Qantas Frequent Flyer sale: outcomes for your Qantas points

With Qantas’ 27th February half-yearly announcements coming up, the future of Qantas Frequent Flyer may become clearer in a few weeks. Since late last year there has been increasing noise and rumours surrounding a possible Qantas Frequent Flyer sale, which would likely add a range of new factors into their business operations, and thus in the long run, a possible impact on your Qantas point balances.

Where there is smoke, there is fire as the old saying goes, so I’m going to chip in and give my thoughts on what this might mean to the average traveller and point collector over the long term.

It’s worth saying clearly that the following is my speculation on what could happen given any sale, and by no means are any of these outcomes inevitable.

Understanding the reasons for possible changes

Any changes to Qantas Frequent Flyer that come out will primary be due to two reasons – shifts in either incentive and/or attitude as a result of more independent ownership.

Incentive changes in QFF in a Qantas Frequent Flyer sale

While I’d expect that Qantas would maintain majority ownership or control of a sold-off Qantas Frequent Flyer program, the primary incentive for the new entity would be to maximise returns for shareholders – like any public business.

Qantas Frequent Flyer’s current incentive is (or should be) to maximise Qantas’ bottom line by generating loyalty to the airline and it’s frequent flyer program. A newly independent Qantas Frequent Flyer would be profit-maximising by generating maximal patronage of it’s own services, partners, and points.

The difference is subtle, but large enough to have an impact in the long-term. Qantas would of course still be a major partner, but not to the extent of 100% ownership and control that it holds today.

Attitude shifts of QFF in a Qantas Frequent Flyer sale

The attitude of the new operators of Qantas Frequent Flyer has great potential to be different to that of Qantas; and the attitude of Qantas towards its namesake program may also change too.

Attitudinal shifts could include a short-term focus to maximise immediate profit; a change in core loyalty program strategy around their target customer base, and how they service those customers; and an inability to (or disinterest in) reacting to long-term factors, eventually leading to disalignment between the airline and loyalty program.

What might these shifts mean to how you earn and use Qantas points?

1. Points earn and redemption changes (for the worse) with non-strategic partner airlines

Qantas have already shown this year that they are willing to tweak their points pricing (for domestic upgrades), and this trend I think would continue in an independent Qantas Frequent Flyer scenario.

It’s likely that the focus of such changes would be the costs for redemption on non-strategic partners of Qantas, whereas Qantas, and key airline partners such as Emirates and American Airlines would enjoy preferable pricing for redemption, and preferential earn rates on flights.

We have seen Qantas already significantly differentiate their earn rates for competitive oneworld partners Qatar and Malaysia Airlines when they entered oneworld in 2013, with points earn in discount Economy significantly reduced when flying on Qantas or it’s strategic partners, and earn rates in Business and First class also comparably poor.

This trend I think would expand to redeeming points, with a set of increasingly tiered redemption opportunities, with poor value and increased prices to be had when trying to redeem points with lesser partners.

I would suggest that, while many Qantas Frequent Flyer members do redeem on partner airlines, many also do not know that the option exists and that if Qantas Frequent Flyer hold earn and redeem rates steady on Qantas and key partners, this wouldn’t be as much of a customer-relations issue as I might hope.

2. An increase in non-airline partners

An independent Qantas Frequent Flyer would be incentivised to sell more points to make more revenue. I’d expect a range of partners that are increasingly unconnected to travel to make partnerships with Qantas Frequent Flyer.

This will likely increase the number of points being earnt by the general public, rather than giving opportunities for frequent travellers and frequent flyers to increase their earn in any meaningful way. The program could begin to become more like ‘Qantas Point Loyalty’ than ‘Qantas Frequent Flyer’.

3. Leading to… harder to find points seats for redemption

Another outcome of the two changes above – fewer good value redemption opportunities, and more points in the market – will mean that any points redemption opportunities that are cheaper, and more accessible, will be harder to come by.

Right now it’s already hard to get points seats in Qantas’ premium cabins on key routes to London or Los Angeles – this trend would get worse.

4. New point redemption inventory, just for Qantas Frequent Flyer point redeemers – isolating other oneworld frequent flyer programs

This might actually be a positive change. To isolate themselves against any loyalty program competition in the form of other oneworld programs such as American Airlines AAdvantage, or closer to home, Cathay Pacific’s Asia Miles, Qantas and the independent Qantas Frequent Flyer program could choose to open up a set of points seat availability that’s exclusive to Qantas members.

Qantas already do this with Qantas Gold and Platinum status members having access to increased award availability than lower tier / other program members – this could be expanded to mitigate seat availability issues caused by potential changes outlined above.

5. Credit card partner consolidation

Qantas Frequent Flyer have a wide range of credit card partners at the minute. I would rationalisation in this area would be inevitable, with Qantas Frequent Flyer taking a more monopolistic position to cement preferential relationships with only a handful of providers to maximise profit.

It’s likely that competition in the credit card space to acquire new customers would be lost, while ongoing benefits would be maintained, but not improved. Think lower signup bonuses, and less innovation in credit card benefits to replace these bonuses.

This is what I understand has happened with Air Canada’s Aeroplan program late last year (which was spun off as an independent entity), where banks are negotiating over who will be a primary supplier to the frequent flyer program.

6. Focus on program simplicity – leading to the killing of Any Seat Awards that earn points and status credits

An independent Qantas Frequent Flyer would be incentivised to reduce operating cost and simplify the operation of their program in a variety of ways, including the analysis of and removal of under-used earn and redemption opportunities. Certain partners that don’t yield much revenue may get jettisoned – and certain opportunities to use points within Qantas, such as the ‘marginal any seat award’ which has already been, well, marginalised last year may disappear completely.

7. General lack of innovation in airline loyalty promotions

As I mentioned before, the outright goal of the program will not be to generate loyalty to Qantas – it will be to maximise profit, using loyalty as one of the many levers to do so.

As a result, expect fewer promotions that aim to generate loyalty through travel on Qantas, and instead an increased focus on getting more points into the hands of more people, for use in increasingly varied ways.

On Qantas status and benefit changes

I would expect that the benefits of elite status, and the methods and tiers by which you attain elite status, to be controlled by Qantas, and not Qantas Frequent Flyer. I would assume that it’s Qantas (the airline) that have to facilitate and pay for the benefits of Silver, Gold or Platinum membership, and as a result the frequent flyer program wouldn’t be in a place (or have the will) to change these in any significant way.

So, what to do? The outlook for your Qantas Point balance

My advice to Qantas Point collectors and owners of large Qantas Point balances actually doesn’t change. I mirror the wisdom of other frequent flyer writers and experts, in that I believe in only holding enough points in a program that you could redeem them in the time that it takes them to give you notice of significant program changes.

In the case of Qantas, they outline this explicitly in clause 3.2 of their terms and conditions as 3 months notice to program changes. Points are an ever depreciating asset, there’s absolutely no reason to hold them for the long term as their effective value over many years is pretty much zero.

So if you’re an engaged member of the program and like collecting and holding Qantas points now, there’s no reason to change your behaviour or preferences. You should keep hold of your Qantas points, and keep collecting them – but if you are sitting on a balance of several hundred thousand points or more, I’d just start thinking about what you would do with them if put in the position where significant program changes were made that might impact your future use of them.

I’m interested to hear your thoughts in the comments on how a potential sale of Qantas Frequent Flyer might impact you if any of the changes above eventuate. Let me know!

Useful sources and further reading: AusBT, and this analysis from AIMIA/Carlson Marketing, a FFP operator.

Qantas Frequent Flyer sale: outcomes for your Qantas points was last modified: March 29th, 2014 by Keith