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DEVALUED: Avios to Nectar points conversion rate cut (again) from 11th March

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In a ‘surprising but perhaps not surprising’ move, British Airways has announced a further devaluation of the ‘Avios to Nectar’ exchange rate.

This is the second devaluation since the partnership was launched three years ago.

This is NOT a two way devaluation. The ratio from Nectar TO Avios is not changing.

What this means is that you will now take a substantial loss if you move Avios back and forth between the two schemes.

Avios to Nectar conversion rate devalued

What is changing?

Emails announcing this change went out to auto-converters yesterday. It is not yet reflected at ba.com or nectar.com.

When the partnership launched, 250 Avios converted into 400 Nectar points.

Since a Nectar point has a fixed redemption value of 0.5p, it meant that there was a floor value on the value of your Avios. 250 Avios got you 400 Nectar points worth £2, so 0.8p per Avios.

If British Airways or partner flight redemptions started to look like bad value, it didn’t matter. You could move your Avios to Nectar and guarantee yourself 0.8p. To be honest, you struggle to get 0.8p of value on many flight redemptions, especially in long haul Economy, and for many HfP readers transfers to Nectar became very attractive.

From November 2022, the transfer rate moved to 300 Avios = 400 Nectar points.

To save you getting your calculator out, the floor value of an Avios dropped to 0.67p as 300 Avios = £2 of Nectar points.

And now …..

From 11th March 2024, the transfer rate will move to 400 Avios = 400 Nectar points.

The floor value of an Avios drops to 0.5p, as 400 Avios = £2 of Nectar points.

The rate is unchanged in the other direction

The rate when you transfer Nectar points TO Avios remains at 400 Nectar points = 250 Avios.

This means that you can no longer move your Avios backwards and forwards without penalty. You will effectively be losing a percentage if you reverse a transaction:

  • 2,000 Avios = 2,000 Nectar points
  • 2,000 Nectar points = 1,250 Avios

You will lose 37.5% of the value of your points if you end up moving your Avios to Nectar and then back again.

Avios to Nectar conversion rate cut

Why has this happened?

It doesn’t take a genius to point the finger of blame at IAG Loyalty / Avios and not Nectar. There are two issues, I think.

Too much money was flowing out of IAG Loyalty

When Avios moved from Tesco to Sainsbury’s, the aim was to increase the amount of money coming into IAG Loyalty from the supermarket niche. It wanted to become a major partner of a retail loyalty scheme, rather than being a bit part of the Clubcard universe.

Did it work out that way?

When you transfer Avios into Nectar points, IAG Loyalty has to pay real cash out to Sainsbury’s, which owns Nectar.

Because some IAG partners are paying close to 0.8p for their Avios, IAG isn’t making much money on many Avios partner transactions if it pays Sainsbury’s 0.67p per Avios sent over.

This wouldn’t be a problem if people were choosing to spend their Avios on flights. However, it is becoming increasingly clear to many people that this isn’t something they want to do. Cashing out to Nectar made sense.

It is also logical that, with the economy not in great shape, saving some cash by converting Avios to Nectar to pay for your weekly shopping makes sense. It is a lot better for your budget than paying out taxes and charge for two ‘free’ business class flights to North America.

It is also likely that Sainsbury’s shoppers, when facing a choice between redeeming Nectar points for hard cash or turning them into speculative Avios, were voting for the money.

I suspect that the contract between IAG Loyalty and Nectar has an ’emergency break’ clause if too much cash flows in one direction compared to the original plan, and that the break has now been activated again.

Avios to Nectar conversion rate cut

It is now easier to devalue the Avios programme

The other issue is that the 0.8p transfer rate meant that British Airways had to remain ‘honest’. There was a limit to how much it could tinker with Avios because any negative changes would lead to a dash to the (Nectar) exit.

This 2nd factor is now key. Moving from 0.8p to 0.67p to 0.5p of Nectar points per Avios gives BA a LOT more wiggle room to leg you over.

It would be fascinating to know what Sainsbury’s makes of this. It will now see a lot less money coming in, as people decide not to convert Avios to Nectar, but will still be paying IAG when people convert into Avios.

What should you do?

If you were planning on moving any Avios to Nectar, you should do it now. Make sure that you are firm in your decision, as you will lose 37.5% of the value if you later convert back.

Today, 50,000 Avios – the monthly cap – gets you 66,666 Nectar points, worth £333.

After 11th March, 50,000 Avios will only get you 50,000 Nectar points, worth £250.

(And, of course, back in 2021 50,000 Avios got you 80,000 Nectar points, worth £400. That’s some devaluation in three years.)

Conclusion

The two-way simplicity of Avios to Nectar transfers was the real charm of the scheme. The two schemes could operate symbiotically as one.

This has not been the case since November 2022, when the transfer rates started to deviate, and is definitely not the case after 11th March. You will only transfer to Nectar if you know that you have a firm plan to spend them, since transferring back to Avios will see you incurring a loss.

More importantly, converting to Nectar is now no better than any other ‘pseudo cash’ Avios redemption, such as using points for seat selection or ‘Part Pay With Avios’. From 11th March, you will be getting 0.5p per Avios either way.

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Category

British Airways and Avios, Sainsbury's and Nectar

Comments (145)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Kowalski says:
    27 Feb27 February 05:30

    Oh dear, IAG preparing the ground for a big Avios devaluation

    • BJ says:
      27 Feb27 February 06:07

      I am thinking thst’s unlikely because RFS pricing and associated co-payments are already generally bereaved to be too high and the hit from change to earnings still has to hot home in a different way. Devaluation is occurring but in a more stealthy way around the margins lije this Nectar thingy and and increasing avios required for some partner flights forvexample. All stuff that will be significant for them but less likely to shake the boat and grab headlines than a core BA reward flight devaluation.

      • Phillip says:
        27 Feb27 February 06:38

        I’m surprised nobody called BA out for what has been (in my view) a major devaluation with the introduction of RFS in longhaul – including how using certain upgrade vouchers restricts you to certain (high) Avios pay options.

        • BJ says:
          27 Feb27 February 06:56

          HfP ran many articles on how BAEC members got stuffed.

          • Rob says:
            27 Feb27 February 07:31

            Apart from the 6 articles we published which all started with the word ‘STUFFED:’?

        • Phillip says:
          27 Feb27 February 22:00

          I take it back… nobody but HfP! I guess that proves my point. Now that I’m reminded of the Stuffed articles… it still feels like BA got off lightly from the press and the public.

    • Jonathan says:
      27 Feb27 February 07:12

      I generally try to use Avios for non-BA redemptions, particularly good value when cash prices are high and there’s not much choice of available flights.
      I definitely half shot myself in the foot by using Avios to fly to Cairo then home from Amman, I won’t be using BA for those routes again and Tel Aviv ! – unless BA takes a good hard look at what experience they offer for these flights and make some changes. Anything’s an upgrade over their current offering, even if means prices would increase. I remember one reader mentioning once that they’d rather fly TK Economy over BA CE to Istanbul !

      • BJ says:
        27 Feb27 February 07:27

        I think keeping an open mind to partners and routes is key to making BAEC work and feeling satisfied. In the past two years apart from BA I’ve used Avios on Alaska, American, Cathay, Finnair, JAL and Qatar. No complaints with any of my awards 🙂

      • Londonsteve says:
        27 Feb27 February 23:00

        “I remember one reader mentioning once that they’d rather fly TK Economy over BA CE to Istanbul !”

        That might have been me. I still feel the same way and I know I’m not the only one. Whereas TK Business is significantly more expensive than BA (for a significantly better product), TK Economy is always cheaper that BA CE so it’s a no brainer.

    • will says:
      27 Feb27 February 10:29

      They’ve been doing it by stealth for years now. Up the “taxes and charges” element then offer options which use more avios to reduce the taxes and charges to effectively take you back to something close to the original redemption cash charge but with a load more avios.

  • BJ says:
    27 Feb27 February 05:59

    I think this shows that Joe Bloggs may not be so naive as IAG/Avios Group and many of us regular HfP readers might believe. Obviously Sainsbury’s will welcome the boost they are about to receive in the next ten days. In the longer term the newBA earning rules mean they are going to receive less but as Joe Bloggs begins to appreciate their avios earn to burn ratio within BA is getting poorer stil then not even a 0.6p valuation is likely to stem the flow from BA to Sainsbury’s; who knows, it might even increase if Joe Bloggs does not like what they otherwise see at BA and/or the need for penny-pinching persists.

  • TimM says:
    27 Feb27 February 06:17

    “2,000 Avios = 2,000 Nectar points
    2,000 Nectar points = 1,250 Avios”

    The equality symbol, ‘=’, is bidirectional. Perhaps the word ‘buys’ or even the informal use of ‘->’ would be less mathematically incoherent?

    • R01 says:
      27 Feb27 February 06:46

      The article was crystal clear. Perhaps Rob should send you a mathematically correct invoice for all of the free insight and advice that HFP provides.

      • TimM says:
        27 Feb27 February 07:32

        There is nothing free about following HfP links.

        • R001 says:
          27 Feb27 February 08:54

          Then don’t. Give your affiliate commission to a cash back firm or let the company acquire your business for free. I’m more than happy with the value HFP offers and happy to give them a few quid a year in commission if I’m going to buy anyway.

        • DK says:
          27 Feb27 February 08:59

          Does clicking a link cost you anything?

    • Qrfan says:
      27 Feb27 February 06:53

      Yeah I found this part really annoying too.

  • Skybluedave says:
    27 Feb27 February 06:18

    Frustrating for me that my account is STILL locked (3 1/2 weeks and counting,). I already wanted to transfer some Avios to Nectar, this makes me even more convinced that I need to do a big transfer before the 11th.

    I just have everything crossed that BA finally send me the email that helps me unlock my account!

  • Alex G says:
    27 Feb27 February 06:19

    If the partnership has driven customers from Tesco to Sainsbury’s, then it will still be working for them.

    • BJ says:
      27 Feb27 February 07:00

      Even if it only heloed them maintain their own market share then that was a result given the numbers switching to Aldi and Lidl.

    • Andrew says:
      27 Feb27 February 09:30

      Exactly. Supermarket loyalty schemes aren’t and have never been about making money (directly). Sainsburys and Tescos expect the schemes to have a, potentially large, net outflow of money. Their only purpose is to persuade you to shop at supermarket X rather than supermarket Y. I used to hardly ever visit Sainsburys whereas since the avios/nectar partnership probably a good 75% of my supermarket spend goes to them so in that respect the partnership has been a success.

      After a generous introductory period I’m convinced that it was the plan all along to reduce the avios->nectar rate to the bog standard 0.5p/avios. I very much doubt that this has come as a surprise to nectar/sainsburys.

      • Man of Kent says:
        27 Feb27 February 10:42

        Don’t forget too the value of all that data they collect about their customers through these schemes.

  • NigelthePensioner says:
    27 Feb27 February 06:26

    I believe that BA will, towards the Summer, increase the Avios required for reward flights – a smack you in the face devaluation. They appear to be a struggling airline with a struggling loyalty programme (never mind IAG’s profits from ripping off Customers). The endless changes in every aspect of their retail programme shows they do not have a clue as to what works and what doesn’t, as their algorithm for predicting positive change in the Customers’ eyes is hopelessly inaccurate. Yet still they blunder on. Are Avios now really worth collecting (with the inordinately high fees on reward flights) or do you just wait for a seat sale and buy then – they have a sale every 6 to 8 weeks so never too long to wait.
    Remember status is all very well, but if you are flying J or F, you get the perks anyway. Is it really a deal breaker to check in at F when flying J and then enter into a busy misnamed lounge? Im sure I could go back to a small wait at J check in (or travel with my generous BA cabin allowance) and just go to the B gates lounge or the pretty much identical J lounge at A gates.
    C’mon think this through!

    • Phillip says:
      27 Feb27 February 06:44

      I wonder what you base “struggling airline with a struggling loyalty programme”. Big difference between struggling and low quality airline! I would say BA and the Executive Club are doing mighty fine! They have a big captive audience which is not voting with their feet. Plus, the grass is really not that greener on the other side (at least where the BAEC is concerned)!

      • will says:
        27 Feb27 February 10:35

        BA (well IAG’s) risk is their debt. IF there is a downturn they are not well positioned to weather it and may face the prospect of refinancing at unfavorable rates while making operational losses.

        We do appear to have entered an era where governments create money to mitigate downturns though so who knows what will happen!

    • executiveclubber says:
      27 Feb27 February 07:14

      Sorry but that’s just nonsense

    • Deek says:
      27 Feb27 February 09:07

      There’s a huge amount of value to be found in avios, if you’re willing to do a little legwork and be flexible. Perhaps that’s the issue – it’s not going to be handed to you on a plate

    • MartinT says:
      27 Feb27 February 16:15

      Do you have any idea how Avios is performing and the results ? Such a bold statement when we know little.

      • Rob says:
        27 Feb27 February 17:06

        Avios Group accounts can be downloaded and it’s also in the IAG results. Surging away. However, selling more points is what leads to devaluations. You really want Avios to be struggling because there will be less pressure on reward seats that way.

  • Robert says:
    27 Feb27 February 06:26

    Looking at the (tongue in cheek) bright side, at least it will save a bit of admin for those that did MR->Avios->Nectar, who can just go straight from MR to Nectar now

  • Erico1875 says:
    27 Feb27 February 06:26

    I wouldn’t be surprised or upset if there was a general devaluation of Avios, say 10%.
    M O’L has already indicated that he thinks summer flight prices will be higher this year due to demand and lack of aircraft.
    eg Ryanair Edi to BCN 6 July to 19 July £466 inc seat selection and 20kg luggage. Playing around with dates saves maybe £60.
    You can bet Jet2 ,TUI and BA are even more expensive.
    This makes Edi or Gla to LHR to BCN very attractive using Avios, even in economy

    • Erico1875 says:
      27 Feb27 February 06:37

      The cheapest, there are 2, direct BA City flyer flight Edi to PMI sat 7 July to Sat 21 is £649 economy, CE is £905.

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