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Iberia drops Amex, gives STATUS with its new credit card – BA to follow?

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I recently wrote this l-o-n-g article on how I saw the future of airline credit cards in a world of 0.3% interchange fees.  In summary, I expected to see higher fees, lower miles earning but better benefits – I even speculated that airline status as a card benefit may be on the way.

Three months later, Iberia has done it.

Before I come on to that, let’s look back.  In early 2015, American Express held an investor day in New York which I covered here.  At that event, it was announcing a new IAG contract.  This would include launching an Iberia American Express card, to replace the existing Amex / Visa combination. It never happened.

Two year later, Iberia seems to have dumped American Express.  Whatever deal was signed appears to have been torn up.  This is not surprising, since co-brand Amex cards make little sense with a 0.3% interchange fee.  An airline is better off partnering with Visa or MasterCard because they have far better acceptance in stores and have the same 0.3% interchange fee.

The new Iberia cards are the way forward

It is rare that Iberia shows you the future, to be honest.  They have delivered here though.

Iberia has launched a new premium credit card called Iberia Icon.  It is ONLY available as a Visa.  Goodbye American Express.

It will earn 0.5 Avios per €1 spent.  This isn’t huge, but is probably the maximum that can be funded given 0.3% interchange fees.

There is a fee of €90 per year, waived in year one.

There is a sign-up bonus of 15,000 Avios which is very generous for a €90 fee card.  You get an extra 4,000 Avios if you add a supplementary card.

Full details are on this website, in Spanish.

But here is the key …..

New cardholders receive Iberia Plus Plata status – equivalent to British Airways Bronze status or oneworld Ruby status – immediately when they sign up.

After the first year, you will keep your status as long as you spend €9,000 per year, of which €100 must be on iberia.com.

Iberia Plus Plata / oneworld Ruby status doesn’t give you lounge access.  When flying BA, however, you would get access to business class check-in desks, priority boarding, 25% bonus Avios on your flights and free seat selection seven days before departure.  Not bad for €90 per year.

There are some other small benefits too – Avis Preferred Plus status, which comes with free car upgrade and free additional driver, and access to the VISA Hotels Luxury Collection.

Will British Airways follow?

These Iberia changes are a very surprising development.  Will British Airways follow?  It’s possible.

The flow chart is simple:

As I reported here, Amex recently lost what is (almost) its final appeal against co-branded credit cards being included in the 0.3% interchange fee cap imposed on Visa and MasterCard.   Only Amex own-brand cards can now charge shops high fees.

Are the BA Amex cards now loss making for Amex?  At best, on the free card, they are paying Avios 0.75p for Avios when you spend £1, yet only receiving 0.3p in pseudo-interchange fees (topped up by IT charges and interest payments and FX fees, knocked down by bad debts and admin costs).

If BA switched to Visa or MasterCard, there would be the same cut of interchange fees to play with BUT the cards could be used in far more places, increasing overall billings.

The BA Amex cards currently generate over £1 billion per month in billings.  That should mean a £10m+ monthly income stream to Avios, but presumably a far smaller – following the recent EU ruling – stream of profit into Amex.  Something has to give.

Conclusion

It will be fascinating to see how this plays out.

The Iberia card is pretty much exactly what I predicted would happen given the new market dynamics.

The questions for HFP readers are these:

Would you give up your free BA Amex with 1 Avios per £1 for a BA Visa paying 0.5 Avios per £1, with a £75 fee, but coming with BA Bronze status?

Would you give up your BA Premium Plus Amex with 1.5 Avios per £1 for a BA Visa paying, say, 0.75 Avios per £1, costing £195, but still coming with a 2-4-1 voucher and adding BA Bronze status?

Would you take out a new BA Elite Visa costing £495 but coming with 1 Avios per £1, a 2-4-1 voucher and giving BA Silver status?

None of these cards currently exist, of course. I made up the commercial details – I don’t have any inside information – but I reckon they are not far from where we will end up in a few years.

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

Comments (139)

  • DS says:

    Meanwhile, Lufthansa is launching credit cards where they’ve never had any before, eg Sweden
    and the earnings is excellent, much better than their German one.
    There are two different ones, the better one :
    “Miles & More Prime World Mastercard”: 25 miles per 100kr (ca €10) i.e. 2.5 miles per €1 spent
    [until Dec. 31 100 award miles for every 100 kr (€10) you spend – i.e. 10 miles per €1 spent]

    (There’s various welcome bonuses: lounge voucher, Avis weekend voucher etc.)
    http://www.miles-and-more.com/online/portal/mam/se/earn/special_offers/offer?nodeid=481078958&l=en

    There’s also a new SAS Premium Mastercard, with good earnings and which also gives you
    1000 status points per month, in addition if you earn more than 200.000 points per year (regardless of how; rental cars, flying, shopping) you get 60% off rewards in Business Class. (eg Tokyo would be 60.000 return and no fuel surcharge) and you can book as many rewards a you want.
    here: http://oi67.tinypic.com/32zkxtj.jpg and here: http://oi63.tinypic.com/dyltte.jpg

    The SAS Amex has been around for several years, the elite card gives you status points, the 2-for-1 vouchers is valid on Star Alliance even in First and you can earn several vouchers per year https://www.flyertalk.com/forum/sas-eurobonus/1621255-new-sas-eurobonus-american-express-elite-sweden.html

  • Lev441 says:

    Rather than automatically give status, wouldn’t it be good to award tier points on levels of spending – therefore rewarding higher spending without overloading the lounges with lots of extra bronze members…? Pretty sure one of the Usa credit card airlines does this but can’t remember which one!

    • James says:

      This would be my thought… On a BA card it could maybe give something like 10 TP for every £1000 spent, 20 TP for BA spend…

    • Steve says:

      But bronze members aren’t getting lounge access.

    • Alan says:

      Would definitely much prefer some status/tier points, otherwise if you want higher status you’re stuck trying to earn again from 0 even though you have some mid-term level.

  • LM says:

    Interesting development. I’m going to hit the 10K spend in a few months time, but currently got the free BA Amex and was going to upgrade to the BAPP nearer the time, but would it be wise to upgrade now in case they close this route off? Speculating but concerned this may happen..

    • Rob says:

      No, I definitely wouldn’t worry about that.

    • Ando says:

      LM – I am in a similar position to yourself, approaching £10,000 spend on the free BA card. Are you suggesting upgrading the card to the premium version in order to release the 2-4-1 on hitting £10,000?
      I had no idea you could do that, it would be incredibly handy if so.
      I normally have the premium card, but downgraded a while ago for a pro rata refund as I had unlocked a second companion voucher and had no need for another.

  • Cheshire Pete says:

    Surely the only mechanism that would work is not offering free Bronze, as what if you already had bronze on your BAEC account?

    Logic would say if you get a Free card and hit whatever threshold you get 300 tier points added to your account, If you have a Paid Card then 600 would be Added.

    Any other way would simple not integrate with you regular Tier point earning via flights Vs the Card benefits allied with the reward for holding/spending on that Card.

    • Alan says:

      Agree inclusive Bronze would be of no interest to anyone that already had higher status.

  • Liz says:

    Bronze for £195 sounds good to me. I would earn the 300 points to move up to Silver by flying. I think it would be great if BA offered that.

    • Peter K says:

      Assuming it’s not like the Hilton/IHG cards where you get status but if you want higher status your have to earn it from scratch the hard way.

    • Nick says:

      I don’t imagine you would be given any tier points. So you would still need 600 for silver. For example when you get bronze as a soft landing from silver, you still need 600 TP to qualify for silver.

      • Polly says:

        Nick, don’t we get soft landing silver from silver? And yes we still must obtain 600 new TPs to become actually silver again?.

    • Alan says:

      Although if they did it like IHG then you’d still be starting from zero when trying to get up to Silver…