British Airways Avios: rewards or lottery?

I have over 106,00o Avios, enough to get me from Heathrow to Hong Kong first-class and still have some left over. These are frequent flyer points given out by British Airways. I have a lot of them and wanted to spend them. Unfortunately, I haven’t been able to cash them in the four times or so that I have tried. In fact I wasn’t able to book a Heathrow to Hong Kong flight in any class of travel. I admit,   I was more than a little disappointed. But my curiosity was bigger than my disappointment and so my last failed Avios experience got me thinking.

In fact when I went forward a month or so I still couldn’t get a Heathrow to Hong Kong flight, apart from one flight which required a stopover in Riydah, Saudi Arabia. The Riydah stopover isn’t really an option at all, unless one is:

  • A Saudi national
  • Part of the tour group (of four or more) with a Saudi visitors visa
  • In possession of a Saudi business visa, which requires an invitation from a Saudi company
  • In possession of a Saudi employment visa

If you don’t fit into any of those categories, you aren’t allowed to transit through a Saudi airport, this would include the lions share of the BA customer base.  In other words, I had two hopes: Bob Hope and no hope.

So I did an unscientific survey amongst my contacts and found that they’d managed to spend their Avios (and their predecessor Air Miles)  on trans-Atlantic flights occasionally, but mostly for short-haul European flights.  They like me had found it hard to book longer haul flights.

This time I tried going through customer services who checked and told me that there were no reward flights available when I wanted to go. I enquired via the British Airways Twitter account about trading options and they said how would one put a monetary value on Avios?

So bear with me whilst  I break this down:

There are a limited number of rewards seats, how many on the journey I want to go? I don’t know. Where they go or when they are, apart from searching via the British Airways site. It isn’t exactly a transparent process, what proportion of seats could notionally qualify? This sounds to me like the start of a game of chance, rather than the traditional rewards scheme like my local coffee shop, Superdrug or Boots cards.

Why are there a limited number of seats? Presumably to reduce the redemption rate down to an ‘acceptable’ level. Given that Avios are earned in proportion to transactions:

  • Airline flights
  • Promotional partner purchases
  • Credit card transactions

This implies that there is some form of monetary value exchange by the affiliate marketing parter, there is some from of monetary value to British Airways and by implication there is some form of monetary value (after BA has taken it’s cut) to the consumer (me).

So how do we derive a value? I suspected it is likely to vary according to route. Here are some examples based on single flights from London (all airports) on December 1, 2012, versus how many Avios the trip requires. I have taken out taxes from the flight price to make the comparison between the payment methods fair. I have also not included the credit card surcharge and picked the cheapest flight shown. All data has been provided from the British Airways website with a currency setting in pounds:

Destination | class Avios Price in pounds Avios/Pound
Hong Kong (1st) 91,000 7,312.01 12.4453
Hong Kong (business) 60,000 4,709.01 12.7416
New York (1st) 60,000 6,822.71 8.7942
New York (business) 40,000 4,199.71 9.5245
Dubai (1st) 60,000 3,627.01 16.5426
Dubai (business) 40,000 2,755.01 14.5190
Helsinki (1st) 22,500 439.95** 51.1422
Helsinki (business) 15,000 439.95 34.0948
Manchester (business) 4,500 2.60* 1,730.7692

*  Avios lists a business class option to Manchester, the ticket booking system only offers economy. The price is minus the airport tax.

** Avios lists a first-class option to Helsinki, the ticket booking system only offers business and economy class

So this is a very small sample size, but there seems to be some sort of pricing strategy at work, which implies that British Airways has some sort of notional value on the Avio as a currency unit and they are trying to elicit customer behavioural change and maximise the Avios/pounds price that they get for flights.

I presume that they would probably move around reward seats to use Avios iron out gaps in demand. But given that Avios price can alter, why does British Airways need to also restrict demand with ‘reward seats’ availability?

Given this research there are a number of attributes that I think would go into deriving a the notional value of an Avios if it was to be traded:

  • Where I want to go and when I want to go which dictate a probability of getting hold of a reward seat
  • How long the Avios are needed for. If you want to fly next week, it doesn’t matter whether the Avios you are buying the flight run out in a month or four years time. If you are buying Avios to use in 12 months their expiry date matters more

Some of these attributes start to make Avios look like a derivative, so an algorithm similar to the Black-Scholes equation would factor in:

  • The risk that you wouldn’t be able to spend the Avios
  • The notional value of the Avios based on where market players actually want to go to rather than where British Airways wants to game their flight plans to go

In a market like Points.com, were Avios to be floated as currency or against other rewards programmes, one maybe able to see their true value. A massive deflation in their value would support my hypothesis of Avios not being rewards per se, but more analogous to a lottery ticket.

And such a situation would be counterproductive to customer  loyalty, because the gamed nature of the programme would become more readily apparent. Imagine if you were told you can enter a game of maybe getting on some flights for free (excluding airport taxes), but more points doesn’t necessarily increase your chances of winning. British Airways Avios customer loyalty scheme wouldn’t seem so attractive, would it?

I’d leave the final words to John Lydon:

Ever get the feeling you’ve been cheated? Good night!

which he apparently said at the end of the last Sex Pistols concert, Winterland Theater, San Francisco, California January 14, 1978.

 

2 Replies to “British Airways Avios: rewards or lottery?”

  1. Love it.

    This is one of my pet hates too. I’ve looked once or twice at using different reward schemes to book flights and – like you – found myself thinking that I was in possession of a large amount of nothing very valuable.

  2. Great post, Ged. I have more than 400,000 Avios at the moment, even after recently cashing 100,000 for two roundtrip business class tickets to Dar Es Salaam. My experience has been that if you want to book long haul rewards tickets in business or first, you literally have to call / book on the day the tickets become available in the booking system, which is usually about 13 months before the flight date. Sometimes, travel planning can accommodate this, as it can in the case of my trip to Tanzania next year, but more often, it cannot. In that respect, your post hits the nail on the head — mileage rewards programmes turn out to be a mostly empty offer that shouldn’t (rationally) drive any loyalty. Obviously, in spite of these facts, it does so anyway. A victory for marketing over substance?

    Good luck in your quest to get to Hong Kong on your miles.

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