Fierce contest for airline loyalty shaping up as a win for customers

Qantas frequent flyers program provides endless opportunities for members to earn points but a lot fewer chances of redemption, prompting once loyal customers to look elsewhere.

Premium seats such as Qatar Airways’ QSuites are considered the ultimate reward for frequent flyers.

Airline loyalty programs today are about much more than earning a free flight from flying ­regularly.

With opportunities to earn points from activities as diverse as sleeping and exercising to taking out a mortgage, program members can build big balances without even stepping onto a plane.

But what happens when customers cannot use those points in the way they planned; when the “dream” of flying up the front of the plane to a destination of choice is constantly out of reach?

For many of Qantas’s 15 million-plus frequent flyers, that is increasingly the reality, with experts largely agreeing that the program is in danger of becoming a victim of its own success.

Adele Eliseo of The Champagne Mile says Qantas tries to equitably allocate rewards seats but there are just not enough to go around.

“It’s clear these quick dumps [of reward seats] that get sold out in half an hour are not even touching the sides,” Eliseo says.

“The vast majority of Qantas Frequent Flyer members aren’t getting that traction and finding the rewards, so it’s quite difficult.”

Frequent flyer expert Adele Eliseo says flyers find it hard to get reward flights.

Fellow frequent-flyer expert Steve Hui of iflyflat.com.au says it is a fundamental problem of supply and demand that occurs when loyalty programs grow too large.

“The job of loyalty programs is to ‘sell the dream’ to make people want to collect points,” Hui says.

“You may have seen the petrol station ads, where one screen is someone putting petrol in their car, and the next screen is a guy swimming.

“In reality the connection’s not that close. Just putting petrol in does not mean a free holiday but they sell that dream and people get pissed off when it’s always out of reach.”

Adding to the challenge for Qantas is increasing competition in the loyalty space.

Improvements in technology have seen overseas carriers such as Qatar Airways and Singapore Airlines make it easier for Australian customers to earn points with their own programs, in ways other than flying.

American Express cardholders in Australia can now amass Qatar Airways’ “avios” towards seats, and Singapore’s KrisFlyer members can build their points balances at restaurants, bars and cafes in Sydney and Melbourne.

Hui says it’s likely more airlines will follow the KrisFlyer lead and sign up local retailers to partner with their program.

“Previously you needed hardware terminals to do point-of-sale loyalty programs, but now you just need an iPad with a QR code. It’s way easier and so cheap to introduce,” he says.

Redeeming points with airlines other than Qantas is also getting more straightforward due to products such as American ­Express membership rewards.

Steve Hui of iflyflat.com.au

Eliseo says customers who earn points on the credit card can then choose to redeem them on a range of airlines including Qatar Airways’ Privilege Club, which has come on board as a transfer partner.

“What that means is you can book a one-way business class flight from most Australian cities into Europe for 90,000 avios, compared with 130,000-140,000 Qantas points,” she says.

“The conversion rate is about the same and the taxes and carrier charges are far smaller on Qatar, plus you’ve got the QSuite business class, so we think that’s going to give Qantas a run.”

With earnings approaching half a billion dollars in the last ­financial year, there’s no suggestion Qantas Frequent Flyers is in strife.

Engagement by the program’s 15 million-plus members is enormous, with 175 billion points earned last year, and 150 billion points redeemed on everything from flights to gift cards. Flights are the most popular way to use points, and Qantas says as many as 5 million reward seats are available for booking with the airline and its 45 partners.

Point Hacks editor Daniel Sciberras says there’s much to like about the Qantas program, but he recommends customers don’t limit themselves to one scheme.

“If you’re based in Australia, it makes sense to join Velocity and Rex as well,” Sciberras says.

“We would welcome more competition because it’s not only great for consumers, it’s great for the programs because they innovate.”

Velocity CEO Nick Rohrlach agrees that innovation is key, pointing to the ability of customers to transfer points to KrisFlyer and the “family points pooling” feature.

With Velocity now having almost 12 million members, Rohrlach says it is taking care to ensure its rewards keep pace with that growth by building a strong ecosystem of partners.

“We know how important reward seat availability is … and we are focused on getting members to rewards fast,” Rohrlach says.

“We are proving to be a competitive proposition for Australian travellers.”

Eliseo shares that sentiment, suggesting Velocity is giving Qantas a run for its money.

“They’ve brought on new airline partners like Qatar Airways, ANA and United, so members have got good potential for using those points for premium redemptions,” she says.

“And let’s face it, that is the ultimate reward for loyalty.”

Originally published as Fierce contest for airline loyalty shaping up as a win for customers