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