I am often asked for my thoughts on how to value an Avios point. In our articles we use 1p as a ball-park figure, and it is the value I use myself, but the real world is more complicated.
For the value of the new readers who always join us in January, looking to plan travel for the year ahead, I want to run through my thinking again today.
What is an Avios worth TO YOU?
The value of an Avios point to you is based on numerous factors:
- where you fly
- what cabin you fly in
- whether you normally use a British Airways American Express 2-4-1 voucher, and (the one rarely considered)
- what class and/or airline you would pay for if Avios flights were not available
You need to know how YOU value an Avios because it impacts on what you are willing to pay for them.
We occasionally see offers which allow you, indirectly or directly, to pick up Avios for 0.75p to 1p each. Should you jump in at these prices? You can’t be sure unless you have valued your Avios for your personal circumstances.
You need to be sure that you are getting substantially more for an Avios than your cost price to make it worthwhile. This is especially true because you are substituting something very liquid – cash – for something that is not very liquid at all.
The same goes for Avios-earning credit cards. Once you’ve got your British Airways Premium Plus American Express ‘2 for 1’ voucher in the bag, you need to know whether 1.5 Avios per £1 is a better deal than a cashback credit card or, say, 2 Marriott Bonvoy points per £1 via the Marriott Bonvoy American Express. If not, your British Airways Premium Plus Amex card can go back in the drawer.
Here are six different Avios scenarios – which is right for you?
Instead of answering the question of Avios value directly, I devised six scenarios for an Avios redemption. As you can see, each puts a different value on an Avios point.
Before we start, remember that Avios points now have a ‘floor’ value. The partnership with Nectar, launched in early 2021, lets you trade 250 Avios for 400 Nectar points, worth £2. This means that your Avios are worth 0.8p each when used to shop at Sainsbury’s, Argos, eBay etc. Do not redeem your points for flights if you get less than 0.8p.
If you ever have the opportunity to acquire Avios for less than 0.8p, you will definitely come out ahead because you can always spend via Nectar. Whether higher valuations make sense depends on how you spend them.
Here are some potential Avios redemption scenarios. Which one matches your travel style?
1. Andrew takes two long-haul holidays a year with his wife and two children, requiring four Club World tickets per trip.
Let’s assume these are 120,000 Avios per seat Club World redemptions (eg Dubai, Boston). One of the two holidays uses the 2 x British Airways American Express 2-4-1 vouchers which Andrew and his wife earn each year.
Let’s assume £605 of taxes per ticket – the current figure to Dubai.
Andrew is financially well off. He redeems on leisure routes (Middle East, Caribbean etc) where in a British Airways or other airline sale a Business Class cash ticket during the school holidays would cost around £1,499 return. He can afford to pay cash if necessary.
Total Avios spent per year for two holidays = 720,000 for eight people across two trips (6 x 120k, adjusting for the 2-4-1’s). This assumes that all the flights are at peak pricing periods.
Value received: £1,499 per flight if paying cash – £605 taxes on Avios tickets = £894 per seat x 8 tickets = £7,152
Value received per Avios = 0.99p
0.99p is a ‘real’ saving since Andrew would pay cash in a sale for Business Class seats if necessary. There is intrinsic extra value from the ability to cancel the Avios seats if needed. However, the calculation ignores the miles and tier points that cash tickets would bring.
If one of these trips fell into an off-peak period, saving 20,000 Avios per person (80,000 Avios in total), then the value would increase to 1.11p.
The annual fee for the two British Airways Premium Plus credit cards is not factored into this analysis.
2. Jez and Louise live in the South East and use their Avios to do European short breaks, flying Economy from Friday to Sunday. They do not spend enough to be able to generate a BA Amex 2-4-1 voucher, and do package holidays for their ‘main’ holidays.
Avios required for an Economy flight to Prague: 10,500 Avios plus £35 taxes based on a peak weekend.
I have used the ‘mid point’ pricing because this is generally the best value of the various ‘cash and Avios’ combinations offered by BA. You should not, under any scenario, take the ‘£1 taxes’ option because it requires a disproportionate number of Avios.
British Airways cash price: £150 per person for a shoulder season ticket on a ‘hand baggage only’ fare, booked three months in advance. However, Jez and Louise would use easyJet from Gatwick if Avios seats were not available, with a typical price (out Fri, back Sun) of £130.
Value received per Avios = 0.90p.
This is a ‘real’ saving compared with the easyJet price. There is extra value from the ability to cancel the Avios ticket.
If Jez and Louise travel on an off-peak weekend the cost of the trip would fall to 9,500 Avios per person which takes the value per Avios point up to 1.0p. The value also goes up if they would take checked luggage, since Avios tickets allow one free suitcase per person.
3. Glynn and Sarah live in Yorkshire and use their Avios to do European short breaks, flying Economy via Heathrow. They do not spend enough to be able to generate a BA Amex 2-4-1 voucher, and do package holidays for their ‘main’ holidays.
Avios required for an Economy flight to Prague from Manchester via Heathrow: 21,000 plus £70 taxes on a peak weekend
BA cash price: Not comparable as they would fly Jet2 from East Midlands if they could not use Avios. Typical cash price for a shoulder season weekend, booked three months in advance, is £170.
Value received per Avios = 0.47p
Glynn and Sarah would be crazy to transfer in Heathrow and add two hours to their travel time for such a poor return. It would make more sense to exchange their Avios points for Nectar points, getting them 0.8p per Avios off their next visit to Sainsbury’s or Argos.
Even if Glynn and Sarah travel off-peak, it remains poor value. At 19,000 Avios per person the value per Avios point only increases to 0.52p and in reality the direct Jet2 flight would be cheaper off-peak too. Moving their Avios to Nectar remains the best option.
4. David is single and happy to take an odd routing if necessary. He only flies Economy when using his own money but is happy to fly Business Class when using Avios. He would normally spend around £350 on a holiday flight to New York in Spring. He lives in the South East.
David flies Iberia in Business Class from Madrid to New York for 68,000 Avios + £204 in tax return, based on an off-peak date (plus 14,500 Avios + £35 for a British Airways Economy flight to Madrid from Heathrow to position). His total cost is 82,500 Avios plus £239.
Value received per Avios (based on £350 cash for a direct Economy flight): Not clear
David has spent £155 less in cash than the cost of an Economy cash ticket, and gets to fly in Business Class instead, but he has also used up 83,000 Avios.
The real value, of course, is that he is flying Business Class and not Economy but he would never pay for Business Class. How should he judge the value?
He knows that he giving up £664 of Nectar points by choosing to use his 83,000 Avios for the flight, so presumably he must value the upgrade at least this highly.
5. Alex and Nicky earn enough Avios per year for one long-haul redemption to California in Club World, using their BA Amex 2-4-1 voucher. They would be willing to pay £1,750 each for a cash ticket in a BA sale or flying BA ex-Europe. Taxes will be £690 per person.
This is potentially the most likely scenario for a Head for Points reader without children. You use using one 2-4-1 voucher per year for one major redemption for a couple.
Alex and Nicky spend 150,000 Avios (with the BA American Express 2-4-1 companion voucher) and pay £1,380 of taxes. This assumes they travel in a peak period. The cash alternative would have been £3,500 for two.
Value received per Avios: 1.41p
This is a ‘real’ saving because they would pay cash otherwise. They also gain cancellation flexibility which a cash ticket would not have, although they lose out on the Avios and tier points earned on a cash ticket.
The value increases to 1.70p if they travel to California in an off-peak period for 125,000 Avios.
The annual fee for the British Airways Premium Plus credit card is not factored into this analysis.
6. Charles and Vicky also do one long-haul redemption each year to California in Club World. They earn fewer Avios than Alex and Nicky, so prefer to ‘Upgrade Using Avios’ a World Traveller Plus ticket to Club World. They expect to pay £900 in a BA sale for their WTP ticket and would pay up to £1,750 for Club World.
The ‘miles for upgrade’ cost of this ticket would be 50,000 Avios per person during a peak period. This saves them £850 per person on the cost of the Club World ticket.
Value received per Avios: 1.7p
This is a ‘real’ saving because they would pay for Club World if necessary.
If Charles and Vicky travel off-peak, the value per Avios point DROPS to 1.42p. This is because the cost of upgrading World Traveller Plus to Club World is higher – at 60,000 Avios – during off-peak periods. Crazy but true.
What about First Class?
You will notice that none of these people flies in First Class. That is because very few of us would pay cash for First, even if we would pay cash for Business Class. The additional Avios you spend for First over Club World give you intrinsic satisfaction and perceived value, but do not translate to a hard cash saving.
(In the last example, if Charles and Vicky would never pay £1,750 for Club World but would pay £900 for World Traveller Plus, then the 1.7p valuation per point is NOT ‘real’ because they would never have spent the extra money for business class in the first place.)
If you earn your Avios for free by flying, the value you get per point is not a concern. However, let’s assume you earn your miles via an Amex credit card. There is a cost to these ‘free’ Avios because you could earn a different reward from other credit cards if you wished – let’s say at a net cost of (say) 0.5p per Avios.
In this case, you need to understand that the extra 50,000 Avios for First over Club World to California is actually costing you £250 (50,000 x 0.5p) in lost rewards from other cards.
Whether that is good value is down to you – but if you’ve paid for the Avios, either directly or indirectly, you need to understand the choice you make.
What about long-haul economy redemptions?
You will notice that none of these people flies British Airways long-haul economy. This is generally a poor use of Avios points because of BA’s taxes and charges.
However, the guaranteed availability of eight Avios seats per flight at peak periods may lead to times when economy redemptions do offer value.
As an example, an off-peak redemption to San Francisco in World Traveller / Economy is 32,500 Avios plus £350. Any cash price of over £600 would see you getting 0.75p+ per Avios of value, although this would be rare at off-peak periods. You also need to be getting over 0.8p per Avios before an Economy flight redemption was better value than turning your Avios into Nectar points.
We’re not putting value on flexibility
Except for those examples above where we are upgrading a cash ticket, all of the ‘100% Avios’ options above are flexible. Pay £35 per person and you can cancel your booking, getting your Avios and taxes back.
In normal times, this is not the case with cash bookings. Cancel and you lose your money. This should also have some impact on whether you use cash or Avios and the value you place on an Avios booking.
At present, of course, you can cancel cash tickets for a Future Travel Voucher. Whilst this generous covid policy remains in place, there is no Avios ‘premium’ for flexibility.
How should you value your Avios?
How YOU value an Avios is totally dependent on how you use them.
As I have shown above, there are good deals to be had in the right circumstances. It is, easily, possible to get over 1p of value per Avios point and the new Nectar partnership gives you a floor valuation of 0.8p per Avios point.