Most retail-rewards schemes are not very useful unless you are a regular customer with sound reasons for being loyal. You typically accumulate tiny numbers of points that can only be used at the company that issues them. If you allow collecting points to influence your shopping decisions instead of going with the best price or service, you’re likely to end up spending more overall. But there are a couple of schemes – or more accurately, two pairs of linked schemes – that can be a lot more useful.

Rewards Cards for Avios

The slickest is Nectar, run by supermarket chain Sainsbury’s, and Avios air miles run by IAG, the parent of British Airways. These are closely linked: Avios can be swapped into Nectar at a rate of 300 Avios to 400 Nectar or vice versa at a rate of 400 Nectar to 250 Avios. Note that because these rates are different, going from one to the other and back again loses you money.

You earn Nectar points at a rate of one point per £1 spent at various outlets (the most useful are Sainsbury’s, Argos, eBay and Esso), but also by clicking through from the Nectar website when buying at a number of other companies. You collect Avios from flying with BA and other airlines, and by going via the BA shopping website. There are also several credit cards that pay rewards in Avios or Nectar points, while other companies sometimes offer a few thousand points of one or the other as a sign-up bonus.

There are various redemption options, but three stand out. First, Nectar points can be used at Sainsbury’s or eBay at a value of 0.5p per point. This puts a cash floor on the value of Nectar, and thus one of 0.67p on Avios. This creates some quirks: Sainsbury’s own Nectar credit card (one point per £5 in most places) is dire compared with the free Barclaycard Avios credit card (one Avios per £1 everywhere), which is in turn the best cashback rate of any free UK credit card. Second, 350 Nectar points gets you a drink of any size at Caffè Nero – at least 1p per point. Last, well-timed redemptions of Avios for long-haul premium flights can easily beat that.

Rewards Cards for Virgin Points

The other is Tesco Clubcard and Virgin Points. You earn Clubcard points at Tesco (one point for £2) and a few other places (such as Esso garages with a Tesco Express store). These swap into Virgin Points (Virgin Flying Club air miles and Virgin Red rewards are interchangeable) at a rate of 1:2.5 (falling to 1:2 in July), but you can’t go from Virgin to Clubcard.

You earn Virgin points from Virgin Atlantic and other airlines, Virgin Atlantic credit cards, via Virgin’s shopping portal and by booking train tickets via Virgin. Both Clubcard and Virgin have many redemption options and Clubcard’s can often be the best value of all the schemes (1p per point in Tesco, but three times that at many partners – falling to twice next month). But the inability to go from Virgin to Clubcard makes this less useful unless you shop often at Tesco and can amass a lot of points.

The Avios reward scheme, pioneered by British Airways, is considered by some to be one of the best reward schemes in the world mainly due to its flexibility. There are lots of different ways to collect Avios points, and there are lots of different ways to spend them as well, from flights, hotels, car hire, and online shopping.

What’s more, points can be used across a range of airlines and holiday providers - you’re not limited to British Airways (BA). A Barclaycard Avios Card is a great way to pick up Avios points with day-to-day spending.

The new bonus offer from Barclaycard

Barclaycard has two Avios products, an Avios Card and an Avios Plus Card, and from the 17th April 2023, the company has doubled the welcome bonus for those applying for either by the 30th May 2023.

The Barclaycard Avios card is the standard offering but it still has some fantastic features:

• If you apply by 30 May 2023, you’ll collect a double welcome bonus of 10,000 Avios (usually 5,000 Avios) if you spend £1,000 in your first three months. New customers only. T&Cs apply
• Collect 1 Avios for every £1 spent on eligible purchases, with no monthly fee.
• Spend £20,000 on the card within 12 months and you’ll receive a British Airways cabin upgrade voucher to use on an Avios Reward Flight booking. T&Cs apply.
• Get up to five months of Apple TV+, Apple Music, Apple Fitness+, Apple News+ and Apple Arcade for free with your new Barclaycard. Continues as paid subscription after trial. UK only, T&Cs apply.

Representative example – most accepted customers get

• 28.9% APR representative (variable)
• 28.9% purchase rate p.a. (variable)
• Based on a £1,200 credit limit
• £0 monthly fee

The approval of your application depends on your financial circumstances and borrowing history, so do the terms you may be offered. Eligibility and conditions apply.

The Barclaycard Avios Plus card comes with a much bigger Avios bonus and you can earn more points with spending:

• Collect 1.5 Avios for every £1 spent on eligible purchases, with £20 monthly fee.
• Spend £10,000 on the card within 12 months and you’ll receive a British Airways cabin upgrade voucher to use on an Avios Reward Flight booking. T&Cs apply.
• Airport Lounge Membership – access over 1,000 airport lounges worldwide at a discounted rate of £18.50 per lounge pass, per person.
• Get up to five months of Apple TV+, Apple Music, Apple Fitness+, Apple News+ and Apple Arcade for free with your new Barclaycard. Continues as paid subscription after trial. UK only, T&Cs apply.

Representative example – most accepted customers get

• 78.9% APR representative (variable)
• 28.9% purchase rate p.a. (variable)
• Based on a £1,200 credit limit
• £20 monthly fee

The approval of your application depends on your financial circumstances and borrowing history, so do the terms you may be offered. Eligibility and conditions apply.

Enjoy flights, hotels and more with Avios

You can spend your Avios on all kinds of travel experiences. Here are some examples of where your Avios could take you:

• 18,500 Avios + £1 for an off peak, economy return flight for one passenger from London to Milan*
• 23,500 Avios + £1 for an off peak, economy return flight for one passenger from London to Barcelona*

*Plus £1. Reward Flight Saver fares offers a fixed cash and Avios amount and are subject to availability. Other pricing options are available. All tangible examples accurate as of January 2022. With Avios, you can explore your favourite destinations on other ways too by spending your Avios on car hire or hotels. Check your eligibility here

Disclaimer

The approval of your application depends on your financial circumstances and borrowing history, so do the terms you may be offered. Eligibility and conditions apply. 10,000 Avios welcome bonus, usually 5,000, when you spend £1,000 in the first 3 months. Barclaycard

Avios for the 10k and Barclaycard Avios Plus for the 50k Avios welcome bonus, usually 25,000, when you spend £3,000 in the first 3 months.

New customers only. Offer ends 30 May 2023.T&Cs apply

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Picking the right credit card could make a huge difference to the cost of your next holiday, with bonus offers on financial products linked to the Avios scheme coming to an end shortly.

Avios is a loyalty points scheme, and you can use the points you earn - known as Avios - to reduce the cost of flights, hotels and even car hire.

There are various ways to earn Avios, including by making use of credit cards on offer from both American Express and Barclaycard. These cards can provide a tremendous way to get upgraded flights and hotels at a discount, but it relies on you being able to pay off the balance in full each month.

Before you apply, it is a good idea to go through an eligibility checker, such as the one on our sister site Go.Compare to see if you’re likely to be accepted for the card.

Here’s what you need to know about collecting bonus Avios points and how the scheme works.

GET 40,000 BONUS AVIOS WITH AMERICAN EXPRESS PLATINUM 

• 40,000 bonus points
• Annual fee: £650 
• Representative APR: 704.6%

The American Express Platinum card comes with a bonus 40,000 membership rewards points.

These membership rewards points can then be converted into Avios, allowing you to slash the cost of your holiday.

To qualify for the bonus points, you will need to spend £6,000 in your first three months with the card, at which point you will get 40,000 points. 

The Platinum card comes with a host of additional benefits for travellers. For example, you get complimentary access to over 1,400 airport lounges across more than 140 countries. You also get comprehensive worldwide travel insurance and £150 in statement credits to spend in restaurants overseas.

Your regular spending with the card also allows you to earn membership reward points, at a rate of one point for every £1 spent, doubling to two points per pound when spending with Amextravel.co.uk.

The offer is only available to those who haven’t held a personal membership rewards-enrolled American Express card within the last 24 months. Those who have can still take the card out and benefit from all other perks, but won’t receive the points.

The American Express Platinum card is very much a premium credit card, as it comes with an annual fee of £650, but if you travel often, this fee may well be worthwhile.

You can either apply directly or go via go.compare’s eligibility checker to see if you will be accepted for this card.

GET 20,000 BONUS AVIOS WITH AMERICAN EXPRESS PREFERRED REWARDS GOLD 

• 20,000 bonus points
• Annual fee: Free for first year, then £195
• Representative APR: 88.8%

Again you benefit from membership reward points, which can be converted into Avios.

With the American Express Preferred Rewards Gold card you can get up to 20,000 bonus points. To do so, you will need to spend £3,000 in the first three months of card membership, at which point you will get 20,000 membership reward points. 

The offer is only available to those who haven’t held a personal membership rewards-enrolled American Express card within the last 24 months. Those who have can still take the card out and benefit from all other perks, but won’t receive the points.

Your spending on the card also earns reward points, at a rate of one point for every £1 spent. This doubles to two points when spending directly with airlines or three points when spending with American Express Travel.

The American Express Preferred Rewards Gold card is another premium card in that it comes with an annual fee of £195. However, that fee is waived for the first year.

A further perk to the card is that you get four complimentary priority pass airport lounge visits per year.

You can either apply directly or go via go.compare’s eligibility checker to see if you will be accepted for this card.

American Express also offers a couple of cards that are directly linked with the Avios scheme itself.

BRITISH AIRWAYS AMERICAN EXPRESS PREMIUM PLUS 

• 25,000 bonus points
• Annual fee: £250 
• Representative APR: 113.1%

New holders of the British Airways American Express Premium Plus card are eligible for 25,000 bonus Avios when they spend £3,000 in their first three months of card membership. If they spend £10,000 in a card member year, they can also get a companion voucher, which they can use to take a “plus one” on the same flight and cabin (including business and first class).

If you spend £10,000 and are travelling solo, you can get a 50% discount on the Avios price you pay for your flight. Vouchers are redeemable on British Airways, Iberia, or Aer Lingus Reward flights and in any cabin.

The offer is only available to those who haven’t held a personal British Airways American Express Card within the last 24 months. Those who have can still take the card out and benefit from all other perks, but won’t receive the points.

The points will be added to your account once you spend the minimum amount, but they can take up to a month to be awarded.

After that, you will earn 1.5 Avios for every £1 spent, and twice that when you spend with British Airways or BA Holidays.

This card comes with an annual fee of £250, but if you travel often, this fee may well be worthwhile.

You can either apply directly or go via go.compare’s eligibility checker to see if you will be accepted for this card.

BRITISH AIRWAYS AMERICAN EXPRESS 

• Bonus: 5,000 Avios
• Annual fee: £0
• Representative APR: 31%

If you would rather not pay an annual fee, you can opt for the British Airways American Express credit card. It comes with a welcome bonus of 5,000 Avios points when you spend a minimum of £1,000 during the first three months of opening the account. After that, you will accumulate one Avios point for every £1 spent on the card.

The 5,000 point offer is only available to new members who haven’t held any personal American Express Cards during the past 24 months.

What’s more, if you spend £12,000 with the card in a year you’ll be eligible for a companion voucher. This means that when you book a flight, you can take someone with you in the same cabin, though you can also use the voucher to get 50% off the Avios price you pay for the flight.

The card has a representative APR of 31% so you should always aim to pay off the bill in full each month.

You can either apply directly or go via go.compare’s eligibility checker to see if you will be accepted for this card.

American Express isn’t the only card provider that allows you to earn Avios on your spending, however ‒ you can also earn points with Barclaycard.

BARCLAYCARD AVIOS PLUS

• Bonus points: 25,000
• Annual fee: £240 (£20 per month)
• Representative APR: 80.1%

With the Barclaycard Avios Plus credit card you can get a bonus 25,000 Avios if you spend £3,000 in your first three months with the card.

After that, you get 1.5 points for every £1 you spend, and can benefit from a British Airways cabin upgrade if you spend £10,000 within the first 12 months.

Be warned, it does come with a monthly fee (£20) that you’ll need to include in your decision-making process.

Barclaycard Avios 

• Bonus points: 5,000
• Fee: £0
• Representative APR: 29.9%

Alternatively, there’s the straightforward Barclaycard Avios credit card.

This card gives you one Avios for every £1 spent with no monthly fee.

If you spend £20,000 on the card within 12 months, you can receive a British Airways cabin upgrade flight.

Barclaycard Avios Rewards

Finally, it’s worth mentioning the Barclays Avios Rewards current account. This is another way to top up your Avios account, and you can even combine it with one of the cards above to really ratchet up your points balance.

The Barclays Avios rewards account gives you 1,500 Avios every month, on top of a welcome bonus of 25,000 Avios if you switch using the Current Account Switcher Service. If you’ve been with Barclays for four months or more, you get 2,500 Avios as a joining bonus. You’ll also get an upgrade voucher each year as an anniversary present.

The Barclays Avios Rewards account comes with a monthly fee of £12.

What are Avios points worth?

Of course, the big question is how much these points are really worth, and how much they can save you on your travel plans.

Let’s take an example, and say that you spend an average of £2,000 a month on each card. Over a year you would earn 29,000 points with the British Airways American Express card, including that initial bonus, which would be more than enough for a flight to Europe.

However, that same spend with the British Airways American Express Premium Plus card would see you rack up a whopping 71,000 points. That would be enough to cover a far longer flight, for example to the Caribbean or south Asia.

Existing American Express customer? Here’s how to boost your Avios points

The bonus Avios are generally only on offer to new customers. However, there may be ways to further boost your Avios balance if you’re an existing customer.

For example, American Express runs a ‘Refer a Friend’ scheme. If you have the fee-free British Airways American Express card and get a friend to take one out too, then you’ll pocket an additional 4,000 Avios. This isn’t limited to a single friend either ‒ you could make up to 90,000 extra Avios from selling the benefits of the card to your friends, should they then be approved.

The rewards are even more significant on the Premium Plus card, with a 9,000 Avios bonus for each friend. The same 90,000 bonus Avios annual cap applies, however.

How to make the most of your Avios points

With any rewards credit card, whether it is tied to the Avios scheme or offers a different form of reward like cashback, making the most of it will mean putting all of your regular spending on the card.

It’s money that you planned to spend anyway, but by using these cards, you ensure that you get something back for every £1 spent. This allows you to maximise rewards, build a bigger Avios balance and therefore save more cash on your future travels. This approach also improves your chances of qualifying for the companion flight deals.

This may be easier said than done of course, since not all retailers accept American Express cards. Nonetheless, it is worth trying.

It’s really important that the rewards on offer from your card are not seen as a reason to increase your spending. Reward cards are designed for people who can clear the balance in full each month. If you are unable to do that, then the interest charged on your outstanding balance will wipe out the value of any rewards you have built up.

Outside of the credit cards, there are ways to boost your Avios balance. For example, British Airways has its own e-store, which works rather like a cashback site. You shop online via the links on the BA website with retailers including John Lewis, M&S and Selfridges, and any money you spend is tracked. You then earn further Avios based on how much you spent.

The offers will vary depending on the retailer in question. For example, if you spend with Booking.com you can earn up to eight Avios for every £1 spent, but with John Lewis this drops to up to two Avios for each £1 spent.

You can also link your supermarket reward scheme to Avios - for example, you can convert your Nectar points into Avios to spend with British Airways. Check out our article on The top supermarket reward schemes to earn air miles.

How does the Avios points scheme work?

Avios is the name of a points scheme, with travellers able to convert their Avios points into discounts on flights, hotels and car hire.

If you are using Avios to cover the cost of a flight, you will nonetheless have to pay taxes and fees, even if the cost of the flight itself is entirely covered by the Avios points.

You will need different amounts of Avios to cover those flight costs based on your destination. For example, a trip to North America will start at 50,000, but this drops to 18,500 for flights to Europe.

Other factors will influence the Avios required too, such as the time of your trip. Travelling during off-peak times will generally cost fewer Avios than if you head off at the busiest times.

You don’t need to cover the entire cost using points either; you can use the points you have and then top it up with cash in order to pay for those flights, hotels, or car hire.

While British Airways is the main airline associated with Avios, you can also use your points to book flights with partner airlines such as Aer Lingus and Iberia.

France’s nuclear power plants have been closed for maintenance over much of the summer. In a blow for its defence industry, Australia cancelled a huge submarine order. And its car manufacturers suffered a blow when Renault was forced to sell its Russian unit. This has not been a great few years for French industrial policy. Yet, undeterred, its leaders are eyeing a lucrative new target: a virtual monopoly on European air travel.

Over the last week it has become clear that France is determined to create a major new force in global aviation. It emerged that the Italian government has chosen a group led by the private-equity firm Certares, and crucially backed by Air France-KLM, to take a majority stake in ITA, the national flag-carrier rescued out of the bankrupt and little-missed Alitalia.

The Italian government turned down a rival offer backed by Lufthansa, and the takeover may well be completed over the next few months; it has enough problems on its plate without hanging on to a struggling airline for any longer than necessary.

France is pulling the strings

It is the involvement of Air France that is most interesting, however. You hardly need to be Sherlock Holmes to work out what is about to happen: Air France has already orchestrated a merger with the Dutch airline KLM; now it is intent on taking creeping control of ITA.

Behind the scenes, French president Emmanuel Macron and his government are clearly pulling the strings. Only last year, France massively increased its stake in the airline, and it now owns 29% of the group, three times the Dutch government’s shareholding. The airline received massive bailouts to help keep it afloat during the pandemic. Now the plan appears to be to add Italy to its growing empire. Who’s next? Perhaps one or two of the smaller European airlines, or even another major national player.

The prospect is of France creating a protected EU flag carrier under effective state control, with a virtual monopoly on European travel. Once that is established, we can expect the British Airways owner IAG, along with its Spanish partner Iberia, to be frozen out of the market. Germany’s Lufthansa, which was beaten out of the bidding for ITA, will be left with little more than its domestic market to serve. And the budget airlines such as Ryanair will find life tougher and tougher, excluded from prime landing slots and left to serve a tourist market at secondary airports.

We will be right back with a 1970s-style airlines industry, with big prestigious state-controlled carriers dominating the business and long-haul markets, and charging sky-high prices, along with a few cheap carriers for everyone else. That might be profitable for France – although the state-controlled airlines of the 1970s were inefficient and kept alive only with massive subsidies from their governments – but the question is, why should this be tolerated by anyone else? So far, the EU’s competition authorities, so fierce when it comes to regulating the US tech giants, or policing rivalry with the City of London, are sitting on their hands.

The world must react

There’s no point expecting them to curb Air France or its ambitions to dominate the European market. But that is no reason for the rest of the world to put up with it. Under World Trade Organisation rules, the UK could take legal action against the airline. The US could demand a stop to it and threaten to retaliate with selective tariffs. Or a group of the other major economies around the world could place restrictions on its landing slots unless the market were opened out.

Macron Air, as it should probably be known, would change the way the whole industry operates. It would raise prices for consumers, simply by setting benchmarks and by controlling so many of the major airports. And it would raise the prices of planes, too, since it would always buy Airbus rather than Boeing, making equipment more expensive for everyone else.

The relatively free, open and deregulated airline industry of the past 30 years would effectively be brought to an end. This should not be allowed to stand.

The IAG (LSE: IAG) share price is a bellwether for the global travel industry.

Shares in the airline group, which owns British Airways and Aer Lingus among others, have jumped around over the past two years as investors have tried to second-guess when the travel market will recover from the pandemic.

After more than two years, it looks as if IAG is finally starting to get back on track. It’s aiming to fly at 80% of pre-pandemic capacity this year (assuming demand holds up), according to its latest trading update.

What’s more, management reckons the company will turn a profit in the second quarter, a huge step in the right direction. If IAG returns to profit, it should remove any question marks over its ability to continue as a going concern – for the time being at least.

IAG’s North American routes are its cash cows

IAG’s portfolio of airline brands gives it scale, while it also has a strong foothold in the key North Atlantic travel market.

The transatlantic route between London Heathrow and JFK New York is the jewel in IAG’s crown. It is the fourth-most active route in the world, and the most profitable. However, over the past two years, stop-start travel restrictions have hammered demand.

Management plans to ramp up capacity to 100% on the route by the third quarter, indicating that demand is returning faster than in other areas. A “strong” return in business travel is helping power the recovery.

As IAG’s main focus is North America and other long-haul destinations, the war in Ukraine has not affected it directly, although it is reporting significantly higher fuel costs as a result of higher oil prices.

The optimistic outlook implies that IAG is starting to draw a line under two years of losses and uncertainty. But it’s not all good news.

IAG is carrying a heavy debt burden

Capacity issues at Heathrow are forcing management to slow its growth plans. The firm was planning to fly 85% of capacity this year; its target is now 80% – not for lack of demand, but for lack of infrastructure. Instead of increasing capacity as fast as possible, management is now focusing on “enhancing operational resilience”.

And while IAG expects to return to profit in the second quarter, it lost money in the first. It recorded a loss of €800m in the first three months of 2022, slightly better than the €1.1bn recorded for the same period last year.

It also ended the period with interest-bearing debt of €20bn, a huge drag on the balance sheet. The cost of sustaining borrowings totalled €233m in the first quarter alone.

The airline industry has some major structural challenges

IAG’s size and transatlantic routes are solid competitive advantages, but the company is not immune to the general issues that plague aviation.

The sector is highly competitive and beholden to volatile fuel prices. That latter point is probably more important today than it has been for decades. Airlines can and do hedge their fuel costs, but they can only hedge so much and for so long.

Even the best hedging programmes cannot help them compete against state-owned carriers such as Etihad Airways. With their almost bottomless pockets, these carriers can keep ticket prices low and absorb high costs during periods of uncertainty. IAG can’t do that, especially with its weakened balance sheet.

Then there’s the cyclical nature of the airline business. Most European airlines make money in the holiday season and lose it over the winter period. A series of bad winters can really hit a firm’s ability to compete in the lucrative summer months. IAG is, to a certain extent, insulated from this by its transatlantic routes. Still, profits have historically (pre-pandemic) dropped substantially over the winter period.

So, while the business might be projecting a return to profit in the second quarter, investors need to be prepared for losses to return in the second half.

Unpredictability makes it hard to analyse IAG

All of this means that it’s impossible for me to try and project where IAG will be in five or ten years from now, and that makes the business pretty much uninvestable. Yes, the airline might perform better this year than it did last year – that wouldn’t be very hard – but that growth might not be sustainable.

As well as all the factors above, the big unknown is the global economic environment. If global growth slows, even IAG’s transatlantic routes won’t help it avoid the fallout.

Even though the stock might surprise to the upside in 2022, it’s unclear how or if the business will grow sustainably from here while paying down debt, fending off the competition and dealing with growing economic risks. I’d avoid it.

SEE ALSO:

Two of the best airline stocks to invest in as the travel industry rebounds

With shares in International Consolidated Airlines Group (IAG) “bumping along at all-time lows”, IAG’s new boss Luis Gallego has decided to shake things up, say Robert Lea and Martin Strydom in The Times. He has forced out Álex Cruz, the controversial head of British Airways, which IAG owns. Cruz, who has been replaced with Sean Doyle of Aer Lingus, earned notoriety for scrapping complimentary food and drink for short-haul economy passengers and overseeing IT disasters that left passengers stranded. BA was branded a “national disgrace” under his management for its job-cutting strategy.

Many BA workers will see the departure of Cruz as “the first good news for cabin crew in months”, says Jim Armitage in the Evening Standard. But while his cuts “may not have been popular”, his overhaul has left airline in “better shape than most” to face Covid-19. Similarly, his decision to stop “chucking money away on rubbish freebies” on short-haul flights made sense given that BA faces tough competition from budget airlines. Most importantly, his success in increasing profit margins to 16% was a “big win” for shareholders and may have helped convince them to back IAG’s emergency fundraiser.

Hired as an enforcer

Cruz is entitled to “feel hard done by”, as his departure is more to do with internal company politics than lack of merit, says Oliver Gill in The Daily Telegraph. Hired as IAG boss Willie Walsh’s “enforcer”, with strict orders to cut costs, his policies were always going to lead to “collateral damage”, destroying any chance of him succeeding Walsh. So after Walsh was replaced by Luis Gallego from Iberia, a much smaller and less profitable part of IAG, it was clear that Cruz was on a “hiding to nothing” and it was only a matter of time before he would be forced out. It looks as though Sean Doyle’s task will be delivering a slightly more palatable version of his predecessor’s policies, says Nils Pratley in The Guardian. This is a pity because while Cruz managed to deliver “fat profit margins” before the pandemic struck, his penny-pinching alienated both staff and customers, and left BA “as little more than an upmarket version of easyJet on European routes”. It also made it look “as if the airline didn’t care about how it is regarded on its home patch”, which is a big mistake given that BA currently needs all the goodwill that it can get.

Doyle may be “well-respected” and considered a “fantastic people manager”, say Philip Georgiadis and Arthur Beesley in the Financial Times. But his task is made harder by the fact that his appointment comes just as the second wave of Covid-19 has “snuffed out” hopes that the industry “might be through the worst of the pandemic”. Airlines “are not forecast to recover until 2024 at the earliest”. And BA is “badly exposed” thanks to its reliance on corporate travel – a part of the market that has been “completely gutted” – and the “near-closure” of the transatlantic market.

At the start of the crisis in March I suggested investing in International Consolidated Airlines Group (LSE: IAG), the owner of British Airways. Those who took my advice would have endured a bumpy ride.

The shares surged to 330p before falling back to 155p in early August, meaning that you would have had to close the position at the adjusted stop-loss of 200p. The stock is now at 216p, slightly below where it was when I first tipped it in March. Despite the roller-coaster ride, I think it is time to give the airline group a second chance.

One of the key reasons why IAG’s shares have done so badly is that the travel restrictions and border closures imposed by most governments in order to combat the virus have lasted longer than many people initially predicted.

Although there was a brief resurgence in travel during the summer, as people went on their holidays, this has faded away, with many governments reimposing restrictions in order to reduce the chances of a second wave of the virus in the autumn.

Airlines face strong headwinds

Many experts worry that the industry’s problems could persist even after the crisis ends, with many business trips and conferences carried out online. At the very least, many firms may simply decide that travel budgets are an easy target at a time when many of them are facing sharply reduced profits, or even struggling to stay in business.

IAG’s management is deeply pessimistic. CEO Willie Walsh thinks that the number of passengers using BA may not return to pre-crisis levels until 2023. The company also plans to issue more shares to raise cash to see it through the crisis. As a result, existing shareholders will see their holdings diluted by as much as 50%.

All this looks very bleak. However, there are several reasons to be cheerful. Firstly, most experts agree that there is a good chance that we could see a vaccine by the end of the year, which could see a permanent end to the crisis. Next, similar predictions about the end of business travel were made after the terrorist attacks in 2001 and Sars in 2002-2003, only for it to bounce back.

While the rights issue is not good news for shareholders, it at least reduces the risk of IAG being pressured into accepting a government bailout, which would inevitably come with an equity stake.

Perhaps the best reason to buy into IAG is its valuation. The shares have rallied by nearly 40% from their August lows, but still trade at just two times 2019 earnings, which looks cheap even if shareholders’ holdings are going to be diluted or the recovery in business travel takes longer than expected. I recommend that you buy IAG at the current price of 206p at £15 per 1p. With a stop-loss at 140p, this gives you a total downside of £990.

How my tips have fared

The last four weeks have seen a mixed performance by my three long tips. Royal Dutch Shell produced better second-quarter earnings than many analysts expected, but the oil giant’s shares fell from 1,179p to 1,086p.

Even though it is set to be removed from the FTSE 100, media group ITV remained steady at 58p. Industrial and construction equipment group United Rentals appreciated from $160 to $177, thanks to an unexpectedly good earnings report.

My three long tips are making a collective profit of £1,301 owing to the £2,484 in profits from United Rentals.

My three short tips have also gone in different directions. Electric-truck maker Nikola increased from $36 to $40, thanks to an announcement that it will sell 2,500 trucks to a waste-disposal firm.

Exercise-bike manufacturer Peloton also rose, from $72 to $76. However, online insurance-broker eHealth fell from $68 to $63 amid concern that the number of people cancelling policies is increasing.

Shares in online education provider GSX Techedu declined from $91 to $85, although it hasn’t fallen below the $70 at which I suggested you start shorting. My short positions are making a total profit of £1,172.

Counting International Consolidated Airlines Group, I now have four long tips and three short ones, which is a reasonable balance. Given that my tip on Royal Dutch Shell is making a loss after nearly six months, I will be keeping an eye on it with a view to closing it soon unless things improve.

I also suggest that you raise the stop-loss on United Rentals to $150 and cover your position on eHealth if it reaches $100. As for the other positions, stick with them.

The airline industry has borne the brunt of the financial fallout from the coronavirus. Countries around the world have imposed various degrees of restrictions on flights, from screening and quarantines to outright bans; even where planes are still allowed to fly, demand has fallen so far that airlines have voluntarily cancelled flights.

The industry seems to be facing a crisis much worse than the 2003 outbreak of Sars or the global financial crisis of 2008/2009. Indeed, some experts are predicting that, unless things improve, the entire industry could find itself bankrupt by May.

A nosedive too far

It is no surprise, then, that shares in International Consolidated Airlines Group (LSE: IAG), the parent company of British Airways, have fallen by nearly 60% from the peak of 646p in January to the current level of 259p. However, this is an overreaction. Firstly, it’s still very unlikely that this crisis could force IAG into bankruptcy. While some of its costs are fixed irrespective of how many flights it operates, others, such as fuel, can be drastically cut back under a nightmare scenario of a prolonged grounding, or at least deferred until normal service has been resumed. The company could also save money by suspending the dividend.

Russ Mould of AJ Bell estimates that even if it were to operate at 20% capacity for the next 12 months, a far longer period of disruption that most experts are predicting, it would still only lose around £5bn. While this is a huge amount, IAG has more than £9bn of liquidity, enabling it to survive even an 18-month shutdown.

The fact that CEO Willie Walsh has said IAG will not be seeking government support, in contrast to most other airlines around the world, suggests that the management is confident that it will be able to survive the coming crisis.

If IAG does manage to pull through, it looks extremely cheap. According to the official estimates it is trading at only three times 2021 earnings. While next year’s earnings-per-share estimates are now clearly out of date, they do give an idea of what will happen when things return to normal. Mould also points out that the fact that IAG is in a better financial position than its rivals, especially those in Europe, means that it could benefit from a reduction in the number of competitors, something that Mould thinks is needed to cut the industry’s overcapacity.

I suggest that you go long on IAG at the current price of 227p at £16 per 1p. With a stop loss of 96p, this gives you a downside of £2,096. This is a much wider and deeper stop loss than I normally recommend. However, it reflects the extremely volatile market and the short bias of my portfolio: it has leeway for potential losses on IAG, thanks to current gains from shorting other stocks such as Uber and Boeing. Meanwhile, take profits from shorting Wayfair, which has fallen by 70% since I tipped it in issue 969.

The last 15 months have been awful for shareholders in International Consolidated Airlines Group (LSE: IAG): the share price has fallen by a third. This is mainly to do with problems at British Airways, one of the airlines the group owns (along with Aer Lingus, Iberia and budget carrier Vueling). Not only was BA hit with a £183m fine in July for allowing its security system to be breached, but it also suffered its first pilots' strike a few weeks ago. Hundreds of flights were cancelled, triggering widespread opprobrium.

IAG has now been forced to issue a profit warning telling investors that they should expect this year's earnings to be much lower than originally estimated. Most of this was due to the £121m cost of the BA industrial action, as well as £30m of additional costs associated with threatened future action by ground staff. However, the warning wasn't just due to striking pilots. It also highlighted unexpectedly weak demand for flights (especially on its Spanish low-cost subsidiary Vueling) as another factor likely to depress profits.

The big picture is encouraging

However, while the threats of further industrial action and slowing demand are clearly important, they must be viewed in the context of a business that has done extremely well in recent years. Over the past six years sales have increased at around 5% a year and they are expected to keep growing in the next two years.

At the same time, IAG has also managed to increase its operating margin, which has grown from a tiny 2.8% in 2013 to 15% five years later. This has enabled the group to make efficient use of its capital, achieving a return on capital employed of 14.3% (and a return on equity, another key gauge of profitability, of 32%). Meanwhile, BA seems unlikely to suffer any major damage to its reputation.

Another reason this could prove a good time to buy into IAG is because the fall in its share price means that it is now very cheaply valued, especially compared with other airlines. It trades at only 4.6 times 2020 earnings.

By contrast, easyJet and Ryanair are on 2020 price/earnings ratios of 12.4 and 14.6 respectively. Air France-KLM is trading at 5.7 times 2020 earnings. Other global airlines such as Delta Air Lines, which trades at 7.4 times, are also more expensive. At the same time, IAG also delivers a solid dividend yield of 3%.

With IAG's share price now up 15% since the low in August, I think the stock is a buy. I recommend you go long at the current price of 468p at £8 per 1p (IG Index's minimum stake is £1 per 1p). I also suggest that you place a stop-loss at 348p, which would give you a total downside of £960.

How my tips have fared

The last fortnight has produced mixed results for my six long tips, with half of them going up, but the other half declining.

The ones that increased are JD Sports, which went up from 718p to 750p, Safestore, which rose from 644p to 671p, and Bellway up from 3,268p to 3,354p. However, Superdry fell from 429p to 423p, Bausch Health Companies declined from $23.28 to $20.59 and Volkswagen went down from €162 to €153. Overall, my long tips are making a profit of £2,856, which is down slightly from a surplus of £3,184 two weeks ago.

However, the performance of my short tips has been much better. Four out of five of them have depreciated. Bitcoin is now $8,331 (from $10,136), Netflix is $266 ($292), Uber is selling for $29.64 ($34.64), while Tesla is at $241 (from $285).

Only Weis Markets advanced, going up marginally to $38.32 (from $38.23). This means that if you had followed six of my open tips you would have ended up making money on each of them, for a total profit of £1,953 up by over a thousand pounds from my last column.

Overall, my 11 open positions are making a profit of £4,809, nearly as much as the total losses on my closed positions. I have decided to increase the stop-loss on JD Sports to 700p (from 675p) and am also raising the stop-loss on Safestore to 625p (600p). I am also going to increase the stop-loss on Bellway to 3,000p.

I have, furthermore, decided that I am going to give Superdry one last chance to bounce back, but if there isn't a huge improvement I'll be recommending that you close it. Finally, I'm increasing the stop-loss on Volkswagen to €125. However, I'm not going to tinker with the stop-losses on any of the short positions.

Trading techniques... head and shoulders

Many traders argue that certain stock-price patterns tend to repeat themselves more frequently than you'd expect from chance alone. By spotting these patterns traders can use them to anticipate future price movements. One of the most popular is the "head and shoulders" pattern, which indicates that a price trend may be reversing or about to reverse, either on the downside, in the case of a "head and shoulders top", or the upside, with a "head and shoulders bottom".

In a head and shoulders top the price of the asset rises, peaks (the left shoulder), falls and then makes a new higher peak (the head), before falling again. However, the third time it peaks, it does so at a level than is significantly lower than the second peak (the right shoulder). Traders will go short when the price falls through the "neckline', the lowest point between the first and third peaks. The head and shoulders bottom is the mirror image of the top. In this case the price of an assets falls (left shoulder), partially recovers, falls some more (head), rallies a lot, falls for a third time (right shoulder), but not as far as the second time. In this case the trader would buy the share when it goes above the neckline, which in this case would be the highest point between the two shoulders.

There are some weak signs that a trading strategy based on head and shoulders patterns could work. A 1995 study found that using the technique to trade various currencies against the dollar between 1973 and 1994 produced above-average profits. In some currencies, such as the dollar against the Japanese yen, the annualised profits reached 19%. However, the returns were very volatile and didn't account for trading costs.