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Skift spoke with IAG Loyalty CEO Adam Daniels about the program’s plans to partner with more airlines and other businesses in the loyalty space.

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IAG Loyalty, the company that owns and operates Avios, is probably one of the most overarching programs in the airline industry — and it wants to continue expanding. 

While Avios houses IAG brands like British Airways, Iberia and Aer Lingus, the frequent flyer currency is beginning to partner with other airlines outside of IAG. So far, Avios has signed on Qatar Airways and Finnair. The program is also in talks with other carriers, IAG Loyalty CEO Adam Daniels told Skift. 

The loyalty program also reported a 17% increase in new members in 2023, translating roughly to 4.9 million customers. 

Skift spoke with Daniels about his ambitions for Avios and trends in frequent flyer programs as part of our Leaders of Travel: Skift C-Suite Series.

This interview has been edited for length and clarity. 

A Growing Number of Partnerships

Skift: How has Avios been expanding and adding more partners to its program?

Daniels: If you think about our partners and our partnerships, we’ve probably added more big partners in the last three years than we have in the previous 10. And the likes of Uber, who are now part of our ecosystem and are issuing Avios. You’ve got a number of other financial services partners we introduced. Barclays as a partner a few years back, Caixa in Spain. So a lot of partners have joined the program in the last few years.

And why is that? I think the reason is because they’re recognizing the power of the currency and what it can do for their businesses as well as what it can do for their customers to be on it.

What happens is you get customers that will switch to the individual partner that we’re talking about because the other is a part of the Avios currency. And we also see that customers tend to spend more on average. So their basket size, if you like, is bigger and those customers stay with the brand moving forward. So you can demonstrate that. And we do demonstrate that to prospective partners. We’ve got a couple of partners in the wings, hopefully in the next couple of months that will keep growing on that side of the business. 

Skift: Could you tell me a little bit more about your ambitions to make Avios a global currency?

Daniels: It is very much one of our ambitions to make the currency global. And I choose my words carefully there. It is the currency we’re talking about. And we think we’re on the path to deliver that. We’ve obviously signed relationships with Qatar Airways. Then most recently, with Finnair as well. They’re the first two outside the family. 

The model is slightly different to probably other approaches historically in the travel sector and aviation. Because what we’re essentially doing in this model is that people can adopt the Avios currency and customers can move the currency between airlines.

So, [British Airways] Exec Club members redeeming Qatar has gone up four fold, five fold. And we’ve seen a lot of Avios move between the two carriers. Now we’ve just implemented Finnair. We did the exchange about two-and-a-half weeks ago. And we’ve seen a similar uptick in customers moving their points and redeeming on each other’s metal. So very early days with Finnair, but certainly a really good start that we’re seeing. I think we’ve seen over 150 million Avios being exchanged in the first week, which is well above what we expected.

We’re in active discussions with [a few] carriers at the moment. And we think we have a model that works for other players in this. One thing I would say is that it doesn’t have to be airlines. We’ve been talking to hotel groups, for instance, and other players in this market who are interested in a loyalty proposition.

Concerns on the Devaluation of Frequent Flyer Miles

Skift: At least in the U.S., there has been a lot of talk on how airlines have devalued miles amid inflationary pressures. What do you make of this trend?

Daniels: This is always an emotional subject. It’s something that you’ve seen a bit of, and as I said, you’ve seen a number of carriers increase their reward charts recently. I think that’s not surprising given the demand that we’re seeing for airline seats and the commercial yields that are going up. So there is a pressure there.

We’ve seen airlines move I think more to earning points on your spend. So how much you spend is how much you get. We’re also seeing carriers trying to offer more use of points and the ability to use those points in different ways. And some of those deliver slightly higher redemption costs. I think the key thing here is about enabling customers to get perceived and get value from their reward. So they really feel like getting something that’s really rewarding on the back of that. And yes, rates may need to move if that makes sense commercially, but they also need to make sense for the customers, too. And that’s a real balance that we all have to do going forward.

One of the criticisms of loyalty programs historically has been that it’s been easier to collect [miles] than it has been to use. That is something we’re certainly determined to work on and change. 

Skift: Do you think the shift toward a spend-based approach is fair to consumers?

Daniels: It’s always difficult to strike a balance in terms of how you should award.  I’m not sure that the warning on distance is necessarily the most sensible approach, which has been the historic solution.

We think that the [spend-based] approach makes sense for us. We think it’s fairly clear for customers. They understand that. I think one of the problems with the older systems is that customers didn’t understand it. 

Flying is the minority of points issued. About two-thirds of the points issued are issued by our financial services partners, our travel partners, our retail partners. And that’s where customers look to boost their points balance. That’s where we see the big opportunity for our customers. 

Airline Consolidation and Loyalty Programs

Skift: There have been talks about further consolidation in the U.S. and European airline industries. How will this affect loyalty programs? Are there any concerns about competition?

Daniels: You’re going to see greater integration and greater cooperation between loyalty programs, particularly in the wider airline world in the alliances. I also think you’ll see greater cooperation coordination across industries as well.

In terms of the consolidation, I think there will be an element consolidation here and I think the stronger programs will probably work more closely with other businesses going forward and I think that will be a trend that we’ll see in the loyalty space.

Read more from our new Leaders of Travel: Skift C-Suite Series here.

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Tags: aer lingus, british airways, finnair, iag, iag loyalty, iberia, jet stream, loyalty, qatar airways

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