Originally Posted by Liv's Hairdresser
So up until now QF's last few remaining FFs have been continuing to fly Qantas to either accumulate more points or use the points they've earned. Now the handcuffs are off and they can burn those points on EK, with a commensurate amount of revenue leaving the QF group. What percentage of those FFs will never fly Qantas again? In fact, unless their destination is London, QF is forcing them to fly EK. Why would they even bother flying Qantas from Oz to Dubai when it would be much more seamless to go EK all the way.
QF94, I hear what you're saying about it being a 2 way street. The only problem is that the EK network dwarfs the QF network, and even more so day by day. Who will be getting the lion's share of the FF revenue? Will it be EK carrying Qantas FFs on ULH sectors, or Qantas carrying EK FFs on the odd short domestic hop? Blind Freddy can see that this agreement is a free kick for Emirates and I honestly don't see how we can ever recover from it.
Most of those points are earned by people flying for business on tickets paid for by the business. Qantas buys wholesale seats from EK and pays that price in exchange for FF points earned on higher margin domestic flights. That's a win for QF and a smaller win for EK.
Even better for QF though are the points earned via various credit cards or merchants. Every point costs the merchant 1c or thereabouts. Let's say it takes 128,000 points return to Heathrow. That's $1,280 that has been paid via the merchants. Pretty much guaranteed QF pay EK less than that for a seat. Pure profit, all for keeping some electronic records about how many miles you fly.
And the best part is QF get the money as soon as those points are laoded into your QF FF account. So those 128,000 points earn QF $1,280 up front on which they earn interest until you take your flight.
Now think of all the unused points out there. Muppet analysts have always counted that as a liability to QF instead of being an asset. to make the maths easy let's say there are 1 billion FF points unclaimed (last I heard there were closer to 60bn FF outstanding but let's go with 1bn to make numbers easy). And let's say 500 million of them are from partner programs. That's $5 million QF have got for nothing.
Let's assume corporate borrowing rates are 10% overall. Pay that $5M off and you are saving $500K a year on money other people have given you.
Multiply that by 60 and there's a $30M annual pot of gold you didn't pay a cent for.
And even better, approx 30% of them expire without being redeemed so of out $5M you get to keep $1.67M and give away absolutely nothing.
Multiply that one by 60 and there's $18M free cash into your account.
Sweet.
Better and better it gets - as more and more companies use the partner program as their own loyalty program the number of points QF banks increases and the number that expire worthless but paid for increases as well.
And that's (partly) why the FF Program is so profitable to QF.