01.Limited consumer payoff
Frequent flyer programs are confusing and complicated, but what is clear is that they’ve become a big dollar-driver for the airlines.
Unless you're a frequent business traveller, you're faced with a dilemma. If you want to build up your frequent flyer points, you’ll need to fly the same airline every time or only transact with businesses that allow you to earn points through a linked credit card. But what if a dream discount fare with another carrier pops up?
Frequent flyer miles have a limited shelf life; you would have to fly a lot within a limited window of time for there to be any benefit. Like gift cards with too many restrictions, frequent flyer miles can be a gift that rarely, if ever, gives.
Over the years we have received considerable consumer input about the questionable value of frequent flyer points. One consumer told us: “I used to care a lot, but over the past three or four years really cheap fares have become available with the discount carriers and the bigger airlines got stingy and made their points worth less in real terms. Plus they stopped awarding miles on the cheaper tickets. Last year I lost about 6000 points from not flying enough.”
This is how the situation stood when we last investigated the issue in late 2011. Aside from the details, very little has changed: frequent flyer points are still worth more to the airlines than they are to their customers.
How they add up
, which awards points per mile, gives you at least 1000 points for every one-way flight if you’re a frequent flyer member.
- It costs $82.50 to join but is free through Woolworths Everyday Rewards program.
- You could conceivably come out ahead on points with Qantas on flights less than 1000 miles, but only if you fly often enough that sticking to the same airline makes sense.
- In a Sydney to Melbourne scenario, you’d get 1000 points from Qantas for the 443-mile flight to Melbourne in economy and the same for the flight back.
Virgin’s Velocity program is free, and awards points per dollar spent on domestic flights.
- This means you’d only get 1000 points all up for a $200 return saver fare from Virgin.
- If you bought a more expensive ticket on Virgin, of course, you'd earn more points.
Upping the ante
Qantas and Virgin Australia – the only two domestic carriers that offer points – are battling it out on the frequent flyer front, with Virgin playing catch-up to Qantas’ long-standing market dominance.
In late August 2011, Virgin released a re-tooled version of its Velocity, including a new platinum level for status credits and the opportunity to upgrade on domestic flights using points (previously unavailable).
The new Virgin plan looks like an effort to make points more user-friendly, especially for those who fly a lot. A promised upcoming feature is that families will be able to pool points and status credits and put their membership on hold for six months for parental leave without losing their credit status, something CEO John Borghetti says “is very important to our customers who spend time away travelling and want to share their benefits with their families”.
Borghetti admits that “reward seats were becoming harder to find and more expensive”, although the revised Velocity Frequent Flyer program still does not appear to be designed to reward casual travellers. Not to be outdone, Qantas has a new, higher-level platinum program in the works, aimed at a very select group of flyers.