Qantas Tweaks Its Profitable Frequent Flyer Business, Favouring Full Economy Fares Over Cheaper Seats

Qantas is changing its frequent flyer program. Photo Robert Cianflone/Getty

Qantas is changing its frequent flyer program, cutting the points rewards for passengers in the cheaper seats by 20% in what may be a move to prepare the division for sale.

As the embattled airline attempts to get its balance sheet in order, the program’s nearly 10-million members were late last night emailed the news about the “fairer, more simplified program”, which begins with travel from July 1.

“Put simply, these changes will mean that you’ll earn more Qantas Points and Status credits when you choose more flexible fares. At the same time, we’re reducing the Qantas Points you’ll earn on our lower fares to reflect your spend,” the email said.

Under the new system, points and status credits, the miles flown is ditched in favour of the destination, fare paid and carrier chosen.

The changes reduce the previous 1000-point minimum for Qantas domestic flights to 800 points for discount economy fares, while passengers paying full economy will receive a minimum 1200 points.

The points earned on discounted international fares have been savaged. For example, the Dubai-Frankfurt leg has been nearly halved, from 3012 points to 1700. Even the economy fare points were cut to 2500, however the points increase for all fares from flexible economy and above.

Qantas has split its fare structure into eight groupings: discount economy, economy, flexible economy, premium economy, flexible premium economy, business, flexible business and first.

The cutbacks in the bottom two tiers have been passed on to the six above.

Status credits have also been changed, especially with partner airlines. Most categories stay the same, but there’s a small increase for seats closest to the flight deck, however the status points for the Sydney to Cairns routed have been slashed in all categories, cut from 40 to 30 in flexible economy, and 80 to 60 points in business.

A table of the new points and status regime is here.

Qantas will honour the old points system for flights made after July 1 that were booked before the announcement.

Analysts have estimated the QFF division is worth around $2 billion and CEO Alan Joyce has said all options are on the table as he seeks to stem the $252-million half yearly loss Qantas posted recently.

The frequent flyer program is probably the most profitable part of Qantas, generating revenue in excess of $1.2 billion in the 2013 financial year, adding around $260 million EBIT to the bottom line. The airline makes its money by selling points to other businesses to be involved in the program.

The airline is preparing to launch its business points program, Aquire, next week. Members will earn points on everything from accountancy to leasing and insurance.

Consumer reaction to the Qantas Frequent Flyer program appears to be wary and negative.

Despite the fact that Virgin Australia has long used a rewards program linked to expenditure, Queensland author John Birmingham seemed to sum up the mood best:

Meanwhile, Qantas is also shedding 26 senior management positions as part of cost cutting that will see 5000 jobs go.

Among those departing are the Qantas International security head, senior engineering manager and Jetstar executive strategy manager.

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