IAG’s €1 Billion Loyalty Ambition Depends More on Banks Than Airlines

Key Points

• IAG Loyalty wants to roughly double operating profit to over €1 billion, building on more than £500 million last year and an 18%+ margin that already contributes nearly 12% of IAG's group operating profit.
• Its model is diversified rather than card-dependent: over 80% of revenue comes from external partners buying Avios (two-thirds from financial services), and selling an Avios to a bank earns roughly twice the margin of selling to its own airlines.
• Engagement drives value—an enrolled member is worth 5x a non-member and 11x once collecting beyond the airport, with multi-partner collectors accounting for about 69% of total Avios issuance despite being a minority of active customers.

Summary

IAG Loyalty (IAGL), the business behind the Avios currency and British Airways Holidays, is targeting more than €1 billion in operating profit in the medium term, up from over £500 million last year (an 18%+ margin and nearly 12% of parent IAG's operating profit). Unlike U.S. airline loyalty programs that depend on one or two dominant credit-card deals, IAGL has built a diversified ecosystem: over 80% of loyalty revenue comes from external partners buying Avios—two-thirds from financial services across 17 co-brand card partners and 23 points-to-Avios bank relationships—and the company earns roughly twice as much (40-50% margins) selling an Avios to a bank as to its own airlines. Management's growth plan rests on a market tailwind (more IAG flying plus a UK credit-card market growing 5%+ annually) and three internal levers: acquisition and activation, deeper engagement, and geographic expansion. Customer economics reinforce the strategy—an enrolled member is worth 5x a non-member, rising to 11x once they collect away from the airport, and multi-partner collectors (a minority of the base) drive the bulk of Avios issuance. The active base has grown about 13% a year to 10.6 million, though only a fraction of the 46 million enrolled are active. IAGL has climbed loyalty rankings from eighth in 2020 to a projected fourth by 2026, the only non-U.S. program in the top tier.