Flyer points save Qantas from the red

[medhead]

From the Weekend Australian today

Flyer points save Qantas from red | The Australian

BARELY three decades after American Airlines came up with a novel plan to fill empty seats by rewarding loyal customers, frequent flyer schemes have turned into a multi-billion-dollar international business that is underpinning the profitability of the industry.
This week Qantas revealed that a $226 million profit by its frequent flyer division had saved the airline from reporting an overall loss for the 2008-09 financial year.
The Economist has calculated that frequent flyer points were the second-biggest global currency after the US dollar in 2005, and they have grown in popularity since.
Airlines have turned seat giveaways into cash cows by selling a growing percentage of seats to banks, credit card issuers, and companies such as Woolworths that offer points. They pay the airlines (an undisclosed figure that's good business for both sides) for the points they then award to shoppers, which in turn are redeemed for a variety of services including flights, assuming of course that they are redeemed. Many are not.

Interesting reading. I think it just goes to show that FFP are not there to provide something for free to the customer. They do, in fact, provide an important contribution to the bottom line of airlines.

The story also raises the float and states that it is on hold. But since it is written by the "business editor", I wonder if this is part of a strategy by QF to prepare people for a float.

It ends with the following:

There's only one small cloud on the horizon, which may be part of the reason the Qantas loyalty scheme was never floated: there's no correlation between non-airline loyalty schemes and what airlines call status credits.
That's gold and platinum frequent flyer membership, for instance, and access to lounges. You can save all the frequent flyer points in the world from your grocery shopping but you still won't get past the velvet rope, apparently, if you haven't flown the kilometres.
"It's hard to separate reward from recognition," said one industry source, showing that there's a great deal of desire psychology lurking just below the surface of these schemes.
There's only one small cloud on the horizon, which may be part of the reason the Qantas loyalty scheme was never floated: there's no correlation between non-airline loyalty schemes and what airlines call status credits.
That's gold and platinum frequent flyer membership, for instance, and access to lounges. You can save all the frequent flyer points in the world from your grocery shopping but you still won't get past the velvet rope, apparently, if you haven't flown the kilometres.
"It's hard to separate reward from recognition," said one industry source, showing that there's a great deal of desire psychology lurking just below the surface of these schemes.

One way to separate reward from recognition would be to give status for award flights with the home airline, IMO, given the value of the scheme. Even doing this, I doubt that a frequent spender or shopper would get enough status to even make silver.

 

[samh004]

One way to separate reward from recognition would be to give status for award flights with the home airline, IMO, given the value of the scheme. Even doing this, I doubt that a frequent spender or shopper would get enough status to even make silver.

Would they be the first airline to do so? Would they set a precedent that their partners and alliance members might not be happy with?

Just as we discuss ways to maximise SC and points for paid-fares here, Im sure there'd be a way to maximise SC from reward-fares.

 

[medhead]

Would they be the first airline to do so? Would they set a precedent that their partners and alliance members might not be happy with?

Just as we discuss ways to maximise SC and points for paid-fares here, Im sure there'd be a way to maximise SC from reward-fares.

I guess it would all depend on how they did it, what if it was just 10 points per award segment, regardless of length (20 for J and 40 for F). Of course, the status maximising opportunities are not really the same for award flights, e.g. an ADL-xMEL-BNE is the same price as ADL-BNE, but the points cost is higher on these 2 variations.

But really the practical issues are another question, I was mainly interested that someone running the QFF program has thoughts about separating rewards and recognition.

 

[serfty]

I feel that it is essential for Qantas to separate rewards from status. Flying services are the core of Airlines and it would be vital for loyalty to ensure those who pay to fly the most generally get better serivce than irregular award traveller.

There are very few airlines who have status for non flying activity. Aadvantage is one with it's "Unofficial" Million Miler program where it does not matter where the points come from.

A good example is in N currently where those travelling on JQ saver fares are earning SC's but not points.

 

[brissyflyer]

Would they be the first airline to do so? Would they set a precedent that their partners and alliance members might not be happy with?

Just as we discuss ways to maximise SC and points for paid-fares here, Im sure there'd be a way to maximise SC from reward-fares.

DJ Velocity already gives full status credits for redemptions, at least on those redemptions where it is directly linked to a fare. I did a redemption flight back in January and received status credits.