This is the second instalment of the Loyalty Secrets series, where we dig into public financial data to uncover how large-scale loyalty programs really work – what profits they generate, what they cost to run, and what they hint to us about the strategies of their operators.

​

In this edition, we turn to two of Europe’s biggest airline groups: IAG (parent of British Airways, Iberia, Aer Lingus and Vueling) and Air France–KLM, and examine how their loyalty programs, Avios and Flying Blue, compare across:

​

• Scale: tracking issuance, liability, and growth

• Profitability: how points earn and burn impacts the P&L

• Breakage: the real impact of expiry policies

• Membership: capturing engagement and demographics

​

We also reflect back on our analysis of the US major airlines, to explore transatlantic comparisons and probe the differences.

​

As with our US airline analysis, we derive insights both directly from the financial statements, and from our own inferences, even when the data are buried in footnotes or ad-hoc releases.

​

What emerges is a story of two similarly-sized airline groups with two very different loyalty economics. One is larger and faster-growing, with a mature US footprint and significant cash leverage. The other is smaller but slightly more profitable, and is just beginning to tap the full potential of its partner ecosystem.

​

​

Theme 1. Scale and momentum

​​

On the face of it, both IAG and Air France-KLM are similarly sized airline groups, with passenger revenues of €26-28B in FY24, and total operating revenues just north of €30B.

​

However, their loyalty programs, Avios and Flying Blue, are very different in both scale and growth trajectory:

​

Issuance: IAG issued €1.45B of new Avios points in FY24[1], creating a health cash balance for the airline group, compared with €0.49B of Flying Blue points at AF-KLM.

​​

Liability: With higher issuance comes a larger balance sheet: IAG’s loyalty liability closed at more than 3x the size of AF-KLM’s (€2.9B vs. €0.9B), and this was reflected in a higher per customer liability too (€23.66 vs. €9.25).

​​

Post-covid growth: Over the last 2 years (FY22-FY24), IAG points issuance grew at almost 50% annualised, compared with 20% p.a. for AF-KLM.

​​

​​​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​

The implication is that for two airline groups of comparable scale, IAG is issuing more points, growing faster, and has far more loyalty cash sitting on the balance as a result.

​

​​​​​​​​​​​​​​​On the one hand this creates longer-term redemption risk, but it also offers an attractive externally funded float: IAG holds more cash upfront from banks and partners, which can be used for working capital and gives the group more financial flexibility.

​

How is IAG able to do this? Critically, IAG has a richer partner portfolio: its FY24 results highlighted renewed non-air partnerships with HSBC, Uber, Royal Caribbean, plus a strong credit card base in the US, where interchange fees are high and bank deals are lucrative. By contrast AF-KLM disclosed that only 12% of its Flying Blue members are based in North America.

​

Fundamentally IAG has, over time, built a partner-funded loyalty engine with a strong US presence, and this creates measurable financial benefits to the overall airline group.

​

​

Theme 2. How points impact the P&L

​​​

The difference in scale of IAG and AF-KLM’s respective programs flows straight through to their P&Ls – bigger programs mean bigger top and bottom line impact:

​

Revenue: Last year IAG recognised €1.40B of Avios points redemptions, driving over 4% of group revenue[2]; this compares with €0.49B of Flying Blue redemptions which contributed to about 1.5% of AF-KLM’s group revenue.

​​

Profit: That revenue difference is reflected in profit too – with IAG Loyalty (the business unit for the Avios program) generating €495M of profit at a 17% margin, compared with €200M profit at an estimated 20% margin from AF-KLM’s Flying Blue business unit[3].

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

Flying Blue clearly maintains a comparable margin on points to IAG Loyalty, so both business models work well. And having plentiful leisure routes is important for this, because points redeemed on distressed leisure inventory can create margin upside where the marginal cost of an empty seat is low and ancillary sales are high.

​​​

But ultimately, IAG Loyalty generates more revenue from monetising its partner network and from its US card deals, where high volumes of points sales directly drive its higher absolute profit contribution.

​

​

Theme 3. Breakage and points expiry

​

IAG discloses an interesting stat not seen in AF-KLM’s reporting: its ‘breakage sensitivity’.

​

That is, how much IAG’s loyalty revenue (and liability) would shift if their breakage were to move by 1 percentage point: we find out that a 1 pp change in breakage would move IAG’s deferred revenue by €20M. Putting that in context, it’s equivalent to 0.7% of the loyalty liability, or just 0.45% of group operating profit.

​

This tells us that, unlike for some businesses, loyalty assumptions are not a major swing factor for the group P&L, and the airline is pretty robust to moderate changes in customer behaviour patterns (we can expect a similar robustness at AF-KLM, given its similar structure).

​

Even if IAG Loyalty were a standalone entity (as for example Air Canada’s Aeroplan once was) then the same 1% shift in breakage would still only represent 4% of the unit’s operating profit, no longer trivial but far from existential. The unit’s high margin partner-funded model would still offer strong cash generation and resilience to behavioural change.

 

Another financial and behavioural lever is points expiry policy, and here Avios and Flying Blue differ again:

​

• Avios points expire after 36 months of inactivity, but any account activity resets the clock and will keep the member’s account active.

• For Flying Blue, the time limit is 24 months and the only ‘qualifying’ activities to prevent expiry are points earn from either flying activity, or cobrand card spend.

​

Despite this tighter rule, Flying Blue doesn’t appear to experience materially faster burn: the ‘life of a point’ – the average time for a point earned to be redeemed –  is similar at 1.94 years for Avios, and 1.97 years for Flying Blue.

​

This suggests that holding a marginally tighter expiry policy does not have a corresponding financial impact – rather it is customer behaviour and reward appeal, rather than policy, that tend to shape redemption.

​

​

Theme 4. Member engagement and demographics

​

The data available on member engagement from the two airline groups reveals important contrasts, despite very different levels of disclosure:

​

• AF-KLM publishes key stats on member penetration: 41% of flight segments (in FY23[4]) and 52% of passenger revenue (in FY24) came from Flying Blue.

• IAG doesn’t disclose revenue or segment penetration, but comparing IAG’s 2.5x higher loyalty liability per passenger (€24 vs. €9) suggests that either: (a) a higher proportion of IAG passengers are Avios members, or (b) the Avios program rewards passengers more richly, or (c) both.

​

The international footprint is another differentiator:

​

• AF-KLM discloses that 12% of members are based in North America, as is 26% of passenger revenue. Assuming 1.5x higher long haul yields, this implies that 17-18% of AF-KLM’s capacity is deployed transatlantic.

• IAG doesn’t provide member region splits but does report that 31% of total capacity is deployed on the North Atlantic routes .

​

So assuming the same ratio of member share to capacity share as AF-KLM (12% members from ~18% capacity), then IAG’s North American membership could represent ~20% of its total base.

​​

​

​

​

​

​

​

​

​

​

​

​

​

This is consistent with IAG’s established credit card presence (Chase Visa, Amex, Barclays) plus its 45% share of the transatlantic market (via its joint business with American Airlines).

​

So, while AF-KLM’s 52% revenue penetration shows an engaged member base, IAG likely has an even higher penetration of members plus a larger proportion of that base in the attractive US market – despite similar underlying airline scale.

 

​

Theme 5. Comparisons with US airlines

​

While this current analysis focuses on IAG and AF-KLM, it’s interesting to compare their metrics with the major US airlines covered in our first ‘Loyalty Secrets’ report.

​

Not all data is directly equivalent due to different accounting regimes and disclosures, yet there are several clear comparisons and contrasts:

​

Post-covid growth in Europe: Avios issuance has been growing at ~50% p.a. compared with 0.5-18% for the US majors. Some potential drivers are an EU skew to leisure travel, which bounced back harder than US corporate travel, reinstatement of expiry policies (US airlines tend not to expire points), and perhaps more pent-up demand from Europe’s longer and stricter lockdowns.

​​

Greater importance to US group revenue: US programs contributed to 10-20% of their respective group revenue, compared with <5% for IAG and AF-KLM. These programs are core financial performance drivers in the US, whilst secondary (albeit strong) contributors in Europe.

Higher US loyalty liabilities per passenger: US airlines carry much higher per pax liabilities (over $40), even compared with IAG (~€25). This reflects higher US card penetration with more generous earn rates (due to higher US interchange), and likely less breakage from non-expiry.

​​

​​

​​

​​

​​

​​

​​

​​

​​

​​

​

​

​

Similar loyalty burn down: Both US and European programs experience similar liability burndown rates of 45-50% (that is, the proportion of opening liability burned in the subsequent 12 months). This suggests that despite structural differences, program members are equally as engaged in the experience of redeeming their loyalty points (and it’s this engagement which ultimately drives partner revenue growth too).

​

In summary, whilst European airlines’ programs are smaller and more leisure-focused, they are rapidly accelerating down the runway, led by IAG in monetisation.

​

As US banks continue to build global ecosystems, European airlines will be able to capitalise on this to expand their partner initiatives. Longer term though, full parity with US airlines may remain elusive, constrained by structural differences in their respective banking and travel markets.

 

​

​​

Adam Schaffer, Managing Director

Symbia Advisors © 2025

​

​

​

Sources

International Airlines Group – Annual Report and Accounts, 2022-2024
International Airlines Group – Results Presentations, FY2022-24
Air France-KLM – Consolidated Financial Statements and Notes as of Dec. 31, 2022-2024
 

Notes

[1] Accounted for as issuance revenue deferred

[2] Revenue is recognised at time of redemption

[3] Flying Blue margin estimated at 19.6%, after adjustment for structural accounting differences, since not all of Flying Blue’s redemption revenue actually sits within the airline’s loyalty segment, some flows through to passenger revenue and needs to be added back to enable comparison with IAG Loyalty

[4] Flight segment penetration not available for FY24