Should you be concerned about losing your Avios and Virgin Points to bankruptcy?

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

Is there a risk of losing your Avios points and Virgin Flying Club points if the airlines go bankrupt? And is it even a realistic possibility?

To be honest, this isn’t an article I wanted to write. However, I am being inundated with emails from readers who are concerned about the value of their points being at risk so it only seems fair to address it. I hope that my many friends at Avios Group, BA, Virgin Atlantic and Virgin Group Loyalty Company take it in good grace.

I have a lot of skin in this game

Let me put my own cards on the table. AwardWallet (sign up here, it’s free) shows that I am currently sitting on 6.1 million points across my family members. Assuming 1p per point of value if spent well, this is £60,000 of value which is potentially at risk.

Avios wing 14

In theory I should be concerned. However, ‘only’ 2.5 million of these are realistically at risk. I define ‘at risk’ as meaning they are airline miles.

I don’t see ANY risk to my hotel points since the hotel chains are now all asset-lite businesses which own virtually no hotels and employ comparatively few staff. IHG, for example, reported a 54% operating profit margin in 2019. It throws off so much cash that it literally has no idea what to do with it. Since 2014 IHG has given $3.6 billion back to shareholders ON TOP of their usual dividends. They are going to have a difficult year, and may need to delay any loan repayments due this year, but it won’t get worse than that. Occupancy rates in China are already looking strong again after lockdown was ended.

I don’t see any risk to American Express Membership Rewards points either. Amex isn’t going anywhere in a hurry.

That still means, of course, that I have £25,000 of value ‘at risk’. Should you – can you? – bail out?

I’m not, for clarity.

Avios wing 12

Should you cash out your Avios balance?

No.

The obvious reason is that IAG is sitting on around €9 billion of liquidity. If things get so bad that IAG goes bankrupt then we will pretty much be at the end of the world as we know it, living in caves, and your Avios will be the least of your worries.

To be fair, I should highlight the fact that British Airways has recently had its debt downgraded to ‘junk’ status although this report assumes that IAG would let BA, its biggest operation sink in order to save the rest of the group. In reality, Virgin Atlantic, Norwegian and easyJet will collapse long before British Airways and, by then, the Government would have no choice but to act.

Let’s be more practical for a minute.

I generally value an Avios at 1p and, as my ‘what is an Avios worth?’ article shows, you should actually do a lot better.

If you want to cash out now in panic, however, you obviously won’t be booking BA flights which is where the best value is usually found.

There are other issues too:

you can’t realistically book partner flights. It is likely that tickets on, say, Qatar Airways would be cancelled if IAG went bankrupt as Qatar Airways would not be paid.

you can’t realistically book hotels using Avios. As the hotel won’t be paid until after your stay, your room will almost certainly be cancelled if IAG disappears.

the same goes for ‘experiences’ rewards and Avis car hire rewards

Assuming that you don’t book a hotel on Avios for a stay over the next month, the ONLY easy way to cash out Avios TODAY, with 100% certainty of receiving something, is to order a pile of wine via Laithwaites via this page. The order is executed immediately and you’ll have the champagne, wine or beer within a couple of days.

It’s a terrible deal though, as is redeeming Avios for hotels or car hire.

You are getting around 0.5p per point, compared to 1p+ if you eventually redeem them for flights in premium cabins. Redeeming in panic and losing AT LEAST half the value of your points is not smart, especially given the low risk of IAG hitting critical trouble.

should you be spending all your virgin flying club miles due to coronavirus

Should you cash out your Virgin Flying Club points?

My answer is the same for Virgin Flying Club points, with caveats. Non-flight redemptions generally come out at under 0.5p per point so you’re losing a lot of value.

There are two caveats here though:

the risk of Virgin Atlantic going bust is substantially higher than with IAG. It is compounded by the fact that Delta, its minority shareholder, is restricted by European rules in what it can do since it is already at its 49% ownership limit. The sums required are far beyond what Sir Richard Branson could rustle up. The Government has just rejected Virgin’s first application for a £500 million bailout.

Virgin Flying Club points don’t have real value until you have enough for a long-haul premium flight. If you have a few hundred thousand Virgin points then, yes, they are probably worth 1p each. If you have 20,000 Virgin points, they are certainly not worth £200 because there is no way of using them for a premium redemption.

There is another quirk. Your Flying Club points are not owned by the airline. They are owned by Virgin Group Loyalty Company, a standalone business which is jointly owned by Virgin Group and Delta Air Lines.

Does this make your points more or less safe? It depends on how well capitalised Virgin Group Loyalty Company is. Does it have enough money in the bank so that it could fund a ‘run’ on redemptions? I am guessing it doesn’t. My guess is that it was set up with only a modest cash balance on the basis that – month to month – money coming in from selling points to the airline and other partners would match money spent on redemptions.

The easiest options for emptying your account would be:

1:1 into IHG Rewards Club points (minimum 10,000 points) – gets you 0.4p per mile based on my IHG valuation

2:3 into Hilton Honors points (minimum 10,000 points) – gets you 0.5p per mile based on my 0.33p Hilton valuation

£50 Virgin Group voucher for 12,500 miles – gets you 0.4p per point

There are various hotel and partner flight redemptions too, but as with IAG it is likely that your booking would be cancelled if Virgin Atlantic / Virgin Group Loyalty Company went down as there would be no-one to foot the bill afterwards.

If you want to redeem for any of the above, DO NOT CALL due to long queues. It is easier to use the SMS text message service on 07481 339184. Note that it will take a couple of days to get a text reply. The service operates 24 hours and you MUST reply within 60 minutes of being contacted, even if it is 3am. Failure to reply in 60 minutes means that your case is closed and you need to restart the process.

Conclusion

I’m not bailing out of my points balances. I don’t see any realistic risk in the case of Avios / IAG. Even with Virgin Atlantic, I’m not prepared to take a 50%+ discount on what I should get for my points to liquidate them in a fire sale.

Some people have told me that they might switch to a cashback, hotel or Membership Rewards credit card for the next few months. I can see the emotional reasoning behind that.

Logically, however, it makes no sense. The new points you earn are no different from the points you already have. If you’re unwilling to keep accumulating more airline miles then logically you should bail out of your current balances too. Similarly, if you happy to keep your Avios and Virgin Flying Club points where they are, you should be happy to keep on earning a few more via your cards.

If there is a lesson to learn here, it is one I have been banging on about for years.

Transferable points (ie Amex Membership Rewards, Tesco Clubcard, Heathrow Rewards, HSBC Premier credit card points) are more valuable than non-transferable points (Avios, Virgin points) because you have more options. 1 Amex point is worth MORE than 1 Avios, even though they transfer 1:1, because the Amex points give you a lot more flexibility on top.

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, Virgin Atlantic and Flying Club

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

Phil says:

17 Mar17 March 08:47

I think you down play the likelihood of insolvencies across airline businesses
Marcw says:

17 Mar17 March 09:12

That’s the ideal scenario. But will the real scenario match it,? I don’t think so. We haven’t even reached the worse situation of this COVID-29 crisis. Plus, recovery will be slow and travel behaviour will change, particularly the high yielding business pax. Companies will realise that “Skype/virtual meetings are not that bad” and… Of course, reduced travel.

Also remember HfP team failed to predict the cancellation of the most important travel fair. So take Robs advice with a pinch of salt.
- mr_jetlag says:
  
  17 Mar17 March 12:13
  
  definitely worried if this virus is increasing by 10 every few weeks 🙂
- Lady London says:
  
  17 Mar17 March 18:53
  
  The cat is out of the bag on employers allowing Work from Home now. Even after this settles or we see where it is going it’s going to be very hard for employers to resist WFH.
  
  Unfortunately a lot of other things won’t come back like jobs in good companies that get caught due to lack of liquidity.
  - The Savage Squirrel says:
    
    17 Mar17 March 19:14
    
    On the more optimistic side….
    The clinical staff at my local hospital report that the management have promptly all fucked off a left them to it – and when the NHS realises that it runs better without them….
  - Lady London says:
    
    17 Mar17 March 19:56
    
    conversely, business travel becomes harder to justify as teleconferencing will prove its use…!
Klaus says:

17 Mar17 March 09:24

Agreed, on top of that there is also the question of need. I now have sufficient points for any travel I am likely to do over the next year and a half, so collecting more points is pointless. Switching to the cash back cards makes more sense, maybe in two years we can get a sign-up bonus on the BAPP and Platinum cards again…
Oh! Matron! says:

17 Mar17 March 09:28

Came here to say this.

STOP F*CKING PANICKING PEOPLE

Jesus H Christ. This isn’t a zombie apocalypse.

Points are held by a separate company. If VS go bust, said company can prevent a run by limiting where you can spend the points.

This is why people are panic buying bog roll.

Seriously, stop with the conjecture. That’s for the daily mail brigade, and it’s dangerous.
- Rob says:
  
  17 Mar17 March 11:05
  
  I am guessing VGLC has minimal resources. If the company only has cash in the bank to cover 1/20th of a penny per point, then 1/20th of a penny is all you would be able to redeem them for, so a 95% loss of value compared to today and 50% loss compared to converting to Hilton points.
Robin Henagulph says:

17 Mar17 March 09:39

What the h**l; we are in our 80s, returning to Bermuda and 14 days house confinement so 1st for two, Airportr, Siignature Elite Class (which is great) on miles and spending our children’s inheritance!
- Spursdebs says:
  
  17 Mar17 March 10:59
  
  Good for you enjoy yourselves.
- Lady London says:
  
  17 Mar17 March 18:55
  
  I can hear the music and voiceover from the old Hamlet cigar ad playing.
Roy says:

17 Mar17 March 09:41

We pretty much are at the end of the world. Increasingly strict travel restrictions, and no exit strategy. Everyone knows that as soon as you lift the restrictions, it will all just get worse again.

If nothing changes the current restrictions could go on for years.
- Nige67 says:
  
  17 Mar17 March 09:51
  
  Yes, unless/until there is a vaccine.
  - marcw says:
    
    17 Mar17 March 10:04
    
    Do they work? there wasn’t one for SARS, MERS or other coronaviruses.
    - Rui N. says:
      
      17 Mar17 March 10:31
      
      There is a vaccine for SARS. Never got to the final approval stage because the company gave up on it (when people stopped catching SARS), but the vaccine exists – and the company is using it to work on one for this virus.
      - marcw says:
        
        17 Mar17 March 10:41
        
        Let’s talk in 12-18 months again about this.
      - Roy says:
        
        17 Mar17 March 10:58
        
        @marcw: The human immune system does an extremely good job of killing the virus. Given that most people recover – and even critical cases recover with nothing more than supportive treatment (there is no known antiviral treatment at this time), it’s clear that the human immune system can kill this virus very effectively.
        
        Given that, I think there is reasonable hope that a vaccine can be produced. Of course, depending on how much the virus mutates, it may that we need to produce a new vaccine each year, like we do for flu…
        
        But nothing is certain.
    - Roy says:
      
      17 Mar17 March 10:41
      
      Huge amounts of work is going on on vaccines, although most (not all) scientists are sceptical it would be possible to get a vaccine to the point of widespread use in less than 12-18 months. (A few are hopeful we could do it quicker, but not many.)
      
      The problem is that there’s no guarantee that we will have a vaccine even in 18 months, although we hope we will. It’s really impossible to know when or even whether an effective vaccine will be found.
      
      Effective antivirals are another tack, though. If we have antivirals to treat covid-19, then it becomes much less scary. Potentially we can start to relax the restrictions, then, if we know we can treat people who catch it, and bring the death rate down massively. There seems to be more hope that we might have something on that front in a few months – particularly if we’re lucky enough to find that one of the existing antivirals is effective. But again – no guarantees that this will happen quickly, if ever. Think about how many years it took to develop effective anti-viral treatments against AIDS.
  - Novice says:
    
    17 Mar17 March 10:10
    
    I read US are doing human trial as they think they have developed something.
    
    But a lot of countries are working on it.
    
    May the force be strong with the scientific community.
  - Rob says:
    
    17 Mar17 March 11:02
    
    Here’s a better idea. Why not deliberately expose healthy people under 50 to it? Inject them and they immediately begin 14 days isolation. They can be monitored during this time for the (very unlikely) risk of complications. After 14 days they are tickety book and can become useful to society knowing they are at no risk of being reinfected or infecting anyone else. I would happily do this.
    - Roy says:
      
      17 Mar17 March 11:30
      
      Unfortunately, the death rate is rather too high even amongst healthy people who aren’t very old for this to be anything like a sensible thing to do.
      
      Plus, we don’t even know how long the immunity will last.
      - Rob says:
        
        17 Mar17 March 12:07
        
        What do you mean? It is 0.9% for 40-50 year olds and even that is based on a % of tracked cases, plus some will have had underlying issues.
        
        The number of under 19’s globally who have died, according to a chart I saw on Saturday, is ONE.
        
        Probably a bigger chance being hit by a car crossing the road to the doctor 🙂
    - marcw says:
      
      17 Mar17 March 11:35
      
      there are reports from Japan that suggest infected patients don’t develop immunity.
      - Rhys says:
        
        17 Mar17 March 11:39
        
        General consensus is that it provides at least short-term immunity in the majority of people, though
      - marcw says:
        
        17 Mar17 March 11:50
        
        @Rhys, its not a consensus. It’s an assumption (sadly). Eve the CDC in the FAQ about COVID-19 writes:
        “Can people who recover from COVID-19 be infected again?
        
        A: The immune response to COVID-19 is not yet understood. Patients with MERS-CoV infection are unlikely to be re-infected shortly after they recover, but it is not yet known whether similar immune protection will be observed for patients with COVID-19.”
      - Roy says:
        
        17 Mar17 March 13:15
        
        Few people think immediate reinfection is typical. WHO are correct, though, to say that (like most things about COVID-19) we just don’t know yet.
    - jac says:
      
      17 Mar17 March 14:54
      
      Half of the people in hospital in Belgium and Holland are under 50 and many without underlying health problem. It is clear that the statistics in Italy are heavily scewed against the eldery when 25 % of the population is 65 +
      
      If the risk of a flight crashing at take off was 0.9 %, you would see in normal times 15 planes crashing in Heathrow on a daily basis…. How many people would still decide to fly?
    - Lady London says:
      
      17 Mar17 March 18:18
      
      You mean the Boris plan up to 2 days ago except Boris was doing it in the community?
- Paul Pogba says:
  
  17 Mar17 March 09:55
  
  Possibly false hope, but hope nonetheless: https://www.news.com.au/lifestyle/health/health-problems/coronavirus-australia-queensland-researchers-find-cure-want-drug-trial/news-story/93e7656da0cff4fc4d2c5e51706accb5
  - Roy says:
    
    17 Mar17 March 11:07
    
    Chloroquine and Kaletra.
    
    There’s definitely hope. If we can find existing antivirals that work against this virus (or other existing drugs that have antiviral effects against it) then that’s a big win, because we’ve already used these drugs to treat other diseases (in this case Malaria and HIV, respectively) and hence already know that they are safe.
    
    There are a lot of trials going on at the moment to see whether these and other antivirals really work. Because most people recover by themselves (the virus is killed by the immune system) it’s hard to know whether the drugs really cured them, or whether they made no difference. Could just be people seeing what they want to see….
    
    But there’s definitely hope…
- Lady London says:
  
  17 Mar17 March 18:14
  
  Governments will have to lift restrictions at some point. As time goes on there will be more reluctance to repeat restrictions due to economic effects. This would be overcome and there would be further later periods of restriction if, say, next winter the virus resurged or mutated to become more widely deadly.
  
  This period of restriction is about governments trying to slow spread to try to get facilities in place to treat more people who need hospitalisation, breathing assistance etc and given that will recover. Once facilities have been ramped up to deal with greater numbers of severely affected people governments and populations will resist further periods of restriction except as above.
  
  People won’t talk about it but everyone will know there will still be a % of people who still won’t receive access to treatment, who would survive if treated, and will die or be left with reduced health as a result.
  
  I hope the British government spends enough but I suspect it won’t be done as effectively as it should be. I expect the German response in their country to be much more effective.
  
  Business will need support, there will be macroeconomic consequences that may not be good. We can also be sure that the costs of all this wil be socialised i.e. more tax.
Leo says:

17 Mar17 March 09:46

@Rob,
Ignoring a bankruptcy scenario, what are your thoughts (call it speculations) as to a major devaluation of Avios / points – be it by way of increased cost of redemption or restricted availability (max cash seats)?
- Rob says:
  
  17 Mar17 March 11:03
  
  Unlikely.
jc says:

17 Mar17 March 09:48

Agree. It’s also diversification. Perfectly logical