Qantas urged not to sell out frequent flyers for a quick buck

QANTAS is in a world of pain financially. But is selling its lucrative Frequent Flyer program the answer? Analysts say no.

QANTAS has been warned against selling off its lucrative Frequent Flyer program to try to address a predicted loss of close to $1 billion.

The depreciation of the airline’s ageing fleet, mass redundancies and other writedowns are tipped to add $450 million to already heavy losses when the full-year financial results are revealed on August 28.

It follows a bigger than expected half-year loss of $252 million, which triggered a $2 billion cost cutting program and a target of 5000 redundancies by 2017.

Qantas Frequent Flyers hit 10.2 million

Commonwealth Bank financial analyst Matt Crowe said there was persistent industry speculation Qantas might offload all or part of its loyalty program valued at between $1.5 and $2.5 billion.

He said that would turnaround the airline’s financial woes, but the long term cost would be considerable.

“My view is the frequent flyer program is more valuable to Qantas than it is to anyone else,” said Mr Crowe.

“The only reason it works is because it has a guaranteed supply of (plane) seats from Qantas.

“If you sold the program then getting those seats would be potentially more difficult.”

Qantas would be ‘crazy’ to sell Frequent Flyers

He said the other factor in any sale was Qantas could be seen to be abandoning its most loyal customers.

“By selling Frequent Flyers, you’re giving another organisation the ability to market to your best customers,” Mr Crowe said.

“I’m sure that’s one of the things (CEO) Alan Joyce is grappling with — do you want to give away your highest value customers?”

Qantas faces Frequent Flyer backlash

IG market strategist Evan Lucas said there was no denying Qantas was in a bad way financially with their credit rating close to junk status.

“You and I can borrow money more easily than Qantas because their (Ba2) credit rating is so poor,” said Mr Lucas.

“They could raise money by floating the Frequent Flyer program which would be interesting. It wouldn’t be the most lucrative way of doing it but it’s certainly a possibility.”

Qantas Frequent Flyer timing ‘appalling’

Both he and Mr Crowe agreed the carrier had to find more ways to reduce their cost base which was higher than those of its competitors.

Mr Crowe said Qantas management was frustrated by workplace practices that kept aircraft on the ground, rather than in the air for longer.

“It’s a highly unionised workplace, and I know management believe they could lower their cost base if those restrictive work practices were removed,” he said.

A Qantas spokesman said there was often speculation about the airline, especially in the lead-up to their results.

“We have an established position of not commenting on that speculation one way or the other and instead focus on delivering on the things we have announced and are actually happening,” he said.

Originally published as Qantas urged not to sell out frequent flyers for a quick buck