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

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.)

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Comments

  1. Michael says:

    Another way of making priority boarding more of a joke, give the easy to obtain status away with a credit card! Really is time it was dropped as a bronze benefit!

    • I don’t even get the attraction of it. The plane can’t take off till everyone’s on, regardless of what order they get on in!

      • It’s only of use to the people who have huge hand luggage that they want to make sure they’ve put in the lockers. If airlines actually enforced the stated number and size of carry ons, there would be no issue. As it is, I’ve seen people get on via priority boarding, shove a bag in the over head locker in the CE section of the plane and head to the back and put more bags in.

        • the real harry1 says:

          If we’re late to board, say in the last 10%, I will often stash a bag or 2 in any space I can find – including CE of course – on the way to our seats

          the locker space over your seat doesn’t ‘belong’ to you or the seat

          anybody purchasing a ticket with carry-on luggage entitlement that meets the size requirements has an equal right to use any locker space on the plane that they see fit

        • I’ve witnessed ET passengers being told by cabin crew they cannot pop their cases in the CE section. One woman who wanted to put her case in the locker above me and told she couldn’t started pulling faces at the crew member.

        • the real harry1 says:

          course you can

          otoh doesn’t pay to disobey any instruction (from crew) you get on a plane, so: a) don’t get seen, b) if you get seen, just do the same thing a bit further away, c) take off those silly labels for stow-in-front smaller luggage well before you get to the plane 🙂

        • the real harry1 says:

          it also used to amuse me mildly to use the front loos (& send the kids up there) before they managed to get the curtains up

          once the no-seat-belts-needed buzzer goes, you get about a minute 🙂

      • Michael C says:

        Totally! 13-hour flight ahead of me, with my 3-yr old? Let him sprint up and down T5 for another 30-45 mins while everyone’s boarding!

      • If travelling HBO it makes a big difference. Even if going CE then some folk put their luggage in the overhead bins above the first few rows even when they’re sitting nowhere near!

  2. the_real_a says:

    Lets be real here. The AMEX MR partnership is going nowhere. There is no legislation IMO that says the 2-4-1 bonus cannot be part of the MR package (E.g. transfer 50k in 12 months). Does it really matter if there is no BA logo on the card? It makes no commercial sense whatsoever for BA to pull the AMEX relationship. If makes perfect sense to focus on the MR element of a plain branded AMEX with additional benefits.

    Perhaps you might see IN ADDITION an AVIOS branded Visa card.

    • the_real_a says:

      I would be more worried about LLyods pulling the upgrade voucher. Just booked HKG – LBA / LHR – HKG in Business for 78,000 total avios and £260 fees.

      • If you ever need a cheap one way premium flight back from Asia using this strategy then check out fares on Sri Lankan and Vietnam Airlines.

  3. New Card says:

    I know I labour the point every time this comes up, but Amex has not in any sense lost its appeal concerning co-branded cards.

    All that has been published is an advisory opinion from the Advocate General. This is not a binding decision of the Court, or a decision at all. The Advocate General’s opinion will be taken into account by the Court when the Court reaches its decision. That said, the Court not infrequently departs from the reasoning and conclusions found in Advocate General opinions.

    Moreover – the AG’s primary conclusion is that the issue is premature and therefore inadmissible, since the relevant UK legislation is not yet in force. (The AG only considers the substantive issues in the alternative, i.e. if they are wrong on the inadmissibility point.) The Court could well agree that the reference is inadmissible, which could cause further delays.

    Clearly as a business matter there will be a cloud looming over the issue for Amex, but the legal issue is not yet determined.

  4. BA Visa Elite for sure, although I like being an Amex customer. I wouldn’t do BA visa for £195 because you get pretty little with bronze status and would’ve to work your way up to silver starting from 0 TP – I doubt credit card bronze status comes with 300TP with it, right?

  5. Graham Walsh says:

    Wasn’t there talk of VS binning the MBNA deal with Amex/Visa. Why is no one else doing 2 points per £1 on a premium card?

  6. New Card says:

    Would be the £195 option for me.

    The additional £300 fee for Elite wouldn’t help me much, as the HSBC Premier World Elite card (which is only £195) already provides a 1 Avios per £1 earning rate and lounge access.

  7. It’s a shame you have to live in Spain to get the Iberia card. I have a family trip planned next year and could have used bronze status to select seats 7 days out to avoid circa £800 in fees.

    • Genghis says:

      Would you pay to book seats at 7 days in advance though? Surely most of the good seats will have been snapped up by Golds and Silvers by then?

      • Cuchulain says:

        Genghis,
        Slight aside but here goes – I booked LGW-MCO in PE and MCO-LGW in CW next summer using one of my BA 2-4-1s for myself and better half : as I have no BA status ( BA is crap from NI and Aer Fungus doesn’t accrue status ) will my PE outward and CW allow us to be seated together ? Trip is a 25th wedding anniversary pressie so fingers crossed or I might not making it to 26 !!

        • Genghis says:

          Booking seats in advance depends on status with BA (apart from F where anyone with an F seat can book seats on booking). As such, no BA status = selecting seats 24 hours before take off at OLCI. You should still be able to find two seats together, though they might not necessarily be the best seats in the house.

        • Clarence says:

          Come on cuchulain. I’m from NI and BA from city airport is great. Security is a doddle and you don’t have to go through it again at LHR. Don’t knock a good thing

        • Cuchulain says:

          Genghis – thought so, unless BA introduce Iberia CC ASAP – fingers crossed. Thanks.

          Clarence – sorry, you possibly picked me up wrongly. Thrust of my post that BHD only has BA to LHR and then having to transfer ( with baggage in tow ) to LGW for onward travels invariably ( Orlando this time ). BHD is great for security, yes but it limits you’re connections if you use BA 2-4-1 vouchers.
          Re not going through security again I am connecting through LGW and not LHR to get to MCO.

      • I don’t think seat assignment and selection works in the ways we might expect. My partner who has no status routinely books CW T-355 and gets allocated 2A despite not paying for a seat. The seat appears to be allocated from time of booking and blocked to others regardless of whether they are gold or paying for seat selection. It makes me wonder how BA attaches value to their passengers, there would seem to be more to it than just status and spend.

  8. Penelope Buchannan-Smith says:

    For a frequent flier (Silver and Gold) – I would ideally select none of the options list above. £495 for the 2-4-1 on top of the taxed you pay on redemption make it unusable for me, and for someone who is lifetime gold why would I pay for Bronze? – I understand I may be part of a minority. However, I also understand there a large number of people on here who get at least silver renewal YoY based on solely business travel.

  9. 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

  10. 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!

    • 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…

    • But bronze members aren’t getting lounge access.

    • 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.

  11. 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..

    • No, I definitely wouldn’t worry about that.

    • 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.

  12. 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.

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

  13. 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.

    • 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.

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

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