British Airways have recently added nearly £200 to the cost of redeeming air miles, across the board, on all routes. The extra cost applies to the ‘taxes and fees’ that you pay on all air miles redemptions.

This increase begs the question: is it still worth collecting air miles? More specifically, most people earn their air miles through credit cards, is it still worth putting all your monthly spend through an air miles earning credit card?

Value can mean different things to different people. When you spend money on credit cards there are opportunities to be rewarded with air miles, usually as a percentage of your spend (eg, 1 air miles for every 1 pound spent). This is possible because banks and card networks make money when you spend money through them, either through interest earned when you repay, annual fees, or from the card fees at point of purchase. Since it’s a competitive market many of these banks will give you a slice of their margin to incentive you to spend through them.

In the case of American Express, where they are both the bank and the card issuer, they give you a bigger slice of the proportionally larger margin that they make. Their bigger margins are amplified because they charge merchants more when you spend with them. This is why you see that some merchants don’t accept American Express. No surprise then that most of the ‘high value’ reward schemes are with American Express credit cards, this is usually where you can earn the most air miles.

In order to quantify the value from air miles rewards, we first need to determine how much money air miles can save you when booking flights. For the purpose of this article, I’ll focus on return off-peak flights as these cost the least, flying with British Airways and using their Avios loyalty scheme. Let’s look at some Avios redemption examples in mid-November 2022, and compare these with what you could buy with cash.

These figures are correct as of 20/03/2022, which is when I noted the prices, and only include direct flights with 1x checked baggage allowance.

Short Haul to Europe

London 08/11/22 → Naples 15/11/22

Long Haul to Hong Kong

London 08/11/22 → Naples 15/11/22

Long Haul to New York

London 08/11/22 → New York 15/11/22

How much is Avios saving you in these examples?

By comparing the cost between the cheapest skyscanner option and how much you would pay with a BA (Avios) booking, we can calculate how much money you are saving for each Avios point.

£ per Avios point = £ Saved / Avios Cost

Short Haul to Europe

Long Haul to Hong Kong

Long Haul to New York

In the best case example, you are getting 0.8p in exchange for 1 avios point, and anywhere from 0.4p to 0.8p elsewhere, giving an average of 0.6p for 1 avios point overall.

Should you spend Avios points on flight redemptions, at an average 0.6p per point?

What else can you get for an Avios point?

Avios recently announced a partnership with Nectar, where you can swap Avios for Nectar points, essentially allowing you to spend Avios points wherever you currently can with Nectar. This gives a good opportunity to compare.

For 400 Nectar points you receive 250 Avios and vice versa

Lets look an example:

You get 1.6 Nectar points for every Avios point. Therefore if you convert 62,500 Avios you will get 100000 Nectar points.

You can convert 100000 Nectar points for £500 worth of cash.

62,500 Avios points = £500 at Nectar’s retailers (like Argos, Sainsburys, and eBay).

That gives you 0.08p per point, which isn’t bad when you compare to some of the previous flight examples.

In all of these examples, you will not get more value redeeming your avios points for flights, compared to spending them on Nectar rewards, and in most cases you will actually be worse off if you did. Whether you actually want to spend anything at Nectars retailers is another question all together, but cash at Argos, Sainsburys, or eBay, to name a few, is a pretty good selection to choose from for most people. I should note at this point that I do not work for Nectar..

Can you get more from your credit card spend, outside of Avios or Nectar?

There are plenty of credit cards that offer cashback on your spend. There are many different options with different spend limits, let’s look at the return you could get on 15k spend a year on a credit card.

Not bad returns, in the form of cold hard cash you can spend anywhere, but how does it compare to the return on air miles credit cards?

With the BA AMEX card you earn 15000 air miles for 15k spend (1 point for every £1 spent), when you exclude the introductory bonus. Considering an average of 0.6p per mile redeemed in the above examples, that is the equivalent of £90. If you include the introductory bonus of 5000 Avios in the first year that rises to £120.

With the BA AMEX Premium Plus

You’d be far better off in this scenario with either of the AMEX cashback credit cards above or the Chase Bank Mastercard with its 1st year 1% cashback.

But wait, what about the BA Companion Voucher?

You also earn a ‘companion voucher’ with the BA AMEX cards, when you spend £10,000 within a year (BA AMEX Premium Plus), which allow you to book two people on a flight for the number of miles it would normally cost one.

But the taxes and fees part of the booking is not free and is still doubled.

If you use a companion voucher in the long distance example above, your return on airmiles rockets up to 1.2p per point.

Presuming you book a flight with a companion voucher, we get the following returns:

These returns beat all of the cashback credit cards above and also any option involving nectar rewards.

Conclusion

Before we conclude it is important to note that booking flights with Avios carries some benefits compared to paying with cash. In some cases you will find better availability or improved cancellation flexibility when you use airmiles.

Best value: making use of the companion voucher, earned through having a BA AMEX premium plus card and spending £10,000 in one year, is the only way to get more value from your spending than other credit card reward offerings on the market today.

If you spend more than £10,000 a year, you could maximise the returns you get by switching your spend to a cashback credit card, after you’ve earned your companion voucher. But you will need to keep at least one AMEX card in your wallet to book your flight, as you can only pay for a flight + companion voucher using an AMEX card.

Otherwise: If you don’t intend to earn and use a companion voucher, you will be better off with one of the cashback credit cards above.