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14 Cappuccinos or 1 Free Flight? Math in British Airways' Future of Avios

March 31, 2018
5 min read
14 Cappuccinos or 1 Free Flight? Math in British Airways' Future of Avios
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In January 2017, British Airways removed free food and drink from economy on short-haul flights between London and Europe. In its place, the British flag carrier rolled out a Mark & Spencer-branded menu of paid drinks and food.

Having bounced back and forth between London and mainland Europe quite a bit over the past few weeks, I've gotten quite familiar with this menu. And I've found for myself how both the size and presentation can really vary from the menu photos:

However, it seems that this menu is an interesting look into the "revenue-based" Avios model that British Airways CEO Alex Cruz has been vocal for years about introducing. Sure, you can pay £4.50 (US$5.97) for that chicken couscous salad, but Executive Club members instead have the chance to pay 600 Avios for the snack instead. At current exchange rates, that's a redemption of almost exactly one cent per Avios.

TPG currently values Avios at 1.5 cents each. However, by taking advantage of the mileage-based sweet spots in the Avios redemption program, I've gotten over 12 cents per Avios in value on Iberia premium economy flights. Recently, a TPG reader got almost nine cents per Avios in value on American Airlines flights. And TPG’s Richard Kerr has scored over 10 cents of value for flights in the Caribbean.

While we don't know how much British Airways had to pay for those partner redemptions, it was surely more than the airline would pay for 14 packets of powdered cappuccino...

On my flight Tuesday from London to Naples, Italy, I ordered a "cappuccino" to fight off the jet lag from my short trip to Australia for the Qantas inaugural flight from Perth to London. The price was listed as £2.50 or 325 Avios. While it pains me to even consider redeeming points or miles at just 1 cent each, I was curious about the process. It was straightforward — the flight attendant simply asked for my Executive Club number and last name, and typed that into her tablet.

And this seems to encapsulate Alex Cruz's vision for the future of Avios: they should be redeemable for anything. Indeed, in an interview this week, the CEO said:

"We would like to be in a place, I am not sure if we make it by the beginning of next year or the end of this year, where every single payment that is made in BA through every channel – baggage, seats, upgrades, tickets themselves – can be paid with Avios. You can say ‘I have so many points, and I have so much money,’ and if I have a lot of points, you can pay for the whole thing independently of when you travel which is very, very important."

New options for using points and miles are always good. While there are so many better uses of Avios than buying a powdered cappuccino on-board, having the added ability to redeem Avios for this makes Avios easier to use for many Executive Club members.

The key question is: will British Airways only add redemption options, or — in the process — will the airline remove redemption options? After all, there might be plenty of flyers that'd be happy to get 14 cappuccinos for free using 4,550 Avios if they don't know how to use those points otherwise. However, I'd much rather redeem 4,500 Avios for an award flight from Hong Kong (HKG) to Taipei (TPE) on Cathay Pacific, an intra-Japan hop on Japan Airlines or a flight from London to a wide range of European destinations.

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Indeed, I recently flew from Berlin (TXL) to London Heathrow (LHR) to tour American Airlines' cargo operations. Since the trip came together rather last-minute, I was facing flight prices of around $300 one-way — or 4,500 Avios plus $28 in taxes and fees. This was a small, but important redemption at 6 cents per Avios, showing the power of the mileage-based program.

If Alex Cruz's vision of Avios includes redemptions for couscous salads, cappuccinos, baggage and upgrades in addition to the current mileage-based redemption options, it'll be a positive move (at least on the redemption side). That way, Executive Club members unaware of how to redeem their points will have easier options. Meanwhile, those of us that know how to maximize Avios will still be able to get many multiples more in value from the same points.

However, if the new redemption options come with a devaluation to the current redemption options, it'll be just yet another negative move from British Airways. From going 10 seats wide in long-haul economy to 28-inch pitch in intra-Europe economy, the British flag carrier could continue its transition into a low-cost carrier, milking its historic brand for all it can. I guess we'll have to wait and see which path British Airways chooses.