The value of Part Pay With Avios

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This topic contains 19 replies, has 10 voices, and was last updated by  Bath_VIP 25 Oct 2018
at 12:46
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Viewing 15 posts - 1 through 15 (of 20 total)

  • Bath_VIP
    Participant

    Searching for flights this summer to the States got me thinking about the intrinsic value of part pay with avios (PPWA from now on). I know PPWA has a bad press due to the apparent poor rate of return but I have always felt that people are not taking into account two factors. First, you continue to collect avios and second, it can be used on practically all flights. I thought the following example would be of interest to people.

    Let’s assume you make regular flights from Heathrow to New Orleans (as I am now doing) in business class and you are bronze tier in the BAEC. You would earn 16.2k avios plus 1.25 avios per £ spent assuming you have a Lloyds Amex card. So if your flight costs £2000, you would also get another 2.5k avios making a total of 18.7k avios. At the moment in the sale, you can see flights for £1600-£2500 return assuming you are able to book in advance.

    If you were to use PPWA with a booking, 18.7k avios works out at about £120 per return flight. So by using PPWA on every booking, you would enjoy a permanent £120 off every return flight without any net loss or gain of avios.

    If you wanted to use avios to buy this flight it would cost you £730 + 125k/150k avios for a return flight. Based on the data in the previous paragraph, you would have to take between 7 & 8 return flights before you had enough avios for this redemption (assuming you earn avios from no other source).

    The intrinsic value of PPWA over standard redemptions therefore depends on the average fare you are paying for your bookings. It is the difference between PPWA per flight as above and the saving on the redemption booking divided by the number of flights needed to earn the avios plus your redemption flights. If your normal fare is £2000, the saving is £1270 and divided by 8 returns say, this works out as just under £160 per return flight which is £40 more than the typical PPWA.

    But of course, you also have to factor in that availability for the redemption booking may not be there on your preferred day where PPWA is available all the time. Is the difference in availability worth £40 per flight? In my opinion it is worth more than that so PPWA wins out overall. Secondly, if you are travelling this route only twice per year, you will have to wait 4 years before you get your “free flight” whereas PPWA is available now.

    Clearly the key to this calculation (which is not difficult to do) is the average fare you are paying. I have set up a little spreadsheet tool to do this and for my New Orleans example, I find the following outcomes.

    At £1500 return, PPWA is saves you £28 per return flight compared to a redemption booking
    At £2000 return, Redemptions save you £32 per return flight compared to PPWA
    At £2500 return, Redemptions save you £92 per return flight compared to PPWA

    As you can, for every £100 increase in the average fare, PPWA loses £12 compared to outright redemptions. The financial break even point is £1733 return but given the wider availability and immediacy of PPWA, I would argue the true break even point is £2000 return, a figure that is eminently achievable in my experience with advance booking.

    Of course I have not taken into account the need to acquire a minimum of 18k+ avios before you can start using PPWA but such an amount can often be acquired through straight credit card spend or even a sign-up bonus.

    So I am now convinced PPWA is the better option and its bad press is undeserved but you may have a different view!


    capetonianm
    Participant

    Thank you for going to that trouble and for sharing, that is indeed useful information. I have done similar calculations (on the back of an envelope!) and arrived at similar conclusions, in that PPWA is worth an average of 2% (but it’s incremental) against total spend. Because I don’t fly much on BA, I’ve rarely had enough Avios for a full redemption and have used them for PPWA which seemed good value.

    When I worked in Revenue Management for an airline, I worked out the rough value of ‘miles’ against full redemption and it was roughly 0.07% against spend – I always thought it was pathetic that people locked themselves into ‘loyalty’ programmes for such a paltry return. I accept that there are other benefits beside the redemption flights. For me the best was my LH Senator card which gave me 40kgs. baggage allowance regardless of class of travel, meaning I could carry a couple of cases of wine from South Africa on every trip.


    SwissExPat
    Participant

    I expect that MartinSynclair will chime in here on the value of Avios. I have a view that 1,000 Avios have a ‘cost’ of about stg13. The actual ‘value’ is a little more tenuous. If you use them to travel in Europe on short haul redemptions, then they have a value of what you aviod having tp pay against a normal revenue ticket (adding in that these tickets have a baggage allowance also !!)

    I ten to use mine as Martyn does, short haul in Europe where the value is significant.

    I must look at the Part payment calc and see if further value can be gained.

    An interesting question would be what value BA’s auditors attach to the outstanding Avios at each year end?


    Bath_VIP
    Participant

    Yes using avios for European travel is another option for value. I don’t travel to the continent enough to get that value so PPWA is the alternative for me.


    MartynSinclair
    Participant

    “I expect that MartinSynclair will chime in here on the value of Avios.” – if you insist SwissExPat…

    Yes I mainly use avios for European reward bookings. however, since the introduction of the HBO fares, i tend to check fares before using avios. If I can get to Europe for £40 each way, i will not use avios.

    However, if the scheduled fare is £150+, avios is used each and every time..

    Someone like Tim F or Capetonianm will be able to confirm, but the fare range for European tickets that avios can be used for is somewhere between the cheap HBO fares up to around £400 for economy…. So using avios correctly is a must….


    FDOS_UK
    Participant

    I use Avios for booking reward flights for holidays and city breaks in Europe, e.g. last year we had a great 7 day break in Nice – a month ago, we had a 3 day city break in Lisbon.

    At £140 (for two), these flights are great value, especially as we can visit the Flounge or CX lounge and enjoy the hospitality as a nice bonus to the break.


    nevereconomy
    Participant

    Life is too short for this….


    FDOS_UK
    Participant

    Life is too short for this….

    Life is never too short for a nice city break 😉


    capetonianm
    Participant

    Life is too short for this….

    Which is why I don’t bother, and as I said earlier : ” I always thought it was pathetic that people locked themselves into ‘loyalty’ programmes for such a paltry return. ”
    It’s an exercise I have had to go through in the past in a professional capacity, but personally I’ve never bothered with it.

    Capetonianm will be able to confirm, but the fare range for European tickets that avios can be used for is somewhere between the cheap HBO fares up to around £400 for economy

    I would guess so but I’ve never analysed it to that degree.


    MartynSinclair
    Participant

    @capetonianm

    “Which is why I don’t bother, and as I said earlier : ” I always thought it was pathetic that people locked themselves into ‘loyalty’ programmes for such a paltry return. ”

    Having the ability to fly virtually for free, these sums are not paltry to someone running their own consultancy business….

    Asia run – £1,250 in business (ok, the product is dated, but the seat allows me to sleep for most of the flight) + it comes with 36,000 avios = 8 north Europe sectors.. work out the maths when doing that 3 or 4 times a year and similar USA runs…

    I wonder how travel budgets would alter if multi nationals demanded avios earned on business trips were used on business trips. I agree, this is not practical for longhaul, but for shorthaul, avios tickets are easy to use…


    esselle
    Participant

    Agree with the Europe short break comments.

    Just booked CE to Malaga for four day break for 30k Avios, and got free companion ticket (using AMEX 241 which was about to expire), for the princely sum of £97.80


    miningguy
    Participant

    Having the ability to fly virtually for free, these sums are not paltry to someone running their own consultancy business….

    Could not agree more. For us, running a small consultancy, the Avios we earn enable my family to fly more or less for free for short haul. (Long haul doesn’t seem to work out so well for us either). BA’s OnBusiness also allows us to “double dip” on miles too (although for reward flights they aren’t as generous).

    So in short, the Avios mileage scheme keeps us very loyal to BA (although we will always reject absurdly high fares). Would we prefer a better service, newer planes etc? Yes of course, but the resulting “free travel” is worth the short term discomfort. If the Avios scheme was to become less generous…..or if we became less cash constrained, then we would not hesitate to look elsewhere…..BA with the cut backs have not done much to endear us recently!


    capetonianm
    Participant

    Martyn :
    My comment was not meant to be snide and I hope you didn’t take it that way (I don’t think you did). The point I was trying to make was that whilst some of you obviously travel enough and have worked out how to get the mileage schemes to work for you, I rarely achieved that. I often found people saying : “I’m going to travel on airline ‘x’ to get the points” even if another airline would otherwise have suited them better. Given that at the time the value of the points was generally so low, it seems like an exercise is futility, or should I say, a pointless exercise!

    I was also a self-employed consultant so I do appreciate the need to consolidate expenses.


    MartynSinclair
    Participant

    I wish we could have some smiley icons to add to the end of some posts… to ensure they are interpreted “in the possible taste” 🙂

    Interestingly, my 21 year old, who is an infrequent traveller recently got excited when he realised he had enough of those avios thingies to go to Amsterdam for free….


    FDOS_UK
    Participant

    capetonianm

    I agree with you on the futility of becoming too attached to any scheme.

    At present, BA suits me to the ME and I’ll take the avios and spend them on holidays.

    But I’m always open to different routes/carriers and CHC (cold hard cash) is always exchangeable, so I won’t overpay with anyone.

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