Dynamic pricing: your best or worst friend…
The consensus on points is very simple: they’re complicated. Between finding seats, knowing the amounts needed and the airlines you can use them on, using points is enough to give even the brightest collectors a serious headache. IAG, the parent company of British Airways, AerLingus, Iberia and a major player in the international air travel game has more than hinted at a mercurial at best future for “Avios”, the points currency of British Airways and it’s partners.
This all centers around the amount of Avios points you’ll need to spend to fly. At present: British Airways, Iberia and AerLingus have a perfectly imperfect, simple system for using points. Seats are either available using miles- or they’re not. If they ARE available, there are only two prices you can potentially pay: peak and off peak. If a seat is available, off peak will always be a set number of miles and it’s the same for peak. There’s an easy calendar explaining which dates are peak and off peak, as well. It’s as simple as yes and no- and there are set values for the amount of points you’ll need, so you can set goals and plan. You know first class from London to New York is 68,000 points one way off peak – and you plan accordingly.
Dynamic pricing is entirely different. The number of miles you’ll pay will vary far beyond simple “peak” and “off peak” pricing for a flight. The points you need could vary daily by tens of thousands- for the exact same flights. One day in the distant future it’s 68,000 points, yet tomorrow the same seat costs 680,000 points.
Related: Here’s how to get emails when the seats you want using miles are available.
Levels, Layers And Potential Complication
Those in favor of dynamic pricing for using points have one strong argument: people can use points when they want to. There’s more “choice” and less red tape. But it’s not nearly as peachy as it sounds for most customers, or at least the ones who earn a non astronomical amount of miles each year. Rather than seats simply being available or NOT, there will be varying prices to pay in points. Demand will largely drive the price in points, much like paying with cash. The more popular the day, the more points you’ll need. On a day to day basis, prices in Avios points could theoretically range up to 10x more than the previous “standard rate”. Of course, the number of points needed could potentially go down for extremely “off peak” dates too. At it’s best, it could be a two way street. The grave danger here, is that the old, widely accepted rates using points would likely become an increasingly rare treat for customers traveling on Christmas Eve.
Dynamic pricing is often an underhanded way to charge more miles for the things people really want. For example, some might enjoy being able to spend 200,000 miles one way per person for business class to a peak destination during spring break when the same flights in todays system would cost 50,000 points or simply not be available. This system giving increased flexibility, but how many people can realistically do that, especially on an aspirational level?
And even if they can, should they?
Alex Cruz, British Airways Chairman & CEO has hinted at this direction before. In an interview earlier in the year, Cruz referenced an example where points would be more like cash- where prices in points would vary, based on demand and other factors. The big issue from a consumer standpoint is that loyalty would be less valuable or at the very least- less predictable. Charging 68,000 Avios miles for a one way first class ticket from London to New York, a rate customers currently enjoy is a dependable way to reward loyalty. But moving to a dynamic system, where rates could jump to 680,000 points for the same one way first class ticket, based on demand or price du jour could cloud that loyalty proposition. It’s really a way to largely devalue miles, under the guise of giving more “choice” with which to use our points.
To be fair: I don’t spend my points on British Airways reward flights with any regularity. I buy cash tickets and upgrade using points, or I spend on partners, like 40,000 points from Australia to New Zealand in business class on Qantas. Lots of people also value being able to take cash off any ticket, through part pay with Avios points. The more you can pay, the better for some people.
Introduction In 2018?
The document, which can be viewed in the “Capital Markets Day” presentation found here, points to an intended target as early as 2018. These changes could be gradually rolled in, or introduced in a sweeping new program. Either way, expect plenty of advance notice to be given. For now, the only programs which offer this narrow, treacherous form of loyalty are found with U.S. airlines – and so far, they’re not very popular. One such program, Delta Airlines has purposely removed their loyalty charts, giving customers no idea what any given flight “should” cost using points. Those in the know can “guesstimate” but the shell game is constantly moving. For now, we can only watch and hope the rates we know today, are still the rates tomorrow…
But Why Do This? You Can Already Use Points For Any Seat…
Here is the big, kicking question: why not just further develop part payment with Avios points? If dynamic award pricing is introduced, it would be almost admirably transparently in it’s negative impact to a perfectly imperfect program for using Avios Points. Why? Because a flexible option to use points whenever, on any ticket already presently exists. If availability for traditional methods of using points does not exist, anyone can presently apply points in varying sizes toward a paid ticket using “part pay with Avios” at check out. On these tickets, unlike tickets acquired purely using miles, these part payment tickets earn points and elite status points, while allowing total flexibility. Introducing a “more flexible” system, when this already exists- is nonsense.
“…some might enjoy being able to spend 200,000 miles one way per person for business class to a peak destination during spring break. These seats likely wouldn’t have been available at all under the current system- but realistically how many people can do that?”
Way more than you imagine is my guess. I’m in the camp who is hugely frustrated trying to use miles when I want to. Who cares if Saver rates are offered if you can never take advantage when you need/want to travel? As such, I’m forced to carry miles/points in multiple programs hoping I can find one that might have availability.
If it takes dynamic pricing (and we know in advance that means being shafted) to get a seat, at least it’s an option that one can then either accept or not. The alternative is paying hard cash for flights – that’s anathema to me.
Your points are very valid. My thoughts:
1) There are tons of very high net worth people who earn 10,000+ points per month either via BA, Chase, Amex or SPG. Plus frequent flyers who as you say prefer flexibility.
2) I never think finding avail is as bad as people say, because the tools to set alerts, get emails and be alerted to when seats do open up, either far out or in the nearer term are better and better. It’s in the last couple years actually gotten better, i’d argue.
3) dynamic pricing is absolutely a shafting, but I see the “part pay with avios” as the solution here. If flexibility is king, the part pay with Avios option is a way for people to continue earning miles, while using points as a rebate directly related to cash value. No need to complicate the mileage program as well.
Cheers.
Avios points are very good, as of now, to book ‘off-peak’ flights intra Europe. Business class for 7,500 o/w and $40. Not bad. Also, using them intra-Asia flights is a good deal.
Death of Eu credit card charges.
Fingers crossed I can get lhr – lax first class with 2-4-1 and plenty of points.
If a set number points and cash calculation is no longer available I suspect avios will only be for flyers.
I hope Virgin tie do a new offer to undercut BA.
“treacherous form of loyalty“ sums it up completely. But… Alex Cruz. This doesn’t surprise me one bit. The direction in which he is taking BA is so disappointing.
I save Avios through my Tescos shopping and trying to save up for a economy seat to see my son in Canada. I can never seem to find a seat although was offered £150 off the price of my ticket.. I just want to be able to just use my avios to buy a ticket… Oh I wish I was a regular user with over 100,000 Avios points spare but as a hard worker and very careful shopper it is looking more unlikely I will ever be able to get a ticket to visit him….
Agree, it would no longer be a loyalty scheme. I feel sure they will head this way, which will unlock a whole lot of existing loyal customers like me, who no longer need to remain loyal because of Avios, back into the marketplace. The competition will be the winners. Then in 5-10 years they’ll go back to a proper loyalty scheme. How about they come up with something truely innovative on the loyalty sector instead of just comping the poor American competition.