AA Awards Just Got Cheaper Using Iberia Avios

American Airlines miles can be frustrating to use. Yet, the world's formerly largest airline may be the best option to fly on certain routes, and prices between city pairs with limited competition can make booking with miles especially valuable.

Unfortunately, there aren't many ways to top off your AAdvantage account for an award. Besides Marriott Bonvoy (3:1 transfer ratio), American isn't a partner of any major transferable currency (American Express, Capital One, Chase or Citi). So, once you've tapped out your Barclay and Citi credit card options, you're going to need to fly more, make more purchases through AA's shopping portal or buy more AA miles to boost your AAdvantage balance.

Enter Avios. Both British Airways Avios and Iberia Avios can be great for booking American Airlines awards. Both programs are transfer partners of American Express (1:1), Chase (1:1) and Marriott (3:1). Even better, a new transfer bonus allows Amex cardholders to transfer Membership Rewards to Avios with a targeted 40% or 50% bonus. Members can also instantly transfer Avios at a 1:1 ratio between British Airways and Iberia.

British Airways is generally going to be best for one-way, nonstop awards, and Iberia is the go-to program for booking connecting, round-trip awards. A technical glitch prevented travelers from booking AA awards through Iberia Avios for most of June and into early July, but the ability to book AA awards through Iberia's website has been fully restored.

And the good news continues: Booking American Airlines awards through Iberia just became an even sweeter sweet spot. TPG reader Michael H. recently booked a domestic American Airlines award flight using Iberia Avios, and he noticed that Iberia was improperly collecting Passenger Facility Charge (PFC) fees. As he explains:

"PFC collection is barred by U.S. law on zero-fare, zero-surcharge frequent-flyer tickets. I complained about Iberia's practice to the US Department of Transportation, and Iberia ultimately admitted that it was in the wrong; refunded the $18.00 in PFCs it had collected on my four-segment AA redemption ticket; and awarded me 10,000 Avios as a customer-service gesture."

However, his goal wasn't just to get $18 back. He reached out to us at TPG about this situation to see if we could help put pressure on Iberia to end this improper fee collection once and for all. When I reached out, an Iberia spokesperson responded:

"We are aware of the issue and we have started fixing the problem. Right now, the fee is not being charged anymore. Though it appears during the booking process on the website, it is not charged, when the ticket is issued."

Putting This to the Test

Indeed, in award searches, the out-of-pocket cost was still showing PFC fees. So, we put it to the test to see if Iberia would actually correct the right amount of fees. Thankfully, Iberia Avios just so happened to be the optimal way for my wife and TPG Senior Reporter Katie to book a recent last-minute award flight.

For an upcoming trip we needed to make, American Airlines fares from Atlanta to Tampa cost $364 in standard economy (i.e. not basic economy) or 25,000 AA miles plus $11.20 — for a value of right around 1.4 cents per mile, matching TPG's valuation of AA miles.

Booking through Iberia Avios, the same flights priced out at 17,000 miles plus $27.70. Even with the higher fees, the reduced mileage cost meant we would get almost 2 cents per Avios from booking this award through Iberia Avios — well above TPG's most recent valuations.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

As the Iberia spokesperson warned us, the PFC fees still showed all the way though the booking process.

Even in the confirmation email from Iberia after booking, the taxes and fees were listed as $27.70:

However, when the e-ticket processed, the taxes and fees were listed as just $11.20:

A pending charge for $27.70 popped up on Katie's Citi Prestige and remained pending for more than five days after making the booking. Finally on the sixth day, the charge posted at the reduced $11.20 amount. Strangely, despite the charge not posting until July 30, Citi backdated the posting date to the day the charge was initiated:

With the lower fees, we ended up with a redemption of over 2.07 cents per mile — an even better value.

What if You Paid These Fees

Of course, it's a virtual certainty that Michael isn't the only savvy traveler who has booked an American-operated flight using Iberia Avios and been charged these fees, and Iberia is apparently addressing this very concern based on a statement we received at TPG:

"We are working to identify the customers who have been charged this fee, in order to contact them and refund them the fee."

When I pressed for a timeline, I was told the following:

"Be sure that I will let you know, as soon as we have started refunding the fee that has been charged by mistake."

It remains to be seen how long this process will take — and if they'll need any additional prodding from travelers. Fortunately, we have at least one test case here at TPG, as Points & Miles Editor Nick Ewen redeemed Iberia Avios for a flight from Fort Lauderdale (FLL) to Charlotte (CLT) back in November 2018. He was charged $18.70, so while not the same overcharge as Michael, it was still $7.50 higher than he'd expect on a normal domestic ticket. Only time will tell if Iberia proactively refunds that amount.

Booking With Iberia Avios vs. AAdvantage

Now that the out-of-pocket cost is the same whether you book using American Airlines miles or Iberia Avios, it's easier to do a comparison between the two.

AAdvantage MileSAAVer awards on domestic flights cost 12,500 miles one-way (25,000 miles round-trip) or 7,500 miles one-way (15,000 miles round-trip) if the flights are nonstop and under 500 miles each way. Note that AA might offer a very different award price through its Economy Web Specials dynamic award pricing scheme.

Rather than being region-based, the prices of American Airlines awards booked through Iberia Avios are based on the direct flight miles for the entire itinerary. You can find this number using a tool like Great Circle Mapper.

*During the ongoing transfer bonus, using the base 40% bonus and then rounded up, since points must be transferred in increments of 1,000

Under normal conditions, award flights under 2,000 each way — which is about the distance between Los Angeles (LAX) and Atlanta (ATL) — are going to cost fewer miles through Iberia than AAdvantage.

And that gap is even wider now through October 1 thanks to a targeted bonus for transferring Membership Rewards points to Avios. Most members are targeted for a 40% bonus, although some members are even seeing a 50% transfer bonus. This bonus makes it even easier to accumulate Iberia Avios for these cheaper American Airlines awards.