British Airways Considering Revenue-Based Loyalty Program

This afternoon, TPG sat down with new British Airways CEO Alex Cruz. Based on reader feedback, one of the most pressing questions was about fuel surcharges: Why does British Airways continue to charge excessively high fuel surcharges on award tickets when fuel costs are so low?

While he didn't directly answer this question, he used it to pivot to another very interesting topic — the future of the Executive Club (Avios) program:

The solution to all of this is the setup that I had previously at Vueling where the actual earning of points was value-based (value of the ticket) and the redemption was actually value-based (based on the actual price of the ticket at that time). And I think that, at some point, at BA we're going to have to start thinking about that. So you eliminate the consideration of the taxes and fees and everything else, you look at the total price and based on that price is the number of Avios.

Cruz continued that it's "stupid" that Avios holders aren't able to book a British Airways flight with Avios if there's an available seat. So, it seems like British Airways is considering the Southwest Rapid Rewards or Virgin America Elevate style of points earning and redeeming. You'd earn Avios based on the amount you paid, and then you can redeem those Avios for any flight that has an available seat. The award price would simply be based on the cash price of the ticket.

There's both pros and cons to this style of program. For sure, it makes earning and redeeming a lot simpler; there'd be no flight miles to calculate or award charts to consult. Your Avios would be available for any flight that has a seat, no matter if the flight is tomorrow or just before a major holiday. And, your Avios would have a set value, and hopefully that value is set higher than some of British Airways' current revenue-based redemption options. In some sense, there's a lot to like about a program like this.

However, it'd take the "fun" out of the program. With all Avios having a set value, there would be few (if any) ways to maximize your Avios. The transatlantic sweet spots would no longer be sweet. You wouldn't be able to get up to 7 cents of value per Avios on non-US short-haul flights. And, last-minute bookings would likely be charged at last-minute ticket pricing, when there could've been a low-cost saver award under the current system.

For now, time will tell how — or even if — British Airways would implement a revenue-based program.

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In case you missed the interview, below is the full video. Cruz starts talking about the revenue-based program about 24 minutes in.

Would you want the British Airways Avios program to go revenue-based?