Nothing in life is certain except death and taxes. Except, perhaps, when it comes to airline miles and points.

The British taxman has long considered that miles and points are not taxable. The idea is that since the points traditionally have no nominal value and could only be used to buy plane seats if the airline chose to make them available, they were worthless for tax purposes. They were not, as economists say, fungible.

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But while that was once true, it is not any more. Avios, Virgin Points and other mileage currency like them can now be used for money off all sorts of products, from flights and holidays to wine. Not just money off flights that would otherwise be distressed inventory, or guaranteed redemptions seats. All travel, any time.

Business travel or large amounts of business expenses put through on a personal credit card now offer consumers genuinely free or almost-free holidays. It is inevitable that the taxman will eventually re-consider the current arrangements. Maybe not this year, perhaps not next year. But at one point they almost surely will.

So in this article I wanted to set down some principles that explain why the current arrangements are still fit for purpose. Any attempts to tax Avios beyond the current arrangements will be hard to collect and raise little revenue, so the government should not bother. Let’s try and shape the conversation…

First of all, Avios already are taxed

IAG’s Avios Group Limited (IAGL) paid £90.8 million ($124 million) tax in 2024, according to accounts filed with Companies House. I assume that this was Corporation Tax. This is on turnover of £1,585 million. IAGL’s output that it sells is Avios.

The profit arises when IAGL sells Avios to it’s partners. Presumably this includes IAG airlines as well as third-parties like co-brand credit cards.

IAGL now also has to pay VAT on Avios, after some argy-bargy with the taxman - £557 million plus £100 million interest was claimed according the IAGL’s financial statements.

On the other hand, as a VAT registered company IAGL can claim VAT back against it’s costs, with £215 million recoverable from airline partner BA stated in the accounts.

The accounts also say that IAGL has:

1. 69 million members

2. 15.6 billion Avios transferred out of IAG to Qatar Airways and Finnair.

Not all members redeem on flights. Those that do are not necessarily flying out of the UK. But people who do redeem on ex-UK flights are also paying Air Passenger Duty (APD). So Avios are often taxed at the point of use.

When I last looked at the BA schedule they had just over 2,400 short-haul flights and just over 650 long-haul flights from the UK per week. That represents 124,800 short-haul and 33,800 long-haul flights per week where APD applies.

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Spanish low-cost carrier Vueling made an interesting announcement a few weeks ago. On 23 January the Barcelona-based IAG member said that they will no longer be offering Avios mileage currency to all flyers.

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Only travellers spending more than €200 (£173) or taking three Vueling flights a year will earn the points. In the new programme:

1. “Smart” tier travellers will earn three Avios per Euro – qualification: €200 annual spend or three Vueling flights a year

2. “Basic” tier travellers will earn five Avios per Euro – qualification: €2,000 annual spend

3. “Premium” tier travellers will earn seven Avios per Euro – qualification: €4,000 annual spend.

The new programme’s structure does not seem to have been thought through. As presented, there are no tangible benefits to registering if people only expect to take one or two flights. This could limit the number of people who reach higher tiers even if their flying pattern qualifies.

I think that in due course we can either expect auto-registration as a condition for booking a Vueling flight (if that is allowed, legally speaking) or a small Avios bonus “to get you started”.

Regular readers will know that I am not enthusiastic about earning miles or status based on spend alone. A good loyalty programme should reward people who use their own money buy seats that would otherwise go unsold.

High prices tend to be paid by business travellers. Many will have corporate discounts so net revenue received by an airline is not necessarily as shown on the sticker.

High prices also indicate high aggregate demand, which limits the loyalty value of people paying those prices since the higher the price, the more likely they can be replaced with somebody else.

Most of Vueling’s sister airlines in IAG – Aer Lingus, British Airways and Iberia – all offer comfy higher cabin seats. It is understandable that their loyalty programmes reward people buying these services. Vueling meanwhile offers an all-Economy service.

So why is Vueling making this move? Is there a method in their madness? I think there might be. In this article I attempt to answer six questions:

Q1. How might Vueling earn extra revenue from zero-Avios on flights? (it probably won’t)

Q2. How might Vueling save money from zero-Avios flights? (it probably will)

Q3. How might Vueling’s parent IAG earn extra revenue from zero-Avios flights? (they won’t)

Q4. How might IAG save money from zero-Avios flights? (they won’t)

Q5. Might Vueling be a test-case for other IAG airlines? (probably)

Q6. What are the long-term implications? (potentially significant and good news!)

Now read on…

Q1. How might Vueling earn extra revenue from zero-Avios on flights?

It is hard to see Vueling earning significant extra revenue from this policy.

Those who fly a lot anyway, perhaps on other people’s money, are not affected. Those who fly a little are unlikely to buy extra tickets just for the 500 Avios, worth around €3, promised on moving from “Smart” to “Basic” tiers.

It might even lose Vueling a bit of revenue if Avios collectors fly other carriers or take the train as a result.

But there might be a small revenue stream of Vueling customers flying once or twice a year not using their Avios to save €3. Enough of them could add up to a small amount of revenue that is significant enough that they airlines does not want to throw away.

Q2. How might Vueling save money from zero-Avios flights?

The prospect of Vueling saving money however is much more realistic.

IAG member airlines are well known for their degree of operational autonomy. Unlike at, say, the Lufthansa Group, each airline in IAG can design it’s own products, networks and strategies without too much interference from the centre.

From a loyalty perspective, the accounts will look something like this:

Avios Group Limited sells Avios to Vueling

Vueling pays Avios Group Limited

Vueling gives Avios to it’s customers

Vueling is paid for a few customers redeeming on their metal by Avios Group Limited

Vueling gives more Avios to it’s customers

British Airways and Iberia are paid by Avios Group Limited.

If enough Avios earned on Vueling are spent on BA and Iberia, it is easy to see how Vueling might see that giving Avios away simply transfers their cashflow to other partners in the group.

It is understandable that Vueling would want to save this money.

Q3. How might Vueling’s parent IAG earn extra revenue from zero-Avios flights?

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As far as status-chasers are concerned, nothing is better than an airline’s shiny card. Except perhaps a free shiny card for life.

The coveted cards grant access to premium check-in, swanky lounges (and not-so-swanky-ones), the chance to earn bonus miles when you fly and sometimes priority access to reward seats.

When passengers are just starting out on their lifetime of travel journey lifetime status can seem a long way away.

London-based British Airways requires £550,000 of spend ($730,500) for lifetime Gold. The even more prestigious lifetime Guest List needs £1,500,000 ($1,992,000) of spend and these numbers will only increase over time.

But as the years and flights add up, at some point lifetime status seems not so far away. When this happens, people try to push as much business as possible to their preferred airline.

Accordingly lifetime status increases aggregate demand and willingness to pay.

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Using an expensive longhaul Business Class ticket at £5,000 as a benchmark, lifetime Gold requires 110 flights in BA’s Club World. Or roughly nine years of once-a-month longhaul flying.

The target is not unrealistically high. Some travellers might achieve lifetime Gold on BA in their 30s or 40s. Such passengers might then aim for Guest List for Life, which requires 25 years of monthly longhaul Club class travel.

On Virgin Atlantic lifetime Gold takes ten consecutive years of Gold status and 7,500 of the airline’s tier points on their own flights, not those operated by their Skyteam alliance partners.

On the less flexible fares that would require 100 Upper Class flights, similar to BA. For more flexible fares the requirement is only 50 rides in the groovy-funky airline’s comfiest seats.

This seems about right since Virgin Atlantic has a much more limited network than their great Heathrow rival.

At first glance lifetime loyalty sounds like a great proposition for both airlines and travellers. Unfortunately for airlines there are two problems. The first is harmful for consumers, the second for the airlines themselves.

First up, it is not clear whether or not consumers can trust airlines for “lifetime” to mean the life of the consumer or the life of the airline’s current programme

The question is whether or not the same or roughly similar benefits will continue to be offered to lifetime status-holders for their entire life.

Airlines can renege on their lifetime status promise in two ways.

Carriers may realign and rename tiers so that for example the tier called Gold in the new world is more like Silver in the old world. That way, Gold-for-life passengers lose or dilute certain privileges.

First Class check-in might be downgraded to Business Class. Free advance selection of any seat may become free advance selection of centre seats only. A free overweight (32kg) piece of baggage might turn into an overweight fee waiver on one 23kg piece in the standard allowance.

Airlines can also simply close or terminate their programmes. I think it is unlikely that airlines will abandon loyalty all together.

But over the 20 to 40 year period that the relatively young among today’s road warriors may hope to continue flying it is plausible, likely even, that new models that we have not thought of yet may emerge.

Consumers without faith in their airline may be less likely to push for lifetime status, reducing aggregate demand and willingness to pay. The only way for airlines to solve this problem is to state unequivocally that the benefits earned will apply for a consumer’s entire life. No airline can reasonably commit to this – the problem is unsolvable.

The second problem for airlines, the one that harms airline revenue directly, is that lifetime status can act as a hard break on loyalty.

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How do you treat somebody who buys ten long-haul Business Class tickets on your airline? Like a rockstar, right? Actually, wrong.

Airline loyalty programmes are set up to reward repeat business over a short amount of time. Meanwhile passengers who consistently buy a small number of tickets year-in/year-out receive the same treatment as a one-timer.

In the UK, 46% of the population did not take a foreign holiday in 2023-24 and 20% travelled overseas just once a year, according to the government’s National Travel Attitudes Study.

The low volume travel market represents a significant number of people who are traditionally off the radar when it comes to airline loyalty.

So I was excited to read recently that Virgin Atlantic is launching “Five” to reward customers who have flown with the airline for five years.

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The airline will give 12,000 bonus points to members who have flown with the groovy-funky carrier in five separate years. These do not need to be consecutive. “Five” members will also earn 10% more points on all future flights.

In a world of dynamically priced rewards and 700,000 point return tickets, 12,000 Virgin points might not sound like much. That is not quite fair.

According to vseats.io, a reward price cruncher, 6,000 point one-way fares from London to New York are available in Economy on 168 days over the next year. Meanwhile 115 days have 6,000 point singles in the other direction.

Virgin Atlantic’s “Five” programme is essentially offering an Economy Class reward seat to New York. That is on top of all the other points that a person would earn on their flights. I think this is a fair deal.

In this article I want to explore the idea of long-term, low-volume loyalty in a bit more detail. I will answer three questions:

Q1. Are points or perks the best way of rewarding long-term, low-volume loyalty?

Q2. How relevant are co-brand products for the long-term, low-volume segment?

Q3. What constitutes “regular” low-volume travel?

Q1. Are points or perks the best way of rewarding long-term, low-volume loyalty?

Each year carriers dangle the perks of status in front of passengers.

These often include priority check-in, a checked baggage bonus of some kind, fast-track security and access to a more swanky lounge than warranted by the cabin they have purchased.

Status sounds great in principle. In practice, long-term, low-volume travellers do not fly enough for the benefits to be worthwhile. Airline lounges are a great option compared to sitting out in the terminal when you move through airports regularly. In any other context they are quite good waiting rooms, with one or two exceptions.

It takes two years of frequent travel to make the most of everything that airline loyalty has to offer. The first year to qualify and the second to actually enjoy the status.

By the time many people have flown enough to enjoy their status, their travel needs are over. Frequent travellers are a rare breed – frequent travellers over a period longer than a year are rarer still.

Growing families, career changes and simply getting bored of the whole thing can turn even the most hardened road warrior into a homebody.

Virgin Atlantic have chosen to reward their “Five” members with bonus points. This is understandable. The points can actually be used even by people who do not fly much.

As well as the “free” (plus taxes and charges…) redemption seat to New York, the 12,000 bonus points are worth £60 ($79) on other non-flight products such as railway tickets that consumers are likely to buy anyway. Once again, I think this is a fair deal for five flights.

But could other status perks be used by airlines as a way to reward the long-term, low-volume segment. Let’s take a look at each of them, one by one.

I do not see priority check-in as a particularly valuable long-term, low-volume reward. When operations are normal, airports tend to work well. At Virgin Atlantic’s Heathrow hub most passengers will be through check-in and off to security within five or ten minutes.

Adding “Five” members to the Premium or Upper Class desks would risk clogging these facilities for the big spenders. Plus, many “Five” members will be using priority desks anyway by virtue of buying comfy seats. Infrequent travellers like to fly comfortably too.

Fast-track security is problematic as a “Five” perk for the same reason.

However lounge access might be worthy of a bit more consideration. Much will depend on how busy lounges actually are and when “Five” members tend to travel.

It could be worthwhile for airlines to offer a points or lounge access product as part of a long-term, low-volume product in a targeted way, subject to the following rules:

1. Only offer lounge access as an option to passengers who have a track record of not flying at times when the lounges will be busy (e.g. not in the school holidays)

2. Only offer lounge access as an option to passengers who have not paid for Business Class before.

Such a policy could help airlines inspire some passengers to try a lounge for the first time. In the case of airlines like Virgin Atlantic who offer some truly great “Clubhouse” lounges, it is reasonable to expect that some people would be so impressed that next time they would choose to buy Business Class outright instead, increasing demand and revenue.

Airlines might also consider offering a points or lounge access choice to long-term, low-volume passengers who have a track record of premium spend in other areas, for example bundling pricey hotels with cheap flights.

A final, unpublishable, benefit for long-term, low-volume passengers could be priority for upgrades.

Every now and again airlines must upgrade passengers to a higher cabin when a lower cabin is overbooked. It might be worthwhile choosing passengers who have a good track record of flying year-in/year-out, because they are the ones who might be inspired to pay for the higher cabin next time.

No sensible airline would choose to publish such a policy as it would risk creating expectations that are unlikely to be satisfied.

Q2. How relevant are co-brand products for the long-term, low-volume segment?

I would suggest that co-brands are likely to range in importance across the long-term, low-volume segment.

For some passengers they will be important – Virgin Atlantic’s “Five” counts redemptions, many of which will have come from credit card points.

For others they may be less important. A once-a-year flyer may choose to collect points for aspiration travel. Or they may simply prefer a cashback card, or not to make any effort at all to earn a reward for their spending.

Q3. What constitutes “regular” low-volume travel?

I thought it was interesting that Virgin Atlantic have decided to offer “Five” to all passengers with five years of travel, even if these are non-consecutive.

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Last week I was discussing dynamic award pricing with colleagues on Chris Staab’s webinar “Revenue Management & Loyalty: Friends or Foes?” – you can watch it for free here.

The topic of the moment was about airlines who make all their seats available for purchase with points.

I argued that having reward prices that are unrealistic for the majority of frequent flyers will ultimately put people off the programme. My idea was that after a certain point prices just look ridiculous. The airline will be better off switching off reward availability rather than making their programme look silly.

During the webinar an audience member asked how airlines could find that point. I said it should be linked to customer behaviour – a frequent flyer actually travelling regularly on a route should expect to be able to make a redemption.

The way it came over on the webinar was not quite right. After thought I would like to set my principle as follows:

The highest price for a return pair of reward seats should, in my opinion, represent the miles earned on ten trips in the same cabin, without a co-brand card.

When dynamic pricing proposes price points above this limit, I would switch off availability if I was running the show.

In today’s edition I take a look at Virgin Atlantic’s dynamic pricing of it’s reward seats.

I find that many destinations that look expensive at first glance, such as California, have reasonable availability with my 10x rule in mind. This means that by using dynamic pricing Virgin Atlantic is rewarding many of their most valuable frequent flyers.

However I also find that some destinations, such as Cape Town, still look entirely unfeasible with points and should be switched off almost entirely.

A few data points

I used Virgin Atlantic’s online points calculator to figure out how many miles and Gold member would earn on a return trip in each cabin, at the non-flexible fares. I did not require purchase with a co-brand credit card. My thinking is as follows:

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If you think airlines are big companies, try comparing them to retailers. Delta generated an impressive $61bn (£45.4bn) of revenue in 2024. Meanwhile Walmart generated $681bn of sales in roughly the same time.

Internet behemoth Amazon is a similar size, earning roughly $638bn in 2024, of which $438bn was generated in the United States.

It makes sense that the largest retailers should earn more than airlines. Not everyone buys plane tickets and for those that do only a fraction fly more than once or twice a year. Meanwhile everybody buys groceries, food and drink. Often daily. Sometimes even more.

Yet even the biggest retailers are small fry compared with the national economies of which they are part.

According to Statista, a data gatherer, total consumer disposable income in the United States is forecast to be $20.8 trillion in 2025. Take away housing and healthcare from that and you are left with around $13.5 trillion.

Some of this will be spent. Some will be saved – the Bureau of Economic Analysis reckons about five per cent of gross disposable income. That leaves around $12.8 trillion left for consumption.

Since Walmart and Amazon together generate $1.08 trillion revenue each year they account for around 8% to 9% of US non-housing/non-healthcare consumer spend. So:

1. The largest retailers are roughly a full order of magnitude bigger than the largest airlines in terms of revenue

2. The largest economy is roughly a full order of magnitude bigger than the it’s two largest retailers together in terms of consumer spend.

Now why is this relevant to airline loyalty? Read on…

Today’s miles and points game is being shaped by the wads of cash generated by credit cards. Visa processes around $6.4 trillion of spend and Mastercard $2.7 trillion.

According to Visa’s October 2024 interchange fees table, supermarkets like Walmart pay between 1.18% and 2.00% to take payment depending on the card type. Retailers like Amazon pay 1.47% to 2.30%.

There is also a fixed charge for each transaction – five cents for supermarkets and ten cents for retailers.

Other businesses can pay considerably more. Restaurants and taxis pay 2.1% to 2.6% and a minimum of four cents.

In Europe on the other hand, merchants only need to hand over around 0.3% to the payment facilitators.

With such juicy fees on the table, American banks are anxious to gain market share, attract new card customers and steal existing customers from others.

The share of wallet a consumer puts through their card provider yields healthy returns for bank shareholders.

Airline points are aspirational. They allow consumers to take flights that they otherwise might not. Or travel in style with comfy seats and glamorous services that they would not otherwise spend money on.

American banks capitalise in two ways.

First banks buy points from airlines and passing them on to consumers when they spend money on cards and generate interchange revenue from merchants.

If a bank pays an airline one cent per point, hands out one point per Dollar of consumer spend and earns between 1.18 and 2.6 cents on that spend, their margin is between 0.18 and 1.6 cents.

If every cent of Visa’s $6.4 trillion of consumer spend were put through on miles and points-earning cards, Visa would enjoy a margin after points purchase but before other costs of somewhere between the admittedly large range of $11.5bn and $166.4bn based on US consumer spend only. Business spend and other fees would add more.

The second way banks capitalise on air travellers is by opening lounges in airports. So that when cardholders fly they can feel special by accessing seating areas or food and drink. Such lounges may be overcrowded and poor quality in practice.

Your favourite airline revenue economist is happy to drink in airline lounges. But with one or two exceptions like Cathay Pacific’s dim sum bar I do not eat there. I certainly would not queue to get in.

As a result airlines are selling miles and points like billy-o. Loyalty has become the key driver of the business in America. Here are the margins for five major airlines, according to an analysis of form 10K filings by Visual Approach Analytics, a consultancy:

1. United: margin with loyalty +8.9%, loss without loyalty -1.9%

2. Delta: margin with loyalty +10.5%, loss without loyalty -2.5%

3. American: +4.8%, -8.3% respectively

4. Alaska: +4.9%, -11.4% ditto

5. Southwest: +1.2%, -19.9%.

Every one of these airlines would make a loss without the revenue from selling miles and points.

But turn this around & imagine what it feels like for Walmart & Amazon

The airlines are making hay while the sun shines. But put the boot on the other foot. What are Amazon and Walmart making of this? I doubt they are sitting comfortably while airlines get rich at their expense.

Amazon may be spending $438bn x 1.47% = $6.4bn on payment

Walmart $681bn x 1.18% = $8.0bn on payment.

Even if these figures are too high because Amazon and Walmart have special deals with the banks, these two merchants must surely have a strong incentive to save money. What might they do?

Could Amazon & Walmart launch their own coin to undercut the banks?

If I were Amazon and Walmart I would consider launching my own crypto coin, which consumers can buy from their bank accounts for nothing or close to nothing.

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Last week an airline technology manger asked me which loyalty programme I think is the best. I gave the idea some thought – the question deserves a better answer than “it depends”. I settled on the Nando’s Rewards, which is the only physical loyalty card actually in my wallet.

So why is the Nando’s Rewards so good and what can airlines learn from it. We will first take a look at the ingredients that make a good airline loyalty scheme. Then I ask why the Nando’s Rewards model might have good potential for airlines and how airlines can adapt the Nando’s “chilli wheel”. Now read on…

What makes a good loyalty scheme?

As I was chatting with the tech manager, we went through several characteristics that a great (not just good) airline loyalty scheme needs. There are three.

First up, it actually needs to reward loyal air travellers – people who buy seats that would otherwise go unsold, especially in premium cabins where the opportunity cost of letting a seat go empty is high.

Being the best loyalty scheme does not mean the most profitable programme that just happens to have loyalty in the name.

Selling lounge access and points to credit card holders in America’s under-regulated and over-priced consumer payments market rightfully comes under personal finance or fintech, not airline loyalty.

Delta Sky Club is out. So is groovy-funky Virgin Atlantic’s Flying Club, which cleverly won my loyalty last year but thanks to dynamic pricing of redemptions is now a shadow of it’s former self.

I have been active in London-based British Airways’ “The Club” since 2006. But as BA are now entirely gross revenue-based for both points and status, moving to dynamically priced awards seems only a short distance away.

The second thing that a great airline loyalty scheme needs is to make outsized rewards available to people who engage with the programme, for realistic amounts of spend. At the very least, a viable programme needs to be better for air travellers than cashback.

An American resident holding an Amex and whacking $500k (£372k) of office supplies like toner at Staples or hard disks from Dell on her card might well earn enough points for a Biz-Class ticket across the Atlantic and back in Virgin Atlantic’s swanky Upper Class.

Meanwhile a passenger spending $50k on Virgin Atlantic tickets and always travelling in Upper Class might only earn enough points for a one way Upper Class ticket or a return trip in a lower cabin, like Premium.

Virgin Atlantic’s dynamically priced award seats are rewarding people who spend a lot of money but not necessarily on plane seats.

It is unfair because European and British travellers, even if they own a business, typically must make big purchases using payment methods that do not earn points.

It is also unwise for Virgin Atlantic, because it crowds out and dilutes the loyalty of passengers who actually pay for plane seats. Especially in it’s home market.

There are two solutions. The simplest one is to offer a guaranteed number of fairly priced award seats per flight – BA offer four in Club World (Biz), two in Traveller Plus (Premium) and eight in Traveller (Economy). Another is to split the programme into American and rest-of-the-world versions.

The third thing that makes airline loyalty great is predictable prices for redemptions.

Passengers on a clear and dependable pathway to a Business or First Class seat will be more loyal than those whose hopes are dashed by a large devaluation.

When I first flew Virgin Atlantic I needed 30,000 points, a credit card voucher and £581.79 for a return Upper Class flight to Shanghai. I imagined directing my longhaul travel to Virgin Atlantic.

The next time I flew Virgin Atlantic I needed 55,000 points, the voucher and £996.09 to fly Upper Class return to San Francisco.

By the time I flew to San Francisco though, Virgin Atlantic had terminated all their flights to China and introduced dynamic pricing. A look at vseats.io shows that there is no chance of a deal like that anymore. Now I find it hard to imagine ever buying an actual cash ticket with Virgin Atlantic.

The reason airlines devalue their schemes is down to geography and economics.

The distance between cities is fixed by geography, so points earning by miles flown is also fixed by the number of flights taken.

But when people started earning points on co-brand credit cards and through other schemes, points earning became linked to inflation in the wider economy. As people earned more and more miles through (mainly non-airline) spend, the proportion in circulation due to flying began to fall.

More points chasing the same seats led to excess demand. Prices had to rise. Airlines devalued. Basic economics.

The big problem was how airlines did it. Singapore Airlines devalues regularly, so each year the points required for a flight increases a small amount. Loyal travellers collecting points can prepare.

Other airlines like BA do big once-in-a-while devaluations, leading to wailing and gnashing of teeth, and travellers promising never to fly the airline again. Great airline loyalty schemes avoid this.

Why is the Nando’s Rewards such a great inspiration for airlines?

Nando’s Rewards uses what they call the “chilli wheel”. So-called because the restaurant specialises in hot peri-peri sauces. You can see their graphics here.

Your favourite airline revenue economist normally orders his chicken “extra hot” but also occasionally enjoys “medium” or even “lemon & herb” every once in a while.

When you pay more than £7 ($9.33) or more in Nando’s you earn one “chilli”.

After three visits you earn a free starter – think a bowl of olives or nuts. After six visits nuts. After six visits you get a free chicken but still need to pay for your chips, peas or corn. Ten visits yields a free meal, but you still have to pay for your drinks.

On the eleventh visit the wheel resets back to zero chillis and any rewards you have banked remain available for 12 months.

Notice how Nando’s Rewards meets all the criteria for a great loyalty scheme:

1. It rewards regular visitors

2. Rewards are achievable with reasonable spend – only three visits required for a free starter

3. Nando’s Rewards never devalues – even if the price of chicken goes up, you still get a free meal after 10 visits.

It is also incredibly easy to understand.

Nando’s Rewards is similar to other stamp based programmes like Starbucks Rewards, which gives a free coffee after the tenth stamp.

But the critical difference is that Nando’s gives rewards earlier, after only three visits. Which Nando’s can afford to do because people tend to order more items in a restaurant than they would in a coffee shop.

[Interesting aside: apparently Starbucks found that a 12 stamp card with the first two stamps filled was more successful than a ten stamp card starting all blank – people felt already invested]

Nando’s even have status, of sorts. Apparently there is a Nando’s “High Five” black card so celebrities who promote Nando’s can eat for free. You can be sure that writing this article is not enough to earn a black card for me.

Most likely inspired by the BA Premier tier and the Amex Centurion, which both have black cards, the chilli wheel has turned full circle as I am now applying Nando’s Rewards back to travel.

How could airlines adapt the chilli wheel?

There are lots of possibilities. For example, imagine an airline that had a Business Class wheel and Economy Class wheel.

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British Airways’ Avios-only flights have become an established feature of the airline’s business. They were first offered in April 2023 and started small. The points-exclusives were short – Geneva and Sharm-el-Sheikh at first. And they were operated by two-cabin single-aisle planes without flat-beds.

BA have also run twin-aisle Avios-only services. I costed BA’s Avios-only 2024 autumn half-term special to Dubai when it was released.

An Avios flight to Caribbean sun-spot Barbados flew in Feb-2025. Abu Dhabi, just down the road from Dubai but probably harder to fill, operated Avios-only in Easter this year.

Now BA have launched what may be the most impressive Avios-only flight yet. It is their flight to Cape Town leaving on 20-Dec this year and returning just under two weeks later on 2-Jan.

This really is peak-of-the-peak for leisure travel. Other long-haul Avios-only services were in school half-term holidays. On Dubai and Abu Dhabi there will have been some corporate traffic displaced by the points bookers.

Cape Town is right over Christmas. Almost everyone on these flights will be off on holiday. Fares would have been through the roof.

I have taken the opportunity to build a new-and-improved version of my pricing model to figure out the economics of the Cape Town Avios exclusive. It builds additional elements into the previous model.

Avios Group Limited, the loyalty arm of BA’s parent company IAG, will almost surely be paying British Airways for the seats at market rate. My model estimates they may have had to pay BA more than a million Pounds to offer the deal.

The idea is that proving to Avios collectors that they can make impressive and aspirational redemptions attracts more people to the scheme.

The Avios business has certainly been booming. Some highlights from the company’s 2024 annual report are:

1. £363 million profit on £1,585 million revenue, earning 22.9% pre-tax margin

2. £301 million revenue growth 2022 to 2023 (23.4%)

3. Avios earning grew 24% in 2024

4. Avios redemptions grew 20% in 2024.

Bringing in new customers with the Cape Town flight helps propagate this growth of a high-margin product.

So how much might Avios Group Limited be paying BA? Read on to find out…

[Aside: For a recap of how loyalty programmes like Avios generate income, click here. For my remarks on the Avios-Amex co-brand card, click here.]

Why Cape Town & why now?

2025’s Avios-only flights are shown in the table below.

Take a look at the “notice” column, which shows how many days in advance the Avios-only flights were released*. All other Avios-only flights in 2025 were released far ahead, between 222 and 317 days. The average is 262 days.

* These might be out by a day or two as I am not quite sure whether the articles were published the same day as the press release came out

The Cape Town flights have been released 142 days ahead, a bit under five months. Much less notice than the other Avios-only flights. Why? I think there are two possible reasons:

1. Other Avios-only flights might have generated large numbers of bookings and cancellations – narrowing the booking window a bit might help cut down on speculative bookings so more people booking will actually be flying

2. Summer holidays are now in full swing as state schools broke up on 22-July, but private schools started their holidays some time earlier (my old school on 27-Jun) – many private school parents may have just finished their summer holidays and will be thinking about their next break.

It is not clear whether or not BA’s Avios-only flight has a light booked load to now. The flight is one of a pair that operates on the days in question. Based on fare class availability, the second flight looks almost booked out.

When I looked at advance booking curves to Hong Kong BA had cancelled one of two daily flights. The one remaining was in some cases almost full even months out. My guess is that BA have moved any cash ticket holders onto the other flight.

Certainly we have another interesting data point for BA’s secret advance booking curves. People are clearly interested in booking Christmas holidays in the summer.

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Airline loyalty is no longer about miles and points currency. For the time being it is now only about status. Of course miles and points remain a vital part of many airlines’ business models. But they are not strictly a loyalty product any more. This article explains why.

The demise of miles and points as a loyalty reward also presents some interesting o…

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Not much happens in aviation without billing and payment. Although airlines are giant cash mountains, the money flows out fast as aircraft lessors, fuel suppliers, crew and every other supplier demands payment.

Yet under IATA revenue accounting processes, ticket prices are only recognised in revenue account once flights are flown.

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The step-up to graduate economics from a bachelor’s degree can be a big jump. The first few lectures hit hard.

At undergraduate level consumers in an economic model decide to buy two products. Flights and hotels for example. Firms like airlines choose to buy two products too, spending money on both planes and fuel.

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British Airways have changed their tier point qualification thresholds by moving to a revenue-based programme for earning status. There has been much wailing and gnashing of teeth.

Don’t worry, I am not writing a long article about whether or not spend-based status is a good idea (it isn’t). And I am not going to write about whether or not the new tier t…

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Delayed. Cancelled. Devalued. Only one of those words strikes fear into the heart of frequent flyers.

Road warries roll with the punches when it comes to getting on a different plane than the one they had planned to. Especially since their shiny cards get them to the front of the queue when things are disrupted.

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Nothing beats the King James Bible for glorious English prose. Chapter 13, verse 18 of the Gospel of Luke is particularly memorable:

“There shall be weeping and gnashing of teeth, when ye shall see Abraham and Isaac and Jacob and all the prophets in the Kingdom of God, and you yourselves thrust out.”

Substitute “British Airways lounges” for “Kingdom of Go…

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It was my birthday on Tue-12-Dec, just a few days ago. I got a lovely book presenting the Sze Yuan Tang collection of historic paintings of the China Trade, the latest Kylie album and a new razor.

That same day Avios collectors got a great present from Madrid-based IAG (see this article and this article) too. For the first time in IAG’s history a whole l…

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Consider online dating and you might imagine gorgeous girls and hunky guys falling in love at first swipe. The reality is not so sweet, as robot profiles, matches that go nowhere and a sense that a better option is always available can turn even the most romantic heart into stone.

The economics of the dating market might make few hearts race, but they do…

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Summer in Doha is hot. Your favourite airline revenue economist experienced 50 Celsius and 90 per cent humidity while living there. It was sticky and uncomfortable, and when your air conditioning broke it would take more than a few days to get the repair parts due to high demand.

So no wonder the fashionable thing to do in Qatar is fly away for the summe…

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Which do you think is the more valuable business? American Airlines with their speedy jet planes, plush first class seats and impressive route network? Or their asset-light loyalty programme AAdvantage, which sells miles and points that people can exchange for free flights?

Believe it or not, the loyalty programme has it – in July 2020 AAdvantage was val…

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It’s all-change over at Marriott Bonvoy, a large hotel chain’s rewards programme. Until now free nights have required a fixed number of points, with a little variation depending on the season. But from April 2022 dynamic pricing will be introduced with certain constrains and in 2023 will be completely unleashed. Rewards will then cost more or less, but …

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Maxing out the value of loyalty programmes is a popular hobby. Boards like FlyerTalk, blogs like Headforpoints and bars and clubs in affluent areas are often full of people discussing how to get the best deal.

Yet loyalty is not just viral news among consumers – airlines and the financial markets take a keen interest too, because even a simple loyalty sc…

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