Avios

Transaction Model

Helping the FTSE 100 aviation group IAG carve out its loyalty and rewards points programme from BA and Iberia into a separate entity.

Independent approval

PWC were advising IAG on the carve out of Avios and recommended us to build financial model to support it

Satisfying multiple entities

The model calculated the valuation of Avios and compensation for BA, Iberia and the BA Pension scheme

Simplifying complexity

Points schemes for IAG companies, partner airlines and retailers were unified for customers’ convenience

Challenge

IAG (International Airlines Group) was carving out the Avios points part of its business to form a separate entity and wanted to allow passengers on BA and Iberia and partner airlines to still earn Avios points to spend on flights, upgrades and other purchases with partner companies. Separating Avios also required a valuation that compensated the respective companies.

Solution

We built a financial model representing all the entities in the group. This included many permutations for collecting and spending Avios points, which effectively became a single currency across the group and allowed customers to combine points with other forms of payment. Additionally, a change to IFRS required a different accounting treatment to be accommodated in the model.

Results

The model evaluated a wide range of scenarios and the impact each would have on the respective companies. This enabled IAG, to decide how consideration might be paid to BA and Iberia and reach a deal for all parties involved with transparency in the valuation.

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