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

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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: