QF Frequent Flyer - How does it work?

[Captain Peacock]

QF Frequent Flyer profit was the "star performer" in the annual results.

I may be a bit slow around here but what does the Frequent Flyer Program actually do? What to they manufacture, service or sell that makes them so profitable? :confused:

[The Green Goblin]

QF Frequent Flyer profit was the "star performer" in the annual results.

I may be a bit slow around here but what does the Frequent Flyer Program actually do? What to they manufacture, service or sell that makes them so profitable?

They sell a dream.

Unfortunately with the shrinking of the network and the conditions attached to using the points to actually go somewhere, most people give up and buy a toaster :}

[cart_elevator]

It's simple.

Qantas Frequent Flyer charges $$$$ for Woolworths, Amex, CBA, Optus, Hotels (and basically the rest of the large businesses in Australia) to be 'partners' with the program.

Those businesses pay their fees,as they assume that people who are chasing FF points will choose their business over rivals to get a 'free flight somewhere'.

The interesting question is,if FF is earning all these $$ in fees as a stand-alone business entity,does that entity in turn provide Qantas Airlines with revenue from the seats bought with FF points? That's where I start to get confused :confused:

[Romulus]

Give or take a bit every company that offers FF points pays QF 1c per point claimed. This payment occurs when the points are added to your FF account. So if I take my company Expenses credit card that puts through about $10K a month, thus earning me about 12,000 points when I get those 12,000 points added to my FF account the Credit card company pays QF about $120.

Compound that when you use a credit card to pay for certain services that also give you points.

Imagine how all of that adds up across every item/service/offer you can recall where you earn points.

Plus it gives a massive amount of direct marketing capability.

And best of all QF get the money up front regardless of whether or not points are actually redeemed for goods or services. And if people want to redeem points for flights then QF control when and where those flights are available so the opportunity to get on a peak load flight and thus reduce QFs direct sales earnings is minimised whilst also boosting load factors on less sought after flights.

All in all, a huge winning program for QF. Cash rolls in for points that may never be used, QF get to direct point spending wherever they like and, best of all, the punters love it because they think they're getting something for nothing.

[Beer Baron]

As best I understand;
QF FF sell the points to partner companies: credit card companies, hire car companies, Woolworths, Optus, hotels, etc. This is where they generate revenue ($1 Billion last year).
Much of this revenue sits on the QF FF books (~$2.7 Billion) and presumably generates further revenue.
QF FF must eventually pay back some of this money in Award costs in the form of flights, appliances, vouchers, etc. ($660 million last year).
Obviously more points are sold than are ever used and some points expire but QF FF has already been paid for them regardless, hence the profit.

Now the relationship between Qantas the airline and QF FF is more complicated and will require someone smarter than me to explain.

(Looks like I've been beaten to the post)

[Ovation]

The QFF loyalty works great for Qantas but not necessarily for Frequent Fliers.

When I was in business I fortunate to do lots of international travel and accumulated points at a rate faster than most, and was generally able to book at short notice 1A+2A ADL-LHR-ADL or RTW once a year for around 160,000-200,000 points (now about 400,000+), but that was before the loyalty system was hijacked by the accountants.

I feel that over the years the QFF booking system has intentionally made it more difficult or nigh on impossible to book a flight by having extremely limited seat allocations, restriction periods, blackouts etc etc., especially for international flights. The increasing level of difficulty and frustration in using QFF points is IMHO specifically designed to ensure FF's will give up in frustration and buy a seat.

Their rules where unused points expire after a certain period means the contribution from the CC company is then pure profit, so there is an enormous benefit from their expiry.

[dragon man]

Like everthing that Qantas touches this scheme has become another rort. About 5 years ago I found Leveraged Equities gave 1 point for every $ of loan if you paid an extra 1% interest. As the loan was tax deductable this was great. After useing most of my points I went back to do it again to find that it was now .6 points per $ and to redeem them against Woolies or Caltex cash cards I needed 50% more points than the previous time. No longer worth it. Just a small adjustment by QF to the scheme.

[Captain Peacock]

Thanks for that.

[Woodwork]

Qantas sell points to credit card companies and the like. Qantas then make it ultra-impossible to redeem said points, keep the money, and don't have to offer any flights.

I've accumulated about 250,000 and still can't use them. I accumulate most of mine through credit card schemes which means I have no "status". The Jetstar equivalent is actually much more user-friendly. Just doing my normal shopping and bills on their card, I can do a return SYD-BNE or SYD-MEL flight for free every few weeks. Any seat, any time. It's great - hard to imagine it's the same company!

[Capetonian]

The same principles apply to all airline loyalty schemes, which are a sophisticated con from the user's perspective.

A couple of years ago when I tried to use some of my several hundred thousand 'Miles' on the LH Miles and More scheme, the 'free' ticket would have cost me about £450 in taxes and charges. The cheapest ticket I could have purchased for real money on the same flights was about £520, meaning that my 120,000 'Miles' that the ticket would have cost were worth £70.

I am told that the carriers carry forward unredeemed loyalty points as a liability in their books. From an accounting perspecitve that makes sense, but to a normal person they seem to be an asset as they have been paid for, but in all probability will never be used.

I am amazed that so many people do not see through this con, and they will choose a more expensive flight simply to get the loyalty points.

[VH-XXX]

Unlike the competitor offerings of any seat at any time, you have to simply accept that you must book well in advance to get a seat. If you aren't prepared to accept that then don't sign up for the expensive credit card in the first place and get a cheaper or free card without the rewards program.

Through normal spending and the occasional economy QF flights I earn a return trip to New York every 3 years; I can't complain at that. The credit card costs around $200 per year however I also get free international travel insurance, hire care excess removal, extended warranty and insurance on purchases against loss, theft or damage.

[Capetonian]

Unlike the competitor offerings of any seat at any time,
Who would that be?

Through normal spending and the occasional economy QF flights I earn a return trip to New York every 3 years


It probably works out to have the value of a discount of something like 0.7% - I seem to recall I once worked it out and got something like that as a value.