Earlier this month, British Airways introduced Avios, a new name for miles. Now if you’re a member of the BA Executive Club or Iberia Plus, you will earn Avios when you fly, use a credit card, etc. In other words, it’s a shared currency that can be used across airlines under the same ownership. There has been a lot of criticism about redemption levels, but on the bright side, a new elite tier was introduced. I spoke with Simon Talling-Smith, Executive Vice-President, The Americas at British Airways to talk about this and more, including the dreaded fuel surcharge.
Cranky: Let’s talk about some of the changes. It looks like on the elite side, it’s the new tier?
Simon Talling-Smith: Exactly right. We’ve launched a new Bronze tier. Really, a lot of the benefits customers accrued started at our Silver level. We knew there was a big segment of active customers who were not making that Silver level but we still wanted to have a more engaged relationship. So we’ve introduced this Bronze tier. It allows people to enter at half the points of the Silver tier. It gives them substantial benefits like First Class check-in, a better chance to do seat selection, and a 25 percent uplift on Avios when they fly.
Cranky: Can you explain how the tier points work? I see for Bronze, it’s 300 tier points to qualify.
Simon: We distinguish between qualifying points and earn and burn mileage. The qualifying points are our tier points and those are earned by flying, pretty much only by flying. And they accrue over a period of a year and that qualifies you for a level in the Executive Club. Then the following year you need to attain a certain amount of miles to retain that level, but it’s easier for retention than to initially earn it.
Cranky: If I’m new to BA, what kind of flying do I need to do to get 300 tier points?
Simon: A lot of ways to do that.
Cranky: Ok, so I’m in the US and I’ll likely be going over to the UK.
Simon: It’s probably only a couple of Business Class flights per year that will get you into Bronze.
Cranky: I assume part of the motivation for creating this tier was to help align better with American?
Simon: Yeah, both American and Iberia both offer that extra tier. And of course oneworld as a whole has a name for it; it’s Ruby.
Cranky: Beyond elite, earning has not changed, is that correct? If I fly from LA to London I still earn the same?
Cranky: But redemption has changed fairly dramatically.
Simon: Redemption has changed in terms of redeeming your Avios points. Instead of having quite crude and large zones that we carved the network up into, there’s a finer level of segmentation now so different flights may have different redemption levels. It’s not as granular as mileage pricing, but there are are a number of different levels. We have quite a cool map-based calculator to help people.
Cranky: There’s no award chart, right? It’s more opaque than that. You have to put in where you want to go and it’ll spit out how many points.
Simon: Yeah, what we’ve done is basically create nine zones in the world.
Cranky: So why isn’t there an award chart? I was thinking it was much more complex than that.
Simon: The problem is that it’s fairly easy to do that when you’re just flying BA, but as soon as you start to include partners, it starts to get a bit more complicated. So when we wrestled with doing a straightforward redemption table, it became quite unwieldly.
Cranky: If it’s BA, you get up to one connection and it’s journey based, but on partners, it’s leg by leg.
Cranky: There’s been a fair bit of criticism about what’s being considered a devaluation. I think the claim was that the cost of redemption would go down on most itineraries, but that was really just online BA itineraries to and from London. How much attention do you pay to the criticism, and are you looking at making tweaks?
Simon: I’ve read some of the same feedback on FlyerTalk and we’ve been quite active in that space in responding to questions in there. And to some extent, communicating in the world of frequent fliers is a bit complicated with all the rules. When you communicate change, it’s important to stay close to the customer. In particular we did clarify that statement. It’s something like 97% of online journeys with BA are the same or better.
Cranky: Yeah, that’s what it was.
Simon: And then once you start to add partners it gets more complicated. But of course because some of the online journeys are better, you can get situations where online plus partner is still better than it was before. It’s pretty complex, but yes, we are getting a lot of feedback especially from specific groups of people who are focused on partner jounreys and we’re doing our best to follow up with them.
Cranky: So have you identified areas where you said, “maybe we should make a little change”?
Simon: I haven’t done that yet. It’s a little bit early. With a change of this scale, you need to find out what turns out to be frequent significant issues and then start working on them. But at the moment, it’s so early into the change that I think it would be just a little bit too soon to start making the tweaks. We may well make some tweaks, but it’ll be further down the road.
Cranky: But you are paying attention.
Simon: Yeah, we watch FlyerTalk, we’re completely on top of the tweets, we have an active presence on FlyerTalk where people are engaged. So we take all of that, that whole space of blogs and more generic social media very seriously because that’s where people are talking about our brand and we need to be very responsive.
Cranky: Can you talk about what spurred the change to the redemption scheme? I mean, I understand the change to Avios to try to get a shared currency, but in terms of changing the way the redemptions work. What was the thought process?
Simon: I think again sort of opportunity to react to a bit of feedback that we’ve been accruing over years since we last made a change. Customers had been saying “the scheme you’ve got is a bit unwieldy.” Of course a lot of people’s feedback and critique comes down to whether they perceive the number of miles they pay on a journey to be fair or not. And if you have a more granular level of charges, then you’re always going to have a more fair selection. That’s because you have very big regions and the shortest in the region and longest in the region are the same price and people ask why. That’s a big driver.
Cranky: The differentiation between partner awards and BA awards, was that an issue of aligning your incurred costs with mileage spend?
Simon: That was very simple. We have individual exchange arrangements with all those partners, so to some extent when people start flying on partner networks we have to recognize the rules and structure of that partner’s program as well.
Cranky: But you’re not differentiating redemption values by partner at this point, right?
Simon: That’s right.
Cranky: I think that’s all I have, but if you do start looking at changes, I’d love to see the fuel surcharge dropped.
Simon: Yeah, if you could just lean on those guys at OPEC to reduce the barrel price, we’ll be dropping the fuel surcharge quickly.
Cranky: I’m sure that’s something you hear a lot of.
Simon: All I can tell you is that not only does the fuel surchrge not cover the cost of fuel but it doesn’t cover the increase in the cost of fuel.
Cranky: Right, but if it’s a redemption ticket, it’s a question of whether people earned the right to not pay that. We could probably discuss this as a scholarly level.
Simon: The basic math is that if the fuel price goes up so that we end up paying $100 more to carry someone across the Atlantic, the surcharge allows us to recover some of that but it’s not $100. We have to recover that from somewhere else. We don’t want to take that out of any part of the customer experience. We don’t have to have lower quality food or anything else. So that leaves us in the uncomfortable position of having to surcharge while the fuel prices are so high.
Cranky: Did I miss anything?
Simon: I guess the other thing to say is that the relaunch is part of a much bigger program of investment. We’ve said it’s about 5 billion pounds including everything from lounges to service experience to the aircraft themselves to technology. We’re into a very big investment at BA and we see that going on for a number of years.
To learn more about Avios, visit British Airways online.