Finding the Sweet Spots With Avios & Money Rewards

Update: Some offers mentioned below are no longer available. View the current offers here.

The Avios currency is shared by a handful of airlines, but the most popular ones are British Airways and Iberia. While the former is known for its exorbitant carrier surcharges, the latter recently made news for its incredible bonus Avios promotion. However, both carriers offer some significant value when you redeem Avios, and one of my favorite redemptions through both programs is Avios & Money rewards. Today I want to go through the ins and outs of this option to help you hone in on the maximum possible value for your next redemption.

What is Avios & Money?

Let's start with a little primer on how to value a points or miles redemption. When you search for an award flight on most airline websites, you'll be given a price, typically a combination of points or miles along with the amount of money you owe from taxes, fees and surcharges. You then need to decide whether that single redemption option is worth the cost.

The simplest way to make this determination is by looking at a redemption value per point/mile, calculated as follows:

(Cash Price of Ticket - Award Taxes, Fees and Surcharges) / Number of Points or Miles = Value per Point/Mile

That equation may look daunting, but it's much easier to understand with an example. Let's say you were booking a simple round-trip award ticket in the US for 25,000 miles and $11.20 in taxes, and that identical ticket would cost you $411.20 if you paid for it with cash instead of points and miles. In that case, here's the calculation:

($411.20 - $11.20) / 25,000 = 1.6 cents per mile

So in this example, if you value miles in that particular mileage currency at more than 1.6 cents apiece, you'd be better off paying for the ticket, as the redemption is getting you less value than it should. On the other hand, if you value these miles at less than 1.6 cents, this award is a solid one, since you're getting more value than you'd expect.

(NOTE: I know this formula ignores the points/miles you'd earn if you pay for the flight out-of-pocket, but this is just to give a rough estimate of value.)

However, when it comes to using Avios, you have additional options for certain redemptions, and these can offer some terrific value if you think through them carefully. The basic gist is simple: you can redeem the full amount of Avios required for the flight in addition to the required taxes, fees and surcharges, or you can reduce the number of Avios and increase the amount of cash you pay. In effect, you're "buying" Avios by paying cash to reduce the number of Avios needed for the redemption. In certain cases, this can be a spectacular value proposition.

Before getting into a few examples, it's worth noting that there are some airlines that aren't bookable in this fashion:

• Through British Airways Executive Club: Based on my searches, all Oneworld carriers have this option with the exception of itineraries with any flights operated by Japan Airlines and S7.
• Through Iberia Plus: This option is only available on Iberia, Air Nostrum and Vueling when booking online, though British Airways flights are available over the phone.

Even though this is a limited subset of airlines from the Oneworld alliance, it's still a nice option to have, and the alternatives will appear automatically during the booking process. As noted above, you're still given the cost for the regular redemption — a certain number of Avios plus any taxes, fees and surcharges — but you'll then see a handful of additional options for your given itinerary.

When Should I Use Avios & Money?

Of course, being shown options can make it harder to decide which is best, so how do you actually analyze your choices? Given my penchant for calculations and Excel spreadsheets, I (naturally) applied math.

There are two different methodologies that can be used in this type of analysis, depending on how you typically view your redemptions using Avios. I call them "cumulative price" and "total value." Here's a quick definition of each:

Cumulative Price

This number represents the cumulative purchase price per point of the Avios you're "buying" to lower the amount you'd need to use for the full redemption. You can figure the Cumulative Price using this formula:

(Avios & Money Cash Portion - Original Award Cash Portion) / (Original Number of Avios - Avios & Money Avios) = Cumulative Price

The lowest cumulative price represents the best value, since you want to spend the least amount of money per point. This method doesn't care about the cash price of the ticket — it instead assumes you've already committed to redeeming Avios and thus focuses on finding the optimal combination of Avios and money.

Total Value

This number represents the overall value you're getting at each redemption level based on the cash price of the ticket. In other words, it uses the original formula I outlined at the beginning, but with Avios & Money numbers instead of the original redemption numbers. It's the preferred method if you're trying to minimize the number of Avios you're redeeming.

Again, this all sounds great in theory, but it's hard to picture it without illustrative examples. Here are a few to show this in action, including two of which I actually booked myself.

Example #1 — Miami to Seville on Iberia

I'm planning a trip to Spain in March, and unfortunately Iberia only had availability for two business class awards on my desired date of travel. Being the good husband, I dutifully redeemed Avios for my wife and daughter to fly from Miami (MIA) to Seville (SVQ) via Madrid (MAD) in business class, and I set out to grab a seat in the carrier's solid premium economy cabin.

Iberia makes it very easy to see the various options for redeeming Avios. Once you've selected the flight(s) you want, just click "View" at the bottom to see the prices. Here were the ones for my itinerary:

As you can see, the "full" redemption would've set me back 36,750 Avios plus $108.56 in taxes and fees (note that this cash amount will vary slightly day-to-day due to exchange rate fluctuations). Since this was a one-way ticket, the cash price was an astonishing $3,692.66, which meant any Avios redemption would be worthwhile. However, I also had five alternatives via the Avios & Money option, giving me a total of six choices for my redemption.

Using the above Avios & Money offers, here's a table that shows the Cumulative Price and Total Value calculations at each level, with the optimal numbers in bold:

Since this is the first example, let's break it down row-by-row, keeping in mind that the total value numbers are highly skewed given the insane one-way cash price of this ticket:

• 36,750 Avios + $108: With this full redemption option, you aren't purchasing any Avios, but given the high cash price, you're total value is 9.75 cents per point.
• 31,500 Avios + $173.56: With this option, you're spending an extra $65 extra to save 5,250 Avios. This gives you a cumulative price of 1.24 cents per point. Your total value is 11.17 cents per point.
• 24,150 Avios + $223.56: With this option, you're spending an extra $115 to save 12,600 Avios, a cumulative price of 0.91 cents per point (the lowest and thus optimal cumulative price). Your total value is 14.36 cents per point.
• 18,650 Avios + $278.56: With this option, you're spending an extra $170 to save 18,100 Avios, a cumulative price of 0.94 cents per point. Your total value is 18.31 cents per point.
• 13,100 Avios + $338.56: With this option, you're spending an extra $230 to save 23,650 Avios, a cumulative price of 0.97 cents per point. Your total value is 25.6 cents per point.
• 7,600 Avios + $393.56: With this option, you're spending an extra $285 to save 29,150 Avios, a cumulative price of 0.98 cents per point. Your total value is 43.41 cents per point (the highest and thus optimal total value).

If you go with the Cumulative Price calculations, the optimal Avios & Money option is the second choice: 24,150 Avios + $223.56. At this level, I'm essentially purchasing 12,600 Avios at a rate of 0.91 cents apiece. Given that TPG pegs Avios at 1.5 cents apiece, this seems like a great value.

However, the highest Total Value is the last Avios & Money option, and this will consistently happen when the cash price of a ticket is high. Because the money portion of these redemptions is not proportional to the actual price of the ticket, spending just a small amount of Avios can bring you outsized value in reducing the out-of-pocket cost.

For this redemption, I then had a decision to make:

1. Full redemption: 36,750 Avios + $108.56
2. Avios & Money redemption with the lowest Cumulative Price: 24,150 Avios + $223.56
3. Avios & Money redemption with the highest Total Value: 7,600 Avios + $393.56

Any of these options would've been a great use of Iberia Avios given the cash price of the ticket, but I elected to split the difference and went with the lowest Cumulative Price. Thus I redeemed 24,150 Avios and paid $223.56. I transferred Ultimate Rewards points I earned on my Chase Sapphire Reserve and finalized the booking in just a few minutes. Spain, here we come!

Example #2 — New York to London on British Airways

Let's move on to how Avios & Money works when booking through British Airways. As noted above, just two of the 13 airlines in the Oneworld alliance are not eligible for Avios & Money rewards through the Executive Club program, so you have a plethora of options. This is especially beneficial given the incredibly high carrier surcharges that British Airways continues to impose on its own flights, though note that many partners will also have relatively high fees associated with award tickets booked with Avios.

For this example, we'll consider a round-trip flight from New York (JFK) to London (LHR) next April. When you're booking an award flight on British Airways' website, you'll need to select your flights and then click "More pricing options" in the "Journey summary" section at the bottom of the page:

These flights are currently pricing at $1,035.69, but as you can see above, you have six options for redemption. Here's a table that calculates the Cumulative Price and Total Value for this itinerary (optimal values again in bold):

In this example, you'll see that the optimal Cumulative Price and optimal Total Value are the same redemption option: 16,000 Avios and $805.74. However, neither of these numbers are that attractive. Purchasing Avios at 1.17 cents apiece is a solid value, but that's still a lot of cash to shell out, especially considering that simply paying for the flight would only be an extra ~$230 (and you'd earn Avios on it too). In addition, the total value for this redemption would only be 1.44 cents per point, slightly below TPG's most recent valuation of Avios.

If you were considering booking this flight, it would be up to you to decide if choosing Avios & Money makes sense.

Example #3 — Granada to Madrid on Iberia

The third example I'll use is another one that I recently booked. One of the nice things about Avios & Money Rewards is that they're available on short-haul flights as well. For the same Spain trip we looked at above, I needed to fly from Granada (GRX) to Madrid for a night or two before continuing back home to Miami. The one-way cash ticket was booking at ~$250, but Iberia had regular economy awards available for the short flight (just 228 miles, based on the Great Circle Mapper). Just like the first two examples, I was presented with six options for the redemption:

Once again, I went to the math to crunch the numbers and identify which combination of Avios & Money would be the optimal redemption:

As with the first example, there were two different optimal redemptions. The lowest Cumulative Price was 2,350 Avios + $58.86, where I'd be purchasing Avios at 0.8 cents apiece. However, given the relatively high cash price of the ticket, the best value came at the lowest Avios and Money alternative: 1,350 Avios + $68.86. When I compared this to the outright redemption cost of 6,750 Avios + $23.86, I found myself perfectly happy to spend the additional $35 to save 4,400 Avios, which is exactly what I did.

Help, I Stink at Math!

If arithmetic isn't your strong suit, never fear. As I've done many times before, I have created an Excel spreadsheet to help with these calculations. It should be relatively easy to use: simply input the cash price of the ticket plus the Avios & Money combinations and the spreadsheet will highlight the option with the lowest Cumulative Price and highest Total Value (note that all other cells are protected to maintain the integrity of the formulas). The sheet will also populate the COMPARISON section with the three options:

1. The full redemption amount
2. The optimal Avios & Money redemption based on Cumulative Price
3. The optimal redemption based on Total Value (which could match the full redemption in certain cases)

At that point, it's up to you to decide!

Boosting Your Balance of Avios

If you're interested in booking an Avios & Money reward for your next trip, there's no shortage of ways to quickly boost your British Airways Executive Club or Iberia Plus balances. The usual methods apply — taking a paid flight, doing business with a partner, etc. — and hopefully many TPG readers will be earning a bunch of Iberia Avios from the insane recent promotion. However, both of the programs also partner with three of the major transferable point currencies and offer 1:1 transfers:

• American Express Membership Rewards: Transfers to British Airways are instantaneous; Iberia transfers can take 4-7 days but are generally completed within 48 hours
• Chase Ultimate Rewards: Transfers to both programs are instantaneous.
• Starwood Preferred Guest: Transfers will take at least a day but could take up to two weeks.

Thanks to these transfer options, you could use points earned from cards like The Platinum Card® from American Express or the Chase Sapphire Preferred Card for these redemptions. Just bear in mind that both Amex and Chase require transfers to be in increments of 1,000 points, so be sure you're accounting for this restriction when you're ready to make the move.

Bottom Line

There's been some newfound excitement (and frustration) around the Iberia Plus program in the wake of the carrier's incredible promotion from June, but count me in the camp that had already taken advantage of the new partnership with Chase to redeem Avios through Iberia before the deal was announced.

As a former road warrior, I'm no longer able to rack of hundreds of thousands of points and miles a year, so I'm much more interested in stretching the value of my redemptions to the max. The Avios & Money award option through both British Airways and Iberia represents a great way to accomplish just that.