Iberia Plus has run what I’d consider to be the promotion of the year, as they offered 9,000 bonus Avios for every segment booked, up to 90,000 bonus Avios. The Avios post within 10 days of booking rather than after flying, so many people booked $30 one-way tickets within Spain, and are hoping to pick up 90,000 Avios for about $300. That’s an astonishingly good deal… if it all works out as planned.
It’s now the middle of the night in Spain, so I imagine in a few hours Iberia executives will be arriving at their desks to start their Monday, with quite a situation in their hands. I’m sure whoever is in charge of revenue management for Iberia’s domestic network is patting themselves on the back and expecting a promotion shortly, because they’ve probably set new records when it comes to advance seat sales for domestic flights. 😉
Anyway, on a previous post reader Jamie D asked me the following:
Hey Ben! I know Iberia has come out saying they will support this promotion but where do you put the odds?
Typically when we see mistake fares or crazy promotions, I feel like I’m pretty good at predicting the outcome. Of course I’m wrong sometimes, but I feel like I get the outcome right more often than not.
In this case I feel even less confident in my prediction than usual, though that won’t stop me from sharing my thoughts. So let’s talk through it, and I guess we’ll find out anywhere between a few hours and 10 days from now how this plays out.
On the surface, Iberia Plus has no way out
This wasn’t a case of a fat finger mistake, where someone accidentally left off a couple too many zeroes.
When we first heard about the promotion, I was surprised by how few terms there were associated with it. That’s why I was initially hesitant to write about it. I figured the promotion was intended to be targeted, that there was a fare class requirement, or something. There were suspiciously few terms.
But over time Iberia Plus directly confirmed that the promotion was exactly the way it was intended to be. They said you didn’t actually have to fly to earn the Avios, they confirmed that even a cheap domestic one-way ticket qualifies for the promotion, and they confirmed it wasn’t targeted.
So this isn’t just the case of a program accidentally publishing a promotion and then quickly realizing their mistake and backtracking. Iberia basically stuck with it the whole way through, so they have zero grounds on which to not honor this promotion.
Of course what companies can/should do and what they actually do are often two different things, since they know that most people won’t fight them.
Option #1: Honoring the promotion
The logical thing for them to do here is to honor the promotion. I have absolutely no clue how many people took advantage of this promotion. In the past sometimes companies have revealed the details after these kinds of promotions have gone viral.
This is complete speculation on my part, though I’d guess that probably about 10,000 people maximized this promotion, meaning they bought 10 tickets each, for a total of 100,000 tickets sold. Again, this is total speculation on my part, and I could even be off by a decimal point. But that’s the best guess I have.
Assuming the average base fare was about $15 (which is how much the ~$28 fares were before taxes and fees), that means Iberia got about $1.5 million in revenue, and they’re expected to award about 900 million Avios.
That sounds like a lot, though in the context of how many miles are issued by many programs, it’s not actually that much. As a point of comparison, currently American AAdvantage has over 600 billion outstanding miles (though that’s a much bigger program, and also represents all outstanding miles, and not those issued over a period of a few days).
The bigger concern here is that all of these Avios have to be redeemed by December 1, 2018, which will be the limiting factor. There will be a lot of competition for limited award seats.
This might come as a surprise, but I actually think Iberia might not lose that much money if they honor this promotion. A lot of people won’t fully use their Avios, some won’t use them at all, and for those that do use them, the reimbursement rates between airlines for award space are typically quite low.
Even if they do intend to fully honor, this is going to be a complete mess for them. Of course there will be hundreds if not thousands of people who don’t have their Avios post correctly, who have questions, etc. Iberia has awful technology to begin with, and I imagine it’s even worse here, given how complicated this is. It doesn’t seem like Iberia Plus is properly staffed to handle normal operations, let alone the level of involvement they’ll need here.
Option #2: Various levels of not honoring the promotion
Hopefully they do honor the promotion, but if they don’t, there are plenty of ways that could play out. I’m not saying any of these are acceptable or even legal, but I’m just sharing the possibilities:
- They could unilaterally cancel all tickets (they could create a script to cancel any tickets for members who made 5+ one-way bookings for under $50 over the past few days, for example)
- They could technically honor the promotion but intentionally not release any award availability on their own flights, and make it really hard to redeem on partner airlines
- They could only issue Avios to a small percentage of those who took advantage of the promotion, and claim that many people didn’t have their Iberia Plus numbers on the reservations, etc.
- They could retroactively add restrictions, and claim that only existing members are eligible, that you actually have to fly the segments, that they’ll only award the miles after flying, etc.
Let me once again emphasize that none of those options would be at all reasonable, but I’m just trying to share all the scenarios I see. The logistics of them executing any of these options is beyond challenging, so before they make any decisions, I hope they fully consider the implications of them.
My prediction is that Iberia will honor this promotion. Not because they want to, but because they realize they have no other option at this point. If they’re smart, they’ll make the best of it — this will make a great media story that will be picked up widely, they have a huge number of new Iberia Plus sign-ups (which is something airlines really do care about), and they might even pick up some awards for the promotion.
However, I also predict that Iberia Plus customer service will be as lousy as usual. Have an issue with Avios posting? Getting in touch with someone will probably be a challenge. I suspect their website will continue to be not-great, making it tough to book some tickets online. And I also suspect that Iberia Plus hold times by phone will be long, since demand will be through the roof and they won’t increase staffing, and their agents will be as unhelpful as usual.
Do you think Iberia will honor this promotion, or how do you see it playing out?