IAG's €1 Billion Loyalty Ambition Depends More on Banks Than Airlines

The Loyalty Program That Might Outgrow the Airline

IAG—the parent of British Airways, Iberia, Aer Lingus, and Vueling—has set an ambitious target: grow its loyalty arm, IAG Loyalty, into a business generating €1 billion in annual revenue. What’s striking is how little of that plan depends on people actually flying.

The unit, which runs the Avios points currency, is pushing hard into banking partnerships, e-commerce shopping portals, and co-branded credit cards. The shift reflects a broader industry trend: loyalty programs are becoming profit centers in their own right, often more lucrative than the core airline operations they were designed to support.

Banks Pay More Than Passengers

The economics are straightforward. When a bank issues a co-branded credit card, it pays the airline upfront for miles or points that customers will redeem later—sometimes years later. That cash hits the airline’s books immediately, while the liability (the seat or upgrade the customer eventually claims) is deferred.

For IAG, this means a chunk of that €1 billion target will come from financial institutions buying Avios in bulk, not from passengers earning points by flying London to Madrid. It’s a strategy similar to what Marriott is doing with its credit card revenue, where hotel owners are now demanding a bigger slice of those banking fees.

IAG Loyalty already operates the British Airways American Express card in the UK and partners with banks across Europe. Expanding those deals—and launching new ones—is central to the plan.

E-Commerce and Everyday Spending

The second lever is turning Avios into a currency that members earn outside of flying altogether. IAG runs shopping portals where users click through to retailers like Amazon or grocery chains, earning Avios on every purchase.

These portals generate commissions from retailers, and IAG keeps a cut while passing some value to the customer in points. It’s low-margin but scalable, and it keeps members engaged with the program even when they’re not traveling.

The company is also exploring partnerships with non-travel brands—think petrol stations, supermarkets, telecom providers—where everyday transactions can feed the Avios ecosystem. The goal is to make Avios as ubiquitous as cash-back rewards, embedded in daily life rather than reserved for twice-a-year holidays.

What This Means for Travelers

For the average Avios member, this shift could be a mixed bag. On one hand, more ways to earn points is useful, especially for people who don’t fly often. A credit card that rewards grocery shopping or a discount at a favorite retailer keeps the program accessible.

On the other hand, when loyalty programs grow too big, redemption can become harder. More points in circulation can mean fewer award seats, higher surcharges, or blackout dates. Airlines have already signaled they plan to keep fares high even as costs drop, and loyalty devaluations often follow the same logic.

IAG has invested in Avios.com as a standalone booking platform, letting members redeem points across all IAG carriers and partners. That flexibility is valuable, but it also underscores the program’s shift from airline perk to independent marketplace.

The Bigger Picture

IAG isn’t alone in this. U.S. carriers like Delta and United have long treated their loyalty programs as financeable assets, borrowing against future mileage sales during the pandemic. Hotel groups are doing the same. As AI reshapes how travelers discover and book trips, loyalty currencies might become even more abstracted from the core product—less about rewarding flights, more about capturing wallet share.

For now, IAG’s bet is clear: Avios can become a billion-euro business, but only if it stops being just an airline program and starts acting like a fintech platform with planes attached.

If you hold Avios, keep an eye on redemption rates and award availability over the next few years. The program’s growth is good for IAG’s balance sheet, but whether it’s good for your next trip to Dublin or Barcelona depends on how carefully they manage the supply side of the equation.