American Express Commits to Buying Nearly $1 Billion of This Airline’s Miles
Joe Cortez July 30, 2020
American Express is injecting British Airways owner International Airlines Group with a $955 million investment to renew their partnership. The investment allows American Express to purchase Avios from the group, which the financial services provider will utilize for credit card rewards.
American Express and British Airways parent company International Airline Group announced a multi-year partnership renewal, which will cost the financial services company roughly $1 billion. The investment will primarily be used as a pre-purchase of IAG’s reward currency, Avios.
IAG Loyalty to Receive $955 Million For Credit Card Rewards
Under the plan, American Express will pay roughly $955 million (£750 GBP) to the conglomerate’s loyalty program arm, IAG Loyalty. In turn, the financial giant will purchase an unknown supply of Avios that will be used “in the UK and world-wide for its British Airways co-branded cards and Membership Rewards Program.”
Avios are the common loyalty currency of IAG’s airlines. The currency is used in Aer Lingus’ Aer Club, British Airways Executive Club, Iberia Plus and Vueling Club. The subsidiary also says they run “a wide range of services” to both IAG and business-to-business clients.
The cash investment comes as IAG and British Airways are forced to make difficult decisions to keep the airlines afloat during the COVID-19 pandemic. According to Reuters, the airline operator claimed to have around $11 billion in liquidity, but had a daily burn rate of around $237 million (200 Euros).
British Airways and IAG Welcome Cash in the “Fight of Its Life”
With a lack of passengers and high operating expenses, IAG chief executive Willie Walsh told Bloomberg the company is “fighting for its survival.” To those ends, British Airways is working on creative means to reduce their cash burn rate and increase liquidity.
In July 2020, the carrier started selling off their art collection to raise money. The first piece, Cool Edge by Bridget Riley, sold for $2.45 million on the Sotheby’s auction block. Two days later, the flag carrier announced they would immediately retire their fleet of Boeing 747 aircraft, despite being one of the largest operators of the four-engine jumbo jet.
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What could go wrong?BA will just raise the surcharges on redemption tickets from 700.00 each way to 1700.00 each way They will pay it off quickly once travel resumes for the masses.Also double the cost of mileage redemption's
Interesting in light of the new Aeroplan program.
Ok, so let's fast forward a bit and looking around the corner, how is this going to effect travel as it relates to points/miles? I high doubt there is a person on the planet that travels and uses points that does not think the CC companies are not going to have a "seat" at the table with the airlines. What happens if ( pick any US airline) a carrier goes down I mean really goes down and AMEX has a billion on the table? What about the interest rates the Amex charges their going up don't kid yourself. Amex has become the bank of last resort.
A *daily* burn rate of $237m? Are you sure about that? Check again - I think you mean *weekly*….
In the US, Chase is the credit card partner for IAG and Avios is a transfer partner for both Chase and Amex. No mention in the article if there will be an impact to the Chase-BA partnership.