Why does BA sell seats VERY cheaply whilst blocking off Avios availability?

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‘RevMan’ (ie revenue management) as it is called in the trade, is by nature part science and part instinct. Any idiot can fill a plane if they charge ultra-low fares. The real skill is in how you increase the pricing as the plane fills and you get nearer to departure in order to maximise the marginal revenue from every passenger.

If I drop the economic theory, what this means is that – on any particular day – there may be 10 people who need to fly to Detroit as 12 hours notice. BA wants to keep 10 seats empty for those people because their employers are happy to pay the full business class fare.

There may be a further 50 people who have business in Detroit and tend to book 2-3 weeks in advance. BA will want to keep seats for them too, as they will be paying a high semi-flexible price.

You also need to fill all of the other seats on the plane, and you need to siphon off people who are willing to pay £750 to fly to Detroit from those who will only pay £400. As I said, it is half science and half instinct.

BA revenue management and Avios redemptions

If you have tried to find an Avios seat to the United States over the Summer, you will know that there is very little about in premium classes. Very little indeed.

This would lead you to think that BA expects all of these planes to be full of high-paying business passengers – even though that is illogical over the Summer.

I wrote yesterday about some of the astonishing deals available at present from European starting points. See here for more details.

From Brussels, for example, you can buy a Club World ticket to Las Vegas for £917.

For £917, BA will fly you in Club Europe to London from Brussels, Club World to Las Vegas and return. Even a BA Executive Club Blue member would earn a whopping 17,000 Avios back – enough for two return flights to some parts of Europe. If you have an On Business corporate account you will earn over £100-worth of On Business points as well.

British Airways is willing to sell lots and lots of seats at this price.

Yet, for Avios redemptions, the cupboard is bare. But this makes no sense.

Let’s compare the economics to BA side by side:

£917 cash ticket Brussels to Las Vegas – BA needs to cover the cost and taxes of four flights, must issue 17000 Avios (more to a Bronze, Silver or Gold member) and must issue On Business points equivalent to approximately a further 12500 Avios.

£575 ‘taxes and surcharges’ Club World Avios redemption London to Las Vegas – BA need only cover the costs of the two long-haul flight, issues NO Avios and issues NO On Business points. BA reduces its accounting liability for Avios redemptions by the equivalent of 100,000 points. It also has two extra Club Europe seats for sale between Brussels and Heathrow because the Avios redemption is direct.

There is an Air Passenger Duty difference here, because the £917 ticket incurs no APD as the passenger is not stopping over in London. I admit that.

However, taken overall, the net cost to British Airways of the two flights I highlight above must be pretty similar.

If the BA accounts put a book value on an Avios of just 0.25p, then the accounting income from the redemption flight is £575 cash + a £250 reduction in liabilities for the book value of the Avios redeemed. This is around £825.

Similarly, the accounting income for the £917 flight is £917 less, say, £70 for the book value of the Avios and On Business points issued. This is around £850.

Much of a muchness then. So why are Club World Avios redemption seats to the US almost impossible to find when BA is falling over itself to sell Club World seats for cash for roughly the same net cost?

Obviously the £917 flight brings in more hard cash but from an accounting and profit-reporting perspective the difference is small. And that is before you consider the impact on BAEC member loyalty by effectively closing off redemptions ……

How to earn Avios points from UK credit cards

How to earn Avios from UK credit cards (December 2021)

As a reminder, there are various ways of earning Avios points from UK credit cards. Many cards also have generous sign-up bonuses!

There are two official British Airways American Express cards with attractive sign-up bonuses:

British Airways BA Amex American Express card

British Airways American Express

5,000 Avios for signing up, no annual fee and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points, such as:

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 10,500 Avios:

Capital On Tap Business Rewards Visa

The most generous Avios Visa or Mastercard for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus:

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios? Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)

Category

British Airways and Avios

This article is closed to new posts. Discussion continues in the HfP Forums.

Martin says:

3 Jun3 June 07:48

Lack of redemption availability is the key reason why I thought I’d give Virgin Upper Class a try in a few weeks time (spending my own hard earned cash). What’s the point of amassing large amounts of Avios when they are next useless when you want to use them? Please take note BA, from an otherwise loyal customer…up to now.
Oly says:

3 Jun3 June 07:49

the avios aren’t really a liability when there is no availability
- Rob says:
  
  3 Jun3 June 08:12
  
  Ironically, the reverse. Remember that for eg hotel redemptions get you 0.57p of value. BA must be paying out at least 0.45p if you use your Avios for a hotel, knocking off their commission.
  
  Think of all the stuff Avios.com offers at 0.5p per Avios – sports tickets, theme park tickets etc etc.
  
  Similarly, if you redeem on Qatar because there are no BA seats, Qatar gets some real cash from BA.
  - squills says:
    
    3 Jun3 June 08:17
    
    And an empty seat is a wasted income opportunity/ get rid of Avios liability opportunity. Flew back yesterday evening after half term in Europe and nearly half the plane was empty.
    
    Even tuppence hapenny would have been better for BA than diddly squat.
    - TimS says:
      
      3 Jun3 June 09:11
      
      Not quite as pax do cost BA real money, though likely the YQ will cover much of this.
      
      Incremental fuel, catering, pax taxes etc.
    - Billy says:
      
      3 Jun3 June 18:27
      
      Why would anyone book in advance when you can be rewarded by leaving it to the last minute?
Aggers says:

3 Jun3 June 08:15

Minor point, but I think you have miscalculated the LAS fare from BRU.

I think that the £915 per person you quoted in your email yesterday is based on a fare someone posted on FT for two adults and an infant – the infant fare brings the average cost per person down. The actual cost is closer to £1,300 per adult per http://www.flyertalk.com/forum/22949545-post46.html

Of course, if I am incorrect and there is a £915 per person fare, can someone point me towards it so that I can save a further £400 per ticket!
- Joe says:
  
  3 Jun3 June 10:01
  
  Yep, would love to know where to find this too!
- Rob says:
  
  3 Jun3 June 10:03
  
  Aha. Apologies if so. However, as there are plenty of New York seats under £1000 the argument still holds.
- PalCsaky says:
  
  3 Jun3 June 10:53
  
  Prague – New York is for around 980 in August.
Billy says:

3 Jun3 June 08:25

It’s not good business practice to automatically give any unsold seats away to Avios redemptions, as that can lead to people not booking in advance which is the last thing any airline wants.

And surely everyone must know why BA offers cheap fares ex Europe? Must this be explained again?
- jhk says:
  
  3 Jun3 June 08:28
  
  than Ba must not offer the avios points. we and our company would fly much more now each time a bad feeling. and compleet not loyal as the avios points have been for loyal customers
- Rob says:
  
  3 Jun3 June 10:00
  
  You miss the point here. Why not unload those seats for redemption rather than giving them away to Belgians?
  
  There is no law saying that BA must have a set percentage of Belgian pax AFAIK. Simply be uncompetitive in the Belgian market!
  - Billy says:
    
    3 Jun3 June 11:34
    
    I can’t even answer that. Be uncompetitive in one of your markets in order to salve the sense of entitlement of another market?
    - Rob says:
      
      3 Jun3 June 13:03
      
      Yes, works fine as a strategy. Trust me. BA is dumping seats in Europe it cannot sell at home, basically.
      - Billy says:
        
        3 Jun3 June 18:29
        
        And we only like seat dumping when it’s in our favour.
Jermyn says:

3 Jun3 June 09:02

Avios are great for short hops.

Using them for internal flights on JAL next year. 4500 avios +£1
In Europe RFS are pretty decent value too, depending on the time of year and availability of LCC fares.

Even on slightly longer flights: I flew CX first class from HKG-HND earlier in the year, availability was excellent and taxes were once again minimal.

It seems that a lot of people overestimate the value of the 2-4-1 voucher, in order to use it, they’ll fly BA metal and pay so much tax that they annul its value.

Ultimately, if you want to fly long haul premium cabins, Avios are not the answer. For that you need AV,AA and US.
- Calchas says:
  
  4 Jun4 June 16:43
  
  Only Y cabins are available on Avios on JL flights, unless on an international itinerary 🙁 But it is true the best value for avios is often not on BA metal, assuming that’s what you need to do anyway.
  
  F with avios and taxes to Asia is a lot cheaper than just purchasing F tickets, particularly if you get avios “for free” because that is the airline your company requires you to use.
- Ryan says:
  
  10 Jun10 June 18:34
  
  Don’t discount the “oneworld Yokoso/Visit Japan Fare” for JAL internal flights. A flat fee for foreigners who book the flights before they enter Japan: http://www.jal.co.jp/yokosojapan/
  
  The flights I got were under half the price of the standard online fares. They also earn Avios and BAEC Tier bonuses. Also, if there is availabilty on the day you can upgrade to “Class J” (The ONLY difference is a bigger seat) for 1000Y (£5.80) and have an extra 30 Tierpoints.
  
  Booking is a bit of a faff; You have to book by telephone (I couldn’t get the online ordering to work) and send a scanned proof of address. But for 20 Minutes work I saved £300.
Martin Tilley says:

3 Jun3 June 09:06

If any of you have seen ‘The Wolf of Wall Street’ you should surely understand why it works this way?

BA ‘sell’ you your Avios stock with promises of the high-life, champagne flights and sun drenched luxury holidays… and then; do everything in their power to get you to retain that stock. They’ve already made their commision on your stock purchase whether it be from BA flight revenue, Tesco, Amex or whatever.

Banks hold cash & stock liabilities for clients on the assumption they will retain them. BA is in a far stronger position of being able to devalue your holding, or even cancel it entirely if they so wish.

What we’re really talking about here is empty seats, and I concede that a plane with empty seats isn’t being as efficient as possible, but having flown BA in the summer months I’ve rarely seen a barren Club World cabin; quite the opposite in fact…
nick says:

3 Jun3 June 09:07

There has been a noticeable erosion of ba availability over the last 24 months. I’ve been a loyal ba customer for years, but the goodwill has run out. Avios earned through ba are only useful when used with other airlines now.

I wonder whether the avios valuation at 0.7-1p should be revisited. Same goes for the 241- I used one on a door to Germany recently because I could find absolutely no use for it otherwise.

I’m contacting Amex to tell them I’m dropping the bapp because I can no longer use the vouchers for anything useful, and I’m going to start flying with Virgin to see if their availability is any better. It’s sad really, but the baec has become a farce.
- Rob says:
  
  3 Jun3 June 09:57
  
  1p is easily done for Euro redemptions, and as hotel redemptions were 0.57p last time I priced it up, that is the floor.
  
  I am currently contemplating a Gold priority redemption to Vegas and even that, at 200k for J, is over 0.6p if you assume £1750 value.
  - Nick says:
    
    3 Jun3 June 11:33
    
    I suspect you do a lot more travelling than most though, so the chances of you finding avios availability on a flight are greater than for others. For example if you are making say 10 flights a year with 5 long haul, you might still be happy if you can use Avios for 2 of the long haul flights and 5 of the european flights. I make maybe 2 long-haul a year, and 5 European flights (employer travel ban!). There is a very good chance that I will not get availability for either of the long-haul flights, and I’d be lucky to get availability for 3 of the European ones. Which is why I just accumulate avios rather than spending them.
    
    I’m not expecting Avios availability for every flight I want to make, even though I am normally very flexible on dates and times. However I do expect to be able to use them occasionally for a flight that I actually want to take, rather than a flight I take simply because there is availability. Last year was a total washout: complete failure to get any availability to the US west coast in a 3 month window in club world or first (and I was happy flying in to or out of any airport on the west coast, or even Vegas and Phoenix); Failure to get business/first (or even premium economy) to Australia in a 6 month window, with or without connections; failure to get any availability for any of the 5 european trips I had. I ended up using my 241 on flights to Frankfurt for a last-minute skiing trip because I was determined to use the thing – and even then I could not get any flights to the airports a lot closer to the alps. This is in stark contrast to say 2011, where I used Avios for maybe 4 trips to Munich, some to North Africa and New York (which is admittedly a route that still has lots of availability).
    
    I thin the 0.57p floor for the valuation is sensible – I’ll use that for now. If the amount of travel I do increases significantly then I’ll think about it again.
swissy says:

3 Jun3 June 09:22

No F or J award seats for two pax to LAS entirely for the next twelve months,
- jhk says:
  
  3 Jun3 June 09:26
  
  no seats on lax flight than you check true Expedia.com and than you can see many times how many seats are free. as we will call it again Drama BA. till they solved this than i will change the name into BA. also it would be nice that Drama Ba will mention when you will be member that the points nearly never can use. than many people will never be member!!