Maximise your Avios, air miles and hotel points

Should you be concerned about losing your Avios and Virgin Flying Club miles to bankruptcy?

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Is there a risk of losing your Avios points and Virgin Flying Club miles if the airlines go bankrupt?  And is it even a realistic possibility?

To be honest, this isn’t an article I wanted to write.  However, I am being inundated with emails from readers who are concerned about the value of their points being at risk so it only seems fair to address it.  I hope that my many friends at Avios Group, BA, Virgin Atlantic and Virgin Group Loyalty Company take it in good grace.

I have a lot of skin in this game

Let me put my own cards on the table.  AwardWallet (sign up here, it’s free) shows that I am currently sitting on 6.1 million points across my family members.  Assuming 1p per point of value if spent well, this is £60,000 of value which is potentially at risk.

In theory I should be concerned.  However, ‘only’ 2.5 million of these are realistically at riskI define ‘at risk’ as meaning they are airline miles.

I don’t see ANY risk to my hotel points since the hotel chains are now all asset-lite businesses which own virtually no hotels and employ comparatively few staff.  IHG, for example, reported a 54% operating profit margin in 2019.  It throws off so much cash that it literally has no idea what to do with it.  Since 2014 IHG has given $3.6 billion back to shareholders ON TOP of their usual dividends.  They are going to have a difficult year, and may need to delay any loan repayments due this year, but it won’t get worse than that.  Occupancy rates in China are already looking strong again after lockdown was ended.

I don’t see any risk to American Express Membership Rewards points either.  Amex isn’t going anywhere in a hurry.

That still means, of course, that I have £25,000 of value ‘at risk’.  Should you – can you? – bail out?

(I’m not, for clarity.)

should you be spending all your avios points due to coronavirus

Should you cash out your Avios balance?

No.

The obvious reason is that IAG is sitting on around €9 billion of liquidity.  If things get so bad that IAG goes bankrupt then we will pretty much be at the end of the world as we know it, living in caves, and your Avios will be the least of your worries.

To be fair, I should highlight the fact that British Airways has recently had its debt downgraded to ‘junk’ status although this report assumes that IAG would let BA, its biggest operation sink in order to save the rest of the group.  In reality, Virgin Atlantic, Norwegian and easyJet will collapse long before British Airways and, by then, the Government would have no choice but to act.

Let’s be more practical for a minute.

I generally value an Avios at 1p and, as my ‘what is an Avios worth?’ article shows, you should actually do a lot better.

If you want to cash out now in panic, however, you obviously won’t be booking BA flights which is where the best value is usually found.

There are other issues too:

you can’t realistically book partner flights.  It is likely that tickets on, say, Qatar Airways would be cancelled if IAG went bankrupt as Qatar Airways would not be paid.

you can’t realistically book hotels using Avios.  As the hotel won’t be paid until after your stay, your room will almost certainly be cancelled if IAG disappears.

the same goes for ‘experiences’ rewards and Avis car hire rewards

Assuming that you don’t book a hotel on Avios for a stay over the next month, the ONLY easy way to cash out Avios TODAY, with 100% certainty of receiving something, is to order a pile of wine via Laithwaites via this page.  The order is executed immediately and you’ll have the champagne, wine or beer within a couple of days.

It’s a terrible deal though, as is redeeming Avios for hotels or car hire.

You are getting around 0.5p per point, compared to 1p+ if you eventually redeem them for flights in premium cabins.  Redeeming in panic and losing AT LEAST half the value of your points is not smart, especially given the low risk of IAG hitting critical trouble.

should you be spending all your virgin flying club miles due to coronavirus

Should you cash out your Virgin Flying Club miles?

My answer is the same for Virgin Flying Club miles, with caveats.  Non-flight redemptions generally come out at under 0.5p per mile so you’re losing a lot of value.

There are two caveats here though:

the risk of Virgin Atlantic going bust is substantially higher than with IAG.  It is compounded by the fact that Delta, its minority shareholder, is restricted by European rules in what it can do since it is already at its 49% ownership limit.   The sums required are far beyond what Sir Richard Branson could rustle up.  The Government has just rejected Virgin’s first application for a £500 million bailout.

Virgin Flying Club miles don’t have real value until you have enough for a long-haul premium flight.  If you have a few hundred thousand Virgin miles then, yes, they are probably worth 1p each.  If you have 20,000 Virgin miles, they are certainly not worth £200 because there is no way of using them for a premium redemption.

There is another quirk.  Your Flying Club miles are not owned by the airline.  They are owned by Virgin Group Loyalty Company, a standalone business which is jointly owned by Virgin Group and Delta Air Lines.

Does this make your miles more or less safe?  It depends on how well capitalised Virgin Group Loyalty Company is.  Does it have enough money in the bank so that it could fund a ‘run’ on redemptions?  I am guessing it doesn’t.  My guess is that it was set up with only a modest cash balance on the basis that – month to month – money coming in from selling miles to the airline and other partners would match money spent on redemptions.

The easiest options for emptying your account would be:

1:1 into IHG Rewards Club points (minimum 10,000 miles) – gets you 0.4p per mile based on my IHG valuation

2:3 into Hilton Honors points (minimum 10,000 miles) – gets you 0.5p per mile based on my 0.33p Hilton valuation

£50 Virgin Group voucher for 12,500 miles – gets you 0.4p per mile

There are various hotel and partner flight redemptions too, but as with IAG it is likely that your booking would be cancelled if Virgin Atlantic / Virgin Group Loyalty Company went down as there would be no-one to foot the bill afterwards.

If you want to redeem for any of the above, DO NOT CALL due to long queues.  It is easier to use the SMS text message service on 07481 339184.  Note that it will take a couple of days to get a text reply.  The service operates 24 hours and you MUST reply within 60 minutes of being contacted, even if it is 3am.  Failure to reply in 60 minutes means that your case is closed and you need to restart the process.

Conclusion

I’m not bailing out of my points balances.  I don’t see any realistic risk in the case of Avios / IAG.  Even with Virgin Atlantic, I’m not prepared to take a 50%+ discount on what I should get for my points to liquidate them in a fire sale.

Some people have told me that they might switch to a cashback, hotel or Membership Rewards credit card for the next few months.  I can see the emotional reasoning behind that.

Logically, however, it makes no sense.  The new points you earn are no different from the points you already have.  If you’re unwilling to keep accumulating more airline miles then logically you should bail out of your current balances too.  Similarly, if you happy to keep your Avios and Virgin Flying Club miles where they are, you should be happy to keep on earning a few more via your cards.

If there is a lesson to learn here, it is one I have been banging on about for years.

Transferable points (ie Amex Membership Rewards, Tesco Clubcard, Heathrow Rewards, HSBC Premier credit card points) are more valuable than non-transferable points (Avios, Virgin Flying Club miles) because you have more options.  1 Amex point is worth MORE than 1 Avios, even though they transfer 1:1, because the Amex points give you a lot more flexibility on top.

Comments (345)

  • Jo says:

    What can the virgin group £50 voucher be used on?

  • uk1 says:

    For what it’s worth I cashed in over 1m Avios for a quality of large quanity of champagne I’d normally not indulge ourselves in when paying cash for it. Is it bad value? Well to a point yes. I think I’d already decided that our long-haul 241’s in First were becoming increasingly dissapointing and difficult to nab at 355 daya and it seems that future trips might be for cash perhaps in Business in other airlines or possibly First if decent value.

    Shortly after I ordered BA increased the price of the Laithewaites champers by 10% and then closed the shop. Perhaps the flow of cash out was higher than they found comfortable. I still have 500k miles that I sort of regret not converting to more champers.

    So now, in full self-isolated lockdown I am forced to drink really lovely champers and I am pleased that I was forced to this level of self-indulgence. It gives more pleasure than the flights.

    Safe travels all.

    • Peter K says:

      Clearly a fake reply. Apart from anything else First class seats are not released by BA at 355 days out…that lie on your part has unraveled that entire unseemly piece you have written.

      • uk1 says:

        A sad and rather nasty post. Why you would be motivated to post this only you would know.

        It says a lot more about you than me.

        Rob will vouch for me if he notices this and wishes, as he has been instrumental over many years and many cunning plans – from the great BMI credit card cash transfer heist onwards 9in helping be build my stash.

        • Rob says:

          I can confirm I have known this poster for many years (his FT profile under the same name dates from 2004) and if he says he did it, I believe him.

          • uk1 says:

            Thanks Rob …. much of my stash I owe to you. 🙂

            I suspect I owe you more than a glass or two of the Laurent Perrier Mr Laithewaite kindly sent us!

            I’m hoping they reopen the BA wine shop again soon ….

    • Neil Murray says:

      I bought a couple of cases of wine off Laithwaites after the Wine Society decided to shut up shop while I had an order in progress. As Rob says, poor value but this was an emergency. Laithwaites has also closed its telephone and web ordering while they had a backlog, but forgot to shut off the BA/Avios ordering.
      Anyway, Laithwaites delivered and then the WIne Society rethought its actions and re-opened. And they delivered as well.
      I now have more wine than my racks can hold. Oh well.

      • uk1 says:

        Hi Neil,

        In my case the avios were worth more for my normal trips have normally been one or two trips in F for wife and me to Singapore or Sydney using 241s each year. However the cost of avios acquisition made it worthwhile because I was seeing the desire to use the avios for BA F diminishing at the same time as I had fears of losing them. And shut down has meant we’re drinking really decent champers.

        We now have the stuff all over the place ….. but that is a good thing. 🙂

    • RB says:

      Nothing we didn’t know, another senseless post that adds nothing to the community.

      • Hassan Butt says:

        I’ve suspected that they’ve been told to keep their slippers at the door for a long time now. Sorry to see virgin go as they aren’t just BAs home competition but they genuinely offer something better in many cases.

  • Thomas Ainsworth says:

    So the 110,000 Virgin Atlantic air miles I’ve accumulated over 9mths, basically aren’t worth a toss?

  • spinner99 says:

    After doing some digging I’ve found that the voucher I accidentally triggered for my avios return flight to Florida in May will result in a non cancellable flight (although it can be amended for a fee). I’m not happy with this as avios flights are of course flexible and cancellable (for a fee). So having inadvertently swapped my booking for a voucher I now have access to a far inferior product even though I am in effect lending BA money. Can you get some clarification on this Rob? Would be very interested in your comment that you knew someone who had successfully argued for a refund after a voucher had been triggered.

    • Rob says:

      Those are the voucher rules. It is even worse with a 241 as you are restricted on zones too. The person who got a refund was threatening BA due to misprepresentation. I also know 10 readers who tried to swap their voucher when they realised the restrictions and failed, although I am 90% sure that taking BA to CEDR arbitration would see you win.

      That said …. I know a 2nd reader who DID cancel a voucher booking. He wanted cash so the call centre set up a dummy booking which was then cancelled for £35 and he was told everything would then come back as it would have originally.

      I would have done an article but I can’t get to the bottom of how the vouchers work. There is a Flyertalk thread but the ‘these are the best vouchers in the history of the world’ description does not even begin to match the day to day reports I get from readers.

  • Louise says:

    I have also managed to get to 270,000 virgin miles after many years of saving the points and now getting concerned that they were a waste of time, money and effort

    • Tim says:

      That may turn out to be true, but it’s not Virgins fault (apart from they way the load up their company with debt. So actually, it is their fault!)

      I’m in the same boat by the way. Been saving them for a ‘dream’ holiday to celebrate 10th wedding anniversary in the Far East this December. Well that ain’t happening!

  • Peter says:

    It’s good to see your article has been updated with regards to who owns the points. Previously you said it was Virgin Red, but a simple search of Virgin Red’s website finds this to be incorrect. I’ve just spoken to Virgin Atlantic about what would happen if they went under. Firstly the points system is operated by Points.com and you can clearly see this on their customer page. Secondly there is currently no policy in place to deal with the points should VA fail, although they expect something would be sorted out.

    • Rob says:

      Ee, no. Points.com simply operates the ‘buy points’ function.

      I know the Virgin Red team, I have been up to the Notting Hill office numerous times. I know how it works.

      Bottom line – Virgin Red legally owns your points but has no money to fund redemptions if the airline crashes.

      I recommend looking up what is happening to Virgin Velocity in Oz which is a similar structure. Velocity, not Virgin Oz, owns the miles but seems to be insolvent itself.