Do Iberia Changes Forebode British Airways Changes Or Is It Much Ado About Nothing?

26
DDMS IconNever Miss Another Deal - Follow DansDeals on Facebook

Iberia has changed their partner award chart, significantly raising the miles required to fly on partner airlines. Gary thinks that means that British Airways changes are about to be announced as well.

He says,

“Of course, it makes no sense for Iberia to have this chart and not British Airways. Otherwise, you just transfer your Iberia points over to British Airways Avios and redeem on partners from there. In order to effectively charge so much for partners, you’d expect that both programs would have to more or less move in tandem.”

Since the launch of Avios in November of 2011 it’s been ridiculously cheap to fly on short-haul flights thanks to British Airways Avios. Just 4,500 Avios is enough to fly on partner airlines like American and USAirways without fuel surcharges. It’s quickly become the best way to book domestic flights thanks to the ridiculously low rates, the lack of last-minute booking fees, and the dirt cheap cancellation rates.

There’s always been the feeling that it’s too good to be true even though partner airlines are known to pay very small amounts of cash for partner mileage awards.

But I’m not convinced that the Iberia change means that a devaluation is imminent.

-The Iberia partner award chart has been the same for at least 2 weeks. If British Airways was going to devalue imminently or in tandem, wouldn’t we have heard something by now?

-Iberia eliminated reward saver flights within Europe over a year ago. British Airways still has the program which heavily reduces fuel surcharges when you fly within Europe.

-Iberia Avios have never been the same as British Airways Avios for partner flights. You can’t change or refund a OneWorld ticket booked via Iberia while you can refund a British Airways booked ticket for just the forfeiture of taxes paid ($5.60 for a domestic ticket).

-Iberia has always tried to push their own flights over partner flights. They offer a huge discount on fuel surcharges for booking Iberia flights with Iberia Avios. British Airways charges much higher fuel surcharges for Iberia flights.

Those differences have meant that there have always been arbitrage opportunities and plenty of reasons to convert Iberia Avios to British Airways Avios and vice versa. Saying that the allowance of conversion of Avios in both directions means that they have to move in tandem with this devaluation is dubious logic at best. It’s never been applied until now after all.

The British Airways and Iberia programs have many unique nuances and have different non-alliance partner airlines to earn and redeem miles with.

Additionally British Airways Avios program is run as an independent profit center from the Iberia Avios program and British Airways continues to partner with more American banks and credit cards than Iberia.
Those credit card companies will likely push back against a British Airways devaluation. At the very least they would have to announce that a devaluation is coming or else face the wrath of the banks and the people accumulating their miles. And risk losing the millions of dollars those partner provide.

Gary notes that the Avios program was launched in November 2011 without providing details in advance and that means they have a poor track record. Technically that’s true but they did announce in advance that major changes were coming and when they were coming, well in advance of the Avios launch. I wouldn’t consider that to mean that they have a track record of making unannounced changes.

Even if significant amounts of people start converting their Iberia Avios to British Airways (unlikely as it’s not a very well known feature) they can always turn off the conversion process with more ease than aligning the programs.

Might we see an upcoming British Airways devaluation? Sure. After all as flights get more expensive and the value of a dollar goes down there is mileage inflation as well. Airline consolidation also gives even more ability to devalue miles. That doesn’t mean airlines will kill the golden goose that has provided billions of dollars in income from selling miles to the banks and other partners, but they do have more flexibility to devalue up to a point.

However I don’t think that the Iberia changes prove that imminent changes are inevitable, nor am I running to burn my stash of 500K British Airways Avios for flights I don’t need. If you have flights you want to book anyway, then there’s no reason not to book those now. But otherwise, I’m not panicking at all.

Leave a Reply

26 Comments On "Do Iberia Changes Forebode British Airways Changes Or Is It Much Ado About Nothing?"

All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals.

Sort by:   newest | oldest
Justin

Thanks Dan.

Seemed like every other blogger is freaking out. Thanks for the level-headed response.

Kumar

Good article, Dan. Appreciate the reasoning and I trust your wisdom on this.

Dan

Listen, I can’t promise there won’t be a devaluation. All programs get devalued over time just like your dollar does, though your dollar devalues a little bit every day so you don’t feel it as bad as a massive mileage devaluation every handful of years.

I just don’t buy into the logic that the Iberia devaluation means there has to be a British Airways devaluation.

nomad

Thanks a lot Dan, your informative article and cogency calmed me down a bit this morning!

Oscar

Hey Dan, i wanna book a vacation in january 2015to Miami what would you recommend for cheapest mialeage tickets? any good amex transfer out there or should i use delta signup 50k?

Dan

@nomad:
Happy to inject some normalcy.

@Oscar:
Are you flying from Timbuktu?

Gary Leff

Dan, this is a good article but not at all inconsistent with what I’ve said.

You write, “I don’t think that the Iberia changes prove that imminent changes are inevitable, nor am I running to burn my stash of 500K”

And I don’t think that the Iberia changes prove that imminent changes at BA are inevitable either.

As I wrote, “If Iberia is going this route, is co-owned British Airways likely to follow? I do not know the answer to this. I have decent contacts with several airlines — British Airways isn’t one of them.”

The changes at Iberia are huge. The programs don’t move in perfect tandem but they moved to almost identical programs in November 2011. BA told us changes were coming, that 98% of awards would get cheaper or stay the same, that turned out only to be true for UK-based flyers. They don’t consider changes that don’t directly affect the bulk of their UK-based customers to be material, and that would likely include changes to partner award pricing.

On the other hand, what would cut against it (but that I would have thought it would also cut against Iberia making a similar move) is that they’re in a joint venture with several of those partners, they should be metal-neutral…

In general the best values are unsustainable over time. If something is order of magnitude better than what other programs offer, you can expect it to go away. Will this one go away now? Who knows. But the big deal here is that IB, jointly owned with BA by IAG, made this huge change and there’s no doubt consideration and discussions over at BA about how they’ll go forward as well.

I’m not being alarmist, rather there really is some risk here — anyone that’s been dithering on an award booking, figuring they would get around to it later, shouldn’t wait. But I wouldn’t speculatively burn all the points either, just as you aren’t.

Dan

@Gary Leff:

Gary, your headline “HOLY SMOKE: Is British Airways About to Devalue Its Points?” and quote at the very end of the post “you’d expect that both programs would have to more or less move in tandem” implied to me that you think a BA devaluation is imminent.

I’ve read many reports of people (on DDF, FT, Facebook, Twitter, etc) speculatively booking trips and crying “woe is me” based on that implication in your post.

It’s not just myself and other folks who have misread your intentions, it even inspired several other blog posts speculating that a devaluation is imminent.

Yes, you wrote that you don’t have contacts to confirm anything, but most people seemed to take the overall implication of your headline and end of the post as alarmist and to burn and burn fast. If that many people misunderstood your position perhaps a clarification is in order?

The Iberia changes are huge, but clearly the programs are not at all identical and have been growing further apart.

Nor does Iberia try to foster point selling relationships with Chase and SPG like British Airways has done to create a program that more Americans earn and burn in.

I have no doubt that BA will devalue at some point as well, but I don’t think these Iberia changes mean that day is here.
Iberia has always had their quirks and discouraged partner awards.

Nor has the 3rd Avios program, Avios.com, been devalued.

Oscar

@Dan: From NY

Dan

@Oscar:
The cheapest will probably be BA at 15K round-trip. Of course that depends on availability which can be very fluid.

iahphx

Well, I agree with both Gary and Dan!

If you live in the Northeast or Mid-Atlantic, the use of Avios for leisure travel in inevitably seasonal, because 650 miles doesn’t get you to anyplace “warm in winter.” September/early October is a great time to visit many of these destinations, so it’s a darn good time to burn some Avios points for a long weekend.

Booking for next Spring is difficult, because short haul award inventory is not plentiful that far in advance. So many of us will maintain some sort of Avios balance and hope for the best in the coming months.

Dan

@iahphx:
I don’t have any shame in booking a 7.5K or 10K BA ticket.
Plenty of warm places to go in those buckets from the east coast to Florida or the Caribbean.

http://www.dansdeals.com/archives/32877
http://www.dansdeals.com/archives/42827
http://www.dansdeals.com/archives/45109

And in the midwest CMH/IND/ORD-LAX for example is a great 10K award.

In the end it sounds like Gary is agreeing with my booking advice, I think he should’ve made that more clear in his post.

Justin

I think Bermuda is the best from NYC. We’ve been waiting to book that, so we might go ahead and book it today!

But only having the Fairmont hotels severely limits hotel options.

Anonymous

@Dan: thanks! so i geuss you recommend me to apply for a BA 50k avios

Dan

@Justin:
Bermuda is a great deal with BA.

@Anonymous:
Personally I’m not worried about any devaluation happening right away.
I’m not a prophet, that’s just my analysis of the situation.

Chaim

Dan already when you used to call for aa flights not showing up they were able to book them over the phone now they won’t do it and most that is showing up is only first class online that being said there is a lot less availability from aa as well but this morning I tried twice over the phone for saver award that wasn’t showing up on BA and they would not book them or see them

Dan

@Chaim:
Call an international BA call center like the one in Singapore, +65 6823 2095, to book AA saver awards that don’t show up on BA.com.

That has nothing to do with a devaluation, just a buggy website.

Jerry

Thanks for calming me down! I don’t want to blow my 120k that I’m still sitting on. I trust your speculation.

Vladimir

Why would the credit card companies fight this devaluation more than they would other ones (United)

Dov

Dan, The alarming news from all the bloggers (that followed one blogger) that Iberia has devalued their award chart is simply misleading and false, I am surprised that of all the bloggers no one came up and said that the Iberia Partner Award chart was never aligned with the IB BA award chart and so the cost of a Short distance flight on AA operated flights hasn’t changed was always priced at the current rates

nomad

@ Dov: the alarm sounded enuf for me when I was not able to access the BAEC website and log into my account to make award bookings for the past 48 hrs!

Drew

I agree that the panic headlines get more clicks. Dan, I feel like perhaps your article would be better if it a had a “WARNING!” in the headline!

Dan

@Drew:
I really should get Gary to write more of my post titles 😉

bubble347

I’m surprised that no one brought this up so I guess I’ll have to chime in, 500K,seriously? I would expect someone with the mileage game acumen as yourself to have close to 10x that😜.

Dan

@bubble347:
Why would I keep that many eggs locked into one airline instead of in transferable currencies?

Don’t worry about my mileage balances. It’s well into 8 figures overall. The trick is finding the time to burn, not earn.

bubble347

@Dan: I’m not challenging your mileage balances, nor do I think it makes sense to transfer all eggs in one basket, I merely was referring to churning.

wpDiscuz