Velocity Frequent Flyer Valuation Slashed By Two-Thirds

Velocity Frequent Flyer Valuation Slashed By Two-ThirdsThe equity value of Virgin Australia’s Velocity Frequent Flyer loyalty program has been slashed by two-thirds in just a year, according to an independent report commissioned by Virgin’s administrators and presented to the federal court.

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In the report, FTI Consulting valued Virgin’s loyalty business at between $640 million and $704 million. That’s compared to a valuation of $2 billion last year, when Virgin Australia bought back a 35% stake in its Velocity Frequent Flyer program from Affinity Equity Partners.

In 2014, Virgin Australia had sold that 35% stake in Velocity to Affinity for $335 million in a cash-raising exercise. That would have valued Velocity Frequent Flyer at around $957 million – at a time when the frequent flyer program had half as many members as it does now.


When Virgin Australia decided to buy back that 35% stake from Affinity last year, they paid $700 million for it. According to the FTI Consulting report, the entire frequent flyer program is now worth about that much.

Some AFF members and industry experts have taken the valuation with a pinch of salt. For example, odysseus wrote:

That valuation has only been done for a specific purpose. And that purpose benefits from having as low a valuation as possible, which is assuredly why it’s been chosen. If they were trying to sell on the basis of this to another party, a much higher valuation would have been used.

Evert de Boer from On Point Loyalty also told the Sydney Morning Herald that the valuation seemed “low, for all intents and purposes”.

Regardless, the value of Velocity Frequent Flyer does appear to have taken a significant hit over the past year.

For many airlines, frequent flyer programs are a cash cow. They’re a golden goose that keeps on giving. In fact, for many airlines, their frequent flyer programs are worth more and make more profit than the actual airline. This is especially true for Qantas Frequent Flyer at the moment – but there are many other airlines in similar positions. So, what went wrong for Virgin?

There’s no doubt that COVID-19 has impacted on the value of Virgin’s frequent flyer program. But that only explains part of it.

Frequent flyer programs may make more money than the airlines they’re affiliated with, but they very much rely on the airline. Without an airline to support it, frequent flyer programs become less relevant, less appealing and generally fade into obscurity. That’s what happened to Airberlin’s Topbonus program and the Jet Airways JetPrivilege program (which somehow is still around, having been renamed to InterMiles) after those airlines went bankrupt.

Virgin Australia is still flying, but it’s now significantly less appealing to frequent flyers. The airline has withdrawn from all long-haul flights and retired its popular “the business” product, with Business class passengers now being served two-minute noodles instead. The lack of catering may only be temporary, but the airline is undoubtedly repositioning itself as a less premium “hybrid” airline – removing some of the aspirational rewards that drive members to earn points in the first place.

There was a run on frequent flyer points before Virgin entered administration, with Velocity members racing to cash out their points balances as Virgin’s financial situation become ever more precarious. And some once-loyal Virgin customers have decided to take their business elsewhere because they felt let down when Virgin wouldn’t refund their cancelled flights. The removal of benefits when flying with partner airlines will also alienate some frequent flyers.

You don’t have to look too far to find evidence that Velocity Frequent Flyer has lost some of its appeal lately. A long-running AFF thread about cashing out Velocity points is now over 80 pages long. Even today, a disillusioned Platinum Velocity member posted on AFF to question the point of booking with Virgin Australia anymore.

Velocity Frequent Flyer is still an important part of Virgin Australia’s business, and the airline will need to leverage its member base once it resumes regular flying. But it could be an uphill battle to win back Velocity members from here.

Join the discussion on the Australian Frequent Flyer forum: Value of Virgin’s Velocity axed in report

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Matt Graham
The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 60 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil, New Zealand & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can contact Matt at editor@australianfrequentflyer.com.au