Late Sunday night, a post on View From the Wing caught the point and mile blogosphere by storm – there appeared to be a massive devaluation of Iberia Avios and as a result many people, including myself, thought British Airways Avios would shortly be devalued. This is because British Airways Avios and Iberia Avios are very closely tied, to the point you can transfer Avios freely between each program. This would obviously be terrible news as British Airways Avios are unique and great for direct, short to medium flights in which legacy carriers would charge 25,000 to 35,000 miles roundtrip but with Avios, the cost would only be 9,000 to 25,000 miles roundtrip. The Iberia chart showed these awards jumping up in cost to 19,500 to 30,000 miles roundtrip.
Well, the good news is that Iberia did not actually suffer a devaluation last night. These rates by Iberia have actually been in effect for 18 months. Instead, they actually just published their award chart online for redemptions on partner airlines, which apparently was not available previously. Furthermore, experts who have been in the game for decades, weren’t even aware of a separate Iberia award chart for partner redemptions. However, this doesn’t mean a devaluation of British Airways Avios is out of the woods. In fact, I am recommending that if you have flights to book and plan to use Avios, book them soon. Here’s why:
1) British Airways Is Due For a Devaluation – It has been over three years since British Airways last updated their award chart which is right about when a devaluation could be expected. Furthermore the highlights of the current Avios program, which is redeeming 4,500 miles for $300-$400 flights, isn’t sustainable. You know the saying it’s too good to be true – well it applies here, and Iberia actually shows us that. That’s why Iberia charges the same 4,500 miles for only British Airways flights but a lot more for partner redemptions since these cost the Iberia more money (it costs more to pay American Airlines for partner redemptions, especially on expensive flights as compared to its closely linked partner British Airways which doesn’t cost Iberia as much).
2) There Is A Clear Points Arbitrage Opportunity Between Iberia & British Airways and It Can’t Last – I don’t have any anecdotal evidence to support this theory but it simply doesn’t make sense for Iberia to have a higher priced award chart when you could simply avoid it by transferring Avios to British Airways. I refuse to believe this is an intended “benefit” between the two closely linked programs because it doesn’t make sense. Yes, I know its been going on for 18 months but as exposure increases, I can see them closing this loophole either by not allowing transfers or by raising the British Airways Avios award chart to be more competitive compared to Iberia’s. And I think the latter is more likely to happen first.
3) (Most) Miles Are Illiquid – If there was a huge devaluation and you couldn’t use the miles for travel, as a last resort you could redeem them for that toaster oven or an overpriced gift card to Applebees but that’s not why you got the miles in the first place. You can’t easily convert your miles to cash without losing a TON of value. For example, you could redeem 52,400 Delta Skymiles for a pair of Bose QuietComfort headphones which retails for $269. If you wanted to sell then sell them to “cash out”, you would be hard pressed to get more then $225 after selling fees while those same miles would cover two domestic flights which could easily be worth $400-$1000 in value. Use miles for their intended purpose.
4) It’s Easy and Cheap to Cancel a British Airways Avios Award – With British Airways Avios, you can either pay a $55 cancellation fee (which is extremely reasonable compared to other airlines) to get both the miles and taxes you paid on the award flight back or you could do the “free cancellation” online in which you just get the miles back but not the taxes. So if you booked a Chicago to NY award flight, the taxes paid would be $5.60 and in this example, you are obviously much better using the free cancellation and losing the taxes paid. Your loss would be $5.60 which I would gladly pay to hedge against a massive devaluation.
The truth is no one, even the “experts” in this game, know what or when a potential devaluation could happen. It could be weeks, months, years or it could be tomorrow. We simply don’t know and that’s why its always best burning miles sooner rather then later. I’m not saying spend Avios on frivolous flights you really didn’t plan to take but make a more conscious effort to use them now. Remember its better to be weeks, even months early rather than a day late to a devaluation.
And to prove to you I follow what I preach, the following screenshot is my current Avios balance of 656. I ended up burning 20,000 Avios a person for a roundtrip flight to Antigua in March next year but I will have an Award Trip Breakdown post on this redemption so look forward to more details in that post coming soon!