IAG Loyalty's €1 Billion Goal Is Reshaping What an Airline Loyalty Program Actually Is
For decades, airline loyalty programs existed for one purpose: to keep frequent flyers coming back to the same carrier. Earn miles, redeem miles, fly again. The model was simple, circular, and deeply tied to seat inventory. But IAG Loyalty, the division behind the Avios currency used by British Airways, Iberia, Vueling, and Aer Lingus, is pursuing something far more ambitious — and far more complex. The program has set its sights on generating €1 billion in revenue, and the path there runs directly through bank branches, credit card issuers, and financial services partners rather than through departure gates.
This shift raises a fundamental question about the future of airline loyalty: at what point does a loyalty program stop being an airline product and start being a financial product that happens to offer flights as a reward?
The Avios Economy: Bigger Than Most Realize
Avios is already one of the most widely used loyalty currencies in Europe, and its reach extends well beyond the IAG family of airlines. Partners across retail, hospitality, car rental, and financial services all participate in the Avios ecosystem. But the financial services vertical — particularly co-branded credit cards and banking partnerships — has become the engine driving the most significant volume of point issuance.
When a customer uses a British Airways American Express card to buy groceries or pay a utility bill, Avios are earned. Those points are purchased from IAG Loyalty by the card issuer, generating direct revenue for the loyalty division completely independent of whether a flight ever gets booked. This is the commercial dynamic that IAG Loyalty is leaning into aggressively as it pursues its billion-euro target.
The logic is straightforward. Airlines have a finite number of seats. Banks have an essentially unlimited appetite for loyalty currency to attach to financial products. If IAG Loyalty can position Avios as the preferred rewards currency for a growing roster of credit cards, current accounts, and savings products, revenue potential scales in ways that seat capacity simply cannot match.
Why Banks Are the Real Growth Engine
Co-branded credit cards have long been the backbone of loyalty program economics in North America, where programs like AAdvantage and MileagePlus generate billions annually from card partnerships. European markets have historically lagged behind, partly due to regulatory caps on interchange fees that limit the economics available to card issuers. Despite this, IAG Loyalty has identified financial partnerships as its most promising growth lever.
The reasons are several. First, card spending is habitual and recurring. A customer who earns Avios on their everyday spending generates value for IAG Loyalty every month without requiring any operational involvement from the airlines themselves. Second, Avios redemptions are often deferred — customers accumulate points over months or years before booking a reward. This creates a float of unredeemed liability that, managed correctly, is financially advantageous. Third, financial partners are increasingly looking for differentiated rewards products to compete in a crowded market, and a well-recognized currency like Avios carries genuine consumer appeal.
IAG Loyalty has also been working to expand Avios beyond British Airways' traditional customer base. By making Avios available through a wider range of partner products, the division can acquire loyalty members who may never have flown with a British Airways Group carrier, essentially growing the addressable market from the demand side rather than the supply side.
The Risk of Becoming Too Disconnected from Flying
There is a tension at the heart of this strategy that deserves scrutiny. Loyalty programs derive their power from the aspiration they represent. Customers accumulate Avios because they want to fly — ideally in business class to somewhere they have always wanted to go. That aspiration is what makes the currency valuable, both to consumers and to commercial partners. If the experience of redeeming Avios for flights becomes increasingly difficult, frustrating, or unattainable, the entire value proposition begins to erode.
Critics of the loyalty industry have long argued that as programs become more financially sophisticated, the availability of meaningful redemptions — particularly premium cabin awards — tends to decrease. Seat availability tightens, redemption rates increase, and the gap between the promise of the program and its practical reality widens. If IAG Loyalty's push toward financial services comes at the cost of a degraded redemption experience, it risks undermining the very aspiration that makes Avios worth accumulating in the first place.
What the €1 Billion Target Means for Travelers
For ordinary Avios collectors, the immediate implications of IAG Loyalty's revenue ambitions are mixed. On the positive side, more financial partnerships likely mean more opportunities to earn Avios on everyday spending, potentially accelerating the pace at which casual members can accumulate a meaningful balance. New partnerships with banks and retail partners could also broaden where Avios can be spent, adding flexibility to the redemption side of the equation.
On the less positive side, the commercialization of Avios inevitably creates pressure on redemption economics. As the currency becomes more widely distributed through financial products, maintaining its perceived value requires careful supply management — which typically means tighter controls on premium redemption availability and higher point requirements over time.
A Loyalty Program That Has Outgrown Its Airline Origins
IAG Loyalty's billion-euro ambition is a signal of something broader happening across the global aviation industry. The most valuable loyalty programs are no longer measured by how well they retain airline customers — they are measured by how effectively they function as financial ecosystems in their own right. Avios is becoming a currency, and IAG Loyalty is positioning itself as the central bank that issues it.
Whether that transformation ultimately serves travelers as well as it serves shareholders is a question the industry will be answering for years to come. For now, the strategy is clear: the future of IAG Loyalty runs through your wallet before it ever reaches your boarding pass.