 10% of the total passengers on the route – even if it were more than 10% of the revenue. I think there is a bit of an agenda in this comparison.

    I also think the argument of the 1k traveller being more important to the airline than the 5k one is hogwash. If an airline could get many travellers to pay 5k for that seat it would structure seat availability in such away that only 5k seats are available. That person paying 5k to BA is more important than the 1k passenger, and BA consequently gives more points to the 5K one.

    Finally, as I understand it the operating airline does get the fare information from whoever sells the ticket, even if issued on a different airline. The exception might be IT fares where the fare is bundled in. There’s a simple solution for that – don’t award any points on those tickets – they’re very low revenue anyway, and unlikely to be high status travellers in most cases.

    • Rob says:

      Your economics are wrong. There are flights which BA can sell to capacity for a premium price even if they refused to give any Avios or tier points, offer any catering or even bother to turn on the IFE or put water in the toilets. And yet, under a revenue based system, the people on those flights would be over-rewarded due to the cost when actually they don’t need to offer any reward at all.

      It is the Tuesday afternoon flight where BA struggles to fill the seats and relies on the dangling of Avios and tier points, alongside a low fare, to get enough bums on seats.

      Do you think BA should be particularly grateful to you for buying a ticket at a high price when a flight has a waiting list of 50 people? I doubt it.

      • BlackBerryAddict says:

        Sorry Rob, but I think your economics are wrong. The seat on that Tuesday flight does not get sold by the dangling of Avios or TPs. It gets sold because it is a low price. Short of a few mileage runners nobody takes the Avios they will get from their flight into account when deciding. As I said, if BA can sell they flight to capacity for a high price they will do so – by increasing the price through restricting cheap fare buckets. That is far more important than a few Avios. The cost (to BA) of the Avios is small compared to the total fare.
        I also think you need to get away from the single flight thinking. Airlines run a system. No flight should have a 50 passenger waiting list willing to pay 5k consistently. If it did, BA would increase the aircraft size or frequency to maximise their total revenues and profit.

        So yes, I do think that BA is happier me paying 8.3k for a flight than 3k (assuming same class), and they don’t mind giving me more Avios in the process. These are are prices for J and I class to JFK, which at the moment earn about 3500 more avios in J each way. Even if that would rise to 40000 more avios (at 4 avios per £), that is roughly worth £400 – for a fare difference of £5k.

  • Anthony Dunn says:

    It’s remarkably simple: were BA to decide to “restructure” their tier points and Avios awards-system to a completely revenue based system, then those of us who pay our own fares and who do not receive substantial corporate cash backs will simply take our business elsewhere. I have no idea just what proportion of BA’s premium business this would represent but any such move would be unlikely to benefit BA’s revenue figures.

    Beyond this, it is interesting to hear from my better half who works for a FTSE100 listed UK/Australia-based concern that the BA share of their corporate travel is tumbling now that the “BA first” policy has been removed. There comes a point when BA’s pursuit of the bottom line becomes self-defeating and it is rapidly approaching just that point because the cost:benefits scale is increasingly tipping in favour of other carriers who offer a considerably better hard product.

  • Ian says:

    I no longer belong to the Flying Blue programme as the only recent flights I made with Air France earned zero points. If they had moved to a revenue-based model then I would been better off as I’d at least have earned something to keep my account active. As far as I remember, their miles expire after a couple of years of no “activity” on the account. Taking flights which earn nothing count as no activity.

  • Mikeact says:

    I guess I’m one of the lucky ones, having joined Northwest Orients, ‘Free Flight Plan’ in 1982, before it became ‘WorldPerks’.Loads of paper upgrade coupons on any flight, free car weekends, free hotel nights,, free flights with no taxes to pay, all with no or little effort,apart from flying.

    I became Gold in year two and never dropped down, then came along KLM with Flying Dutchman and their tie up with Northwest, and finally the takeover by Delta. I guess due to a not insignificant revenue spend, I was given Flying Blue for life when Northwest dropped out a few years back.

    There have been so many Northwest highlights as the Gatwick station was relatively small and most employees became personal friends. To be invited to their Christmas parties, eg BeachBoys private party was something special, or to join the inbound crew for Dinner down in Brighton.

    Sadly, I’m down to 1 million plus in my FB account now, and I guess to get anywhere near that nowadays would be pretty difficult. FFPs have obviously changed dramatically over the years but having been in at the beginning, with other carriers as well, I read with interest the creative ways of earning and burning and sometimes wish I could start again but I’ll just have to gradually run my pile of miles and points down and take it easy.

    At least we still have way more than enough to get back to Aus/NZ and SA, in Business as well as short haul European trips. It’s just annoying that the ‘charges’ applied means that we usually start in AMS,CDG or MAD, to save a bit of money for our G&T’s ! I wish you all safe travels.

    • TripRep says:

      Great story Mike, thanks for sharing, sounds like good fodder for Rob to run a nostalgic article, maybe he could do a selection of stories over the festive period… 🙂

  • Robert says:

    Massively OT but hopefully someone can help:

    My parents have asked me to help with holiday planning (travel, hotel and car hire) for the two of them next year. They’re happy for it all to be from BA.

    a) can I book flights/hotel/car hire for them through my BA account (currently BA Gold, but having dropped to BA Silver at my parents’ actual time of travel), and is there any avios benefit in me doing so (rather than using one of their accounts – neither have status)? The car hire in particular is a question mark – is the fact that the account holder won’t be a named driver an issue?

    b) Do I or they get the “bonus avios” for joint flight/hotel/avis booking?

    c) Can I use my wife’s BA Amex card to make the booking for my parents on either my or one of their accounts, and will she get the 3 avios/£ spend for this even though it’s not a flight for her?

    d) Can I use my avios to pay (in part or full) for my parent’s flights if I book using my account but I’m not flying with them? Could I upgrade my parent’s flights at a later time using my avios if I book with my account? Am I right in thinking I can’t use a BA Amex 2-4-1 voucher if I’m not travelling?

    Any help would be appreciated.

    Thanks!

    • Rob says:

      You will get the extra Avios for a BA hols booking plus triple Avios on the BAPP (nothing if your wife only has the free BA card).

      You can’t part pay a holiday with Avios.

      You can’t use a 241 on a holiday or if you are not there.

      So …. only benefit to you booking is the extra BAPP Avios.

      • Robert says:

        Rob: Thanks for such a speedy reply. One more thing: if I book the holiday on my account can I later upgrade the flight with my avios on their behalf, or does that only work on flight-only bookings?

        • Stu_N says:

          You can upgrade most BA Holiday fares, the exception is the cheapest economy (Euro and World Traveller) fares. You can only upgrade by one cabin and it is entirely subject to availability – easiest to do it at time of booking if possible, otherwise you will be forever checking for Avios availability. Note also that because the flights are generally very inflexible you need the flight you are booked on to be the one that has the Avios availability (c.f. normal reward bookings where you can easily switch to a different flight to nab the upgrade).

          Generally you would need to phone to do anything complex like this but the BA Holidays people are super-helpful in my experience.

        • Stu_N says:

          I am no expert on this but I am fairly sure you can use your Avios to upgrade them if flights are booked from your BAEC account though you may need to add parents to your “friends” list to be able to spend Avios on them.

          Other thing to consider is if you already have a household account, I believe it can make things a bit messy, there are articles on this if you search

  • Stu_N says:

    I hope BAEC doesn’t go to a full revenue-based model, that would be disastrous for me! I guess one comfort is that tier points don’t have a direct cost to the airline. I imagine a lot are “wasted” as they never get a member to any tier, or promotion to the next tier and few ever get the benefit of Lifetime Gold.

    In my last job I hit Silver fairly easily when domestic economy was 20TPs each way and it was easier still when BA Connect still existed as I used to be at places on their network and work had a fairly relaxed attitude to the meaning of “cheapest reasonable option”.

    Since i moved jobs, my travel reduced and then domestic tier points were reduced, I lost my Silver but it didn’t matter much as I hardly ever flew anyway. That was a period when I didn’t really understand how it all worked and I assumed you could only get to Silver with a lot of work flying/ being super-rich/ flying business long-haul, or two of the three.

    Since discovering HFP and Flyertalk I have worked out how to do 600 TPs fairly easily from EDI, especially this year since CE came to domestics. A couple of CE city breaks booked via BA Holidays, two or three London weekend trips in CE when it’s a small premium over economy (Friday mid-afternoon and LGW on a Sunday evening usually work for that) then I hoover the rest up on the 5-10TP economy segments with work.

    I guess the biggest risk for me is a change to TP earning on short haul business, but hopefully there aren’t that many people in the Real World that rely on that for BA to be too bothered about it. Doubt they would have the cajones to mess with long haul business and First earning, not that I rely on that much, and anyway both are a lot of money even on discounted fares.

    We will see….