British Airways Wants To Introduce Dynamic Award Pricing In 2018

It’s expected that Air France-KLM will announce the details of a new revenue based frequent flyer program tomorrow, though it looks like that’s not the only major European program that may be going revenue based soon.

British Airways just recently had their Capital Markets Day presentation, where they shared their path going forward across various aspects of their business. A lot of the information that was shared is stuff we already knew, like that British Airways is investing in their premium cabin product. Then there was some new information, like the timeline with which British Airways is retiring their 747s.

It looks like British Airways also provided an interesting update regarding their Executive Club loyalty program. Specifically, take a look at this slide (which can be access by going to this page, clicking on “IAG Presentations,” and then clicking on “Capital Markets Day,” and then looking at slide 112):

There are two interesting things here. The first is that British Airways is hoping to form a single group points bank by June 2018. While Avios is currently the currency for most of IAG’s brands, you have British Airways Avios, Iberia Avios, etc., and there are some major differences between the programs.

But perhaps the bigger update is that British Airways wants to progressively introduce dynamic award pricing from 2018. In other words, the number of Avios required for a redemption would be more closely tied to the revenue cost of a ticket. Currently British Airways has a distance based award chart, with very little correlation between the revenue cost of a ticket and the number of Avios required.

It’s not surprising to see this. British Airways’ CEO is Alex Cruz, who used to be in charge of Vueling, and he seems determined to have British Airways mirror the Spanish low cost carrier as much as possible, including with their loyalty program, apparently.

Interestingly they don’t mention introducing revenue based mileage earning. As I argued when we first learned that FlyingBlue would introduce revenue based mileage earning, I don’t really think there’s a need for them to do so, given that European airlines already only award 25% miles for the cheapest fares, so they don’t have much to gain by going so.

The reason US airlines felt like they “needed” to do this was because they awarded 100% miles for the cheapest economy fares, and that was extremely generous.

So we’ll have to wait and see what these changes look like for Executive Club, though it seems like we can at least start to expect some major changes as of next year. I expect any dynamic award pricing would initially only apply to travel on IAG airlines. While I’m sure some airlines would love to introduce dynamic partner award pricing, we’re still several years off from seeing that, in my opinion.

What do you make of British Airways wanting to introduce dynamic award pricing?

(Tip of the hat to Ultimate Llamada)

Comments

  1. Bad timing for BA , they make more then enough from surcharging the tax ( YQ) to cover all their losses ! BA are really trying to piss everyone off in the last few years …

  2. I knew I was taking a risk when I transferred MR points to BA during the transfer bonus. Seems like I need to make a priority of using some of those avios!

  3. I don’t read ‘dynamic pricing’ as a revenue based earning system. Isn’t dynamic pricing a system where the price of something (in this case using avios as the currency) varies according to demand and supply? In this scenario I guess ‘charging’ more avios at times when demand is high and supply low and vice versa?

    If they plan on introducing a revenue based system I would expect them to use some other kind of terminology.

  4. I do not think this is going to be a revenue based system (for redemptions at least, earning YES). Essentially, if that happens, all the Avios program will collapse by itself – its not going to offer any value at all. My gess is that redemptions will still be distance based, but their going to introduce different tiers, similar to what now FlyingBlue uses. Or they use a system like Hilton Honors, like a capping (maximum Avios for a flight based on distance), and from there, downwards depending on demand (for that flight).

  5. But doesn’t BA already do this when you book via BA.com? You will get a price based on the mileage chart plus taxes, and then various alternative prices using less Avios with a co-payment. The section of the presentation you quote isn’t BA specific – it’s about the Avios platform rather than BA, Iberia or Aer Lingus. I was presuming that all they are talking about is having a similar system to the current BA one across the whole Avios platform.

    I may, of course, be totally wrong!

  6. It would end virtually all my spending and I would cut up my chase visa and get a cash back card
    Who needs a program with redemptions tied to cash prices of tickets
    At that point cash is king and avios is nothing more than Adios as one can earn more in cash back than Avios the new Peso

  7. This would be OK if it means that the rather tight quotas on award tickets were lifted.

    As an example I have NEVER been able to book two award tickets for F on BA, no matter what the route or date. So I assume only one F seat per flight is stacked for awards, and when it’s gone, it’s gone. (Maybe at the last minute more are released but I am talking about booking well ahead).

    So the quid pro quo of dynamic pricing for awards, related to the cost of buying that ticket, should be greater availability. The bane of many FF programs is availability, not cost.

  8. Hopefully they make it harder for people to earn/transfer miles from credit cards to FFPs in the mean time, otherwise these measures are worthless.

  9. That’s an interesting point about mileage cards. I feel like the Avios I earn actually flying with BA should be worth more than ones people earn on credit cards.

    Nonetheless, it’s another devaluation of FF miles. The lower cash fares remain, the more of this we’ll see in the market.

  10. Another big chip in a FF program. So much for those bargain award economy hops with avios! Sadly, I think the jig is nearly up for those of us casual flyers in “the hobby” – more restricted credit card bonuses and devalued programs keep piling up. It has been a fun ride while it lasted though, and I’ve gotten to go some great places!

  11. GUTTED!!

    only able to fly in business due to avios from Amex and tesco. Reasonable spend but do not get miles through work so have to game the system. If it gets even more confluluted and if Amex 2-4–1 voucher is defunked avios is pointless
    . It’s the end for my redemptions unless Virgin step up…..

  12. As long as they don’t change partner awards (Alaska and American), it’s fine. Waste of money to spend Avios on British flights with such steep taxes / fees. If they change partner award pricing to be dynamic, that kills the value of many US CC transfer partnerships to them.

  13. “As an example I have NEVER been able to book two award tickets for F on BA, no matter what the route or date. So I assume only one F seat per flight is stacked for awards”

    You’re doing it wrong. I’ve been booking First awards since 2012, to west coast destinations and Japan – two seats at a time.

    If you want to book them, you have to be quick! Remember that they become available at midnight GMT 355 days before you fly. If you’re not there to grab them, someone else will…

    The other thing to do is check daily for a couple of weeks before you want to book the flights. You might find, for example, that two First seats are released for Wednesday and Friday flights, but not Thursday. As a result, you will need to be flexible with the start and end dates.

    Sometimes extra seats are released a few days later. As of right now, for example, there are plenty of First seats from Vancouver to Heathrow for late October next year – two or more per flight, in fact!

Leave a Reply

Your email address will not be published. Required fields are marked *