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.

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Want to earn more points from credit cards? – April 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.