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If you could forfeit your flights and money in exchange for the points. Would you?
If you participated in the Iberia 9000 point bonus per flight promo then you’re probably anxiously awaiting your points being deposited into your account. While I’m sure this ended up being a far more popular promo than Iberia every imagined, I’m not convinced this ends up crippling Iberia, but it’s a huge hassle to them. I’m also sure that many of you will disagree, but if I were in Iberia’s shoes, I wouldn’t be freaking out. In fact…I would heavily consider changing the promo post facto. Allowing those who participated in the promo the option of simply forfeiting their plans and money in exchange for the points. Everyone would sleep easier, like that feature photo provided by Iberia.com of someone sleeping in their business class.
Here’s why Iberia may not be crippled. But it takes further investment on Iberia’s account to manage. Scroll to the bottom for my solution
Iberia releases very little of their own inventory for International business class redemption
This has been the case for quite some time. Sure, you’ll find the occasional flight here and there, more when the schedule first loads, or maybe closer to departure, but the pattern has been established for a long time: there isn’t much inventory available.
These flights would present the biggest loss in terms of revenue for Iberia, but if you aren’t releasing space. You aren’t really losing money.
They could just pull all inventory on highly profitable routes until December 1st.
Is there a huge loss for Iberia on short flights Intra-Europe booked with points?
The logic here is that they were selling flights within Europe between $20 and $40, and if you end up using miles to redeem on routes that are similar to these, what’s the real loss to Iberia?
More than likely Iberia is releasing award inventory when their load is low, and when their load is low, they’re selling tickets for a lower prices. Whether that is $30 or $70 – it’s not the same loss on intra-European legs as would be on international legs. Of course, there are always the last minute situations when load is high, tickets are high, and award inventory is released. But, there are fewer fliers willing to take last minute trips.
Many people may end up planning a trip just to use the points. Iberia is still collecting bag fees on a lot of those customers which drives a huge portion of airline revenue stream, especially on the cheap, short routes.
They could oversell the routes that were most heavily purchased during the promo period.
The most heavily advertised route was Madrid to Mallorca. It was selling in the $20 to $40 range. If you had no, to very little, Iberia activity prior to this promo, the odds are very high you will never board the plane.
Iberia knows this.
They could just increase the % of oversell on the routes most heavily purchased during the promo period. In broadstroke…
- Purchases made from newly created accounts
- Purchases made from accounts with little actiivty
- Purchases made from a single account with same origin/destination repeatedly with lowest cost
- Purchases that ranged from $20-40
Pretty soon they would have a list with the most heavily purchased flights, correlated to the accounts that were either newly created, or had little to no activity, and within a price range, and raise their oversell targets on those routes. As an account shows a no show for flight 1, then 2, then 3, they could predict with higher probability that the account holder wouldn’t show up for flight 4, 5, 6, etc.
Of course, Iberia would need to tightly manage this practice as the penalties are quite high due to EU law, but there’s no getting around the fact that many of these highly purchased flights are going to be flown with substantially lower loads due to no-shows.
It takes a certain level of savviness and patience to book with Iberia, they know this. And Partner costs are very low.
Iberia’s IT has been said to be slow. This is true, and their search engine is laborious, and call centers don’t provide the easiest means of booking partners. With this said…the cost to Iberia for redeeming on partners can’t be that bad. For instance. Check out this data from OMAAT on Star Alliance partner bookings…
I have some Star Alliance data points, which I’ll round a bit:
- Singapore > Bangkok in Singapore Airlines business class: ~$35
- Frankfurt > Vienna in Austrian business class: ~$50
- Istanbul > Tokyo in Turkish business class: ~$250
- Tokyo > Bangkok in Thai first class: ~$250
- Vienna > Bangkok in Austrian business class: ~$300
- Washington > Brussels in Brussels Airlines Business Class: ~$300
- Warsaw > New York in LOT business class: ~$350
- New York > Tokyo in ANA first class: ~$450
- Los Angeles > Frankfurt in Lufthansa first class: ~$1,000
These prices are in premium cabins! Can you imagine how cheap Iberia buys an economy flight from New York to Boston on American?
A lot of partner redemptions require booking roundtrip. This creates a higher barrier to redemption on flights that don’t cost Iberia a fortune anyways…
The Miles expire December 1st. Most won’t use the 90k avios.
There isn’t a huge window of opportunity to use these miles. Redemption is one of the trickiest parts of this entire industry. It’s why I built an award booking service. Yes, acquiring miles, and using your everyday spend is more than half the battle, but if you don’t know where to look to find space, how to navigate routing rules, etc, etc – you’ll end up wasting points, not using them by expiration etc.
What I would consider doing if I were Iberia…Allowing purchasers to forfeit their flights, but not the money. Turning the promo into a sale.
Right now, Iberia is going to have to spend a lot of time reworking their system to account for no-shows, perhaps pulling Inventory, etc, etc. They also face the problem in forecasting revenue when it comes to future flight food purchases, change fees, bag fees, partner bookings, etc.
They also face a lot of blowback if they create negative balances for members because of no shows because of a promo that they miscalculated the demand on. Terrible PR
But, if Iberia offered me the ability to forfeit my flight plans and money, in exchange for keeping the points for the price I paid – I’d take it in a second. They could keep the same restrictions – spend the points by December 1st, but eliminate the negative balance condition.
This would allow customers to choose which flights they wanted to keep and fly, and which ones they were going to dump. In exchange, they could keep their points, and know that their account wouldn’t go negative if they committed a no-show.
Iberia could avoid spending time and money assessing accounts, avoid negative PR, and gain the ability to more accurately predict load, revenue, etc for all the flights purchased during the period. It would also mean, all those flights they sold, could be resold…