Is the American Express Companion Voucher All It’s Cracked Up to Be? An Introduction to My Methodology

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InsideFlyer UK contributor Miles Hunt saved me the effort of writing a post explaining the American Express BA Premium Plus credit card. You can read it here. As he mentions, the companion voucher is often considered to be one of the greatest perks available to UK-resident travel hackers.

But is it really? Of course anybody can claim that using the companion voucher for a free peak-date First Class return ticket from London to Sydney, Australia will save the cardholder 400,000 Avios. But I’m not selling credit cards for a referral commission, I’m analyzing their value under a broader range of circumstances. Only a select handful of Executive Club Gold Guest List members are going to have the “jokers” – the ability to force open reward space where none is available – and a high enough balance of Avios for the paid-for reward. Another small percentage of people are able to confirm their holidays 355 days in advance and can actually grab the limited award space as soon as it opens. The rest of us mere mortals are using these companion vouchers much more modestly.

So, in a series that I will run over the coming days and weeks, I will be looking at a variety of popular British Airways destinations. In each scenario, I will look at the total, all-in cost of using the American Express companion voucher, including the annual fee required to hold the premium card. I will compare this to an alternative “travel hacking” option for the same destination. I’m not sure where my analysis will get to, but I will try to keep it simple…

Since not every reader lives in London, I might throw in a few simple positioning options to Dublin or Madrid. But I will try to avoid the temptation of proposing that you buy SPG points for you, your family, your pets and your unsuspecting in-laws with the aim of combining those Starpoints together in order to convert the lot to Marriott Rewards points and book several Hotel + Air Travel Packages. (complicated, but really quite lucrative!) Simplicity also requires that I ignore award availability, and assume that it is just as easy to find two reward seats on British Airways as it would be on any of the alternatives I plan to propose.

But to get started, we need to aim for some consistency. You’re welcome to “card churn” to chase sign-up bonuses, downgrade the Premium Plus card for a pro rata refund of the annual fee and otherwise “travel hack” American Express to death. But not everybody has the time or inclination to do that. And luckily not everybody does, since otherwise I’m quite sure that American Express would put a stop to it…

Credit Card Ground Rules

It can be tempting to treat “credit card miles” as free, especially for credit cards without an annual fee. But those miles are never fully free – after all, you could choose a cashback credit card and earn cash back instead of miles. And judging by the number of times we write about Topcashback here at InsideFlyer UK, you would be right to treat cash back as important a “travel hack” as earning miles. As long as cashback credit cards exist, therefore, “credit card miles” can never be completely free of so-called opportunity cost.

“Opportunity cost” is a fundamental concept in economics. It is the “cost” incurred by not enjoying the benefit that would have been had by making alternative choice. i.e. because you spent £10,000 on the BAPP, you cannot spend that same £10,000 on a different credit card and earn some other form of incentive. I hope that is clear, since it is fairly crucial to any analysis of the BAPP versus its alternatives.

So, on the credit card side we have two options. The first is the British Airways American Express Premium Plus card. The key features crucial to my analysis are:

  • A £195 annual fee
  • An earning rate of 1.5 Avios per £ spent on day-to-day expenditure

The second option is the American Express Platinum Cashback Credit Card. I believe that this card offers the highest rate of cashback in the UK. The key features crucial to my analysis are:

  • £25 annual fee
  • 1% cashback on your first £10,000 of annual spend
  • 1.25% cashback on any spend above £10,001

For example, if you spent £10,000 annually on the Premium Plus card, you would earn 15,000 Avios but pay £195 for the privilege of holding the card. However, by spending £10,000 on the cashback card, you would actually receive £75 (1% of £10K less the £25 annual fee) to spend anywhere.

“No Free Avios” Ground Rule

Some readers might find this to be controversial. For a UK resident, Avios are unquestionably the easiest form of airline miles to accumulate. But that doesn’t make them “free”; as with the credit cards, earning Avios usually has an opportunity cost. The vast majority of Avios-collecting opportunities have alternatives, whether it be using Tesco Clubcard vouchers at four times face value at a restaurant, or crediting “other people’s money” business travel to a different frequent flyer programme. In addition, every Avios spent as part of a companion voucher reward becomes unavailable for a potentially higher-value reward on Iberia or Aer Lingus. I also want to cater for the fact that many BAPP cardholders are tempted to buy substantial numbers of Avios each year, in order to “make proper use” of the companion voucher.

So, for the purposes of my analysis I will assume that the required Avios for a reward actually cost the cardholder 1p each. The only exception to this is Avios earning from day-to-day spend on the BAPP credit card.

 

Conclusion

So… I’ve outlined the basis for my analysis. If my ideas are not quite clear, yet, hopefully they will become so as I show real examples. Over the next few days and weeks, I will be looking at various British Airways destinations, and seeing whether the companion voucher truly provides value over the alternatives. If you have any specific reward in mind, please leave a comment below and I’ll try to look at it…

Comments

  1. Mike G says

    I’m really looking forward to this series, Craig! Could you please (pretty please) put in an analysis for Hong Kong in First on the 2-4-1? I’ve got the voucher now, just need to earn the last 50k or so of Avios. Thanks in advance!

  2. Dr Redeye says

    not as good value as AS miles to hkg with cathay, but an “easy” way to get JAL business lhr-nrt is with avios, I think it’s 70 000 avios one way through BAEC and availability is pretty good.

  3. Aleks says

    We had a redemption from London to singapore planned and I was able to find two seats out in club world and return in first. It did need some flexibility as we flew out on a Thursday and returned on a Tuesday and luckily work was okay with my chosen dates but it has convinced me that it is possible to find availability if you’re willing to be flexible – we booked our trip four months in advance around the flights that were available but I do agree that won’t suit everyone and this is the reason most people will use to complain about the voucher.

    With regard to opportunity cost I’m quite happy to earn the Avios as my alternative would be to earn nothing. I’m not yet convinced about cash back but am looking into this.

    What does frustrate me is how expensive the taxes are for leaving the UK.

    The big competitor to the 2-4-1 is the cash fares that are coming from Qatar ex EU which will also earn Avios and tier pints.

  4. Nick Burch says

    Your hypothetical GGL probably wouldn’t save the full amount of 400k avios though – generally we’d combine it with one of our Gold Upgrade vouchers (GUF2 at 2500 tier points, 2 x GUF1 at 3500 tier points). So, with Joker + GUF2 + Amex 2for1, we’d pay 1 lot of Club World avios, 2 lots of First taxes, and have two people flying at the pointy end all the way to the land of the kangaroos! 🙂

  5. GnarlyOldGoatDude says

    I have an expiring voucher that I won’t be able to use.
    I have another for next year that I probably won’t use either.

    Bottom line, I have the wrong card.

    • Nick Burch says

      I’d suggest a weekend away somewhere in Club – the 2-for-1 brings the cost of Club Europe down to the cost of Economy (Euro Traveller), but you get more space + lounges + food + champagne on board. (You do have to pay slightly higher taxes). Have a nice weekend away!

      • GnarlyOldGoatDude says

        I get it, however, for a series of complicated reasons, I am only partly resident in the UK.

        If the voucher gave 50% off Avios spend (i.e. one person could get a discount), I could use it.
        If the voucher gave the 2nd person’s Avios free for non-ex UK flights, I could use it (I can’t as I will need to always book positioning flights back to the UK).
        If the voucher gave me 500 Avios, I would use it.

        As it stands, the voucher doesn’t for my circumstance, which is working in the UK, family in Malta.

        • Craig Sowerby says

          Indeed. And you also need your Executive Club account to reside in the UK. Up until a couple of years ago, us “part residents” had more incentive to have their BAEC accounts reside in Europe…

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