Terry McCrann: Qantas’ multi-million dollar frequent flyers mistake
Qantas’ shake-up to its frequent flyer program is more than just a controversial change — it’s an attack on the airline’s most valued clients, writes Terry McCrann.
Terry McCrann
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Dumb, dumb and indeed even dumber. Qantas is ripping hundreds of millions of dollars off those who are supposedly its most important and most valued customers — its frequent flyers.
By the twin strokes of the pens of Olivia Wirth, the head of the FF program, and CEO Alan Joyce, the value of every one of the billions of customer frequent flyer points has been slashed by 10 per cent.
If you have 500,000 FF points, yesterday they were worth $38,470. Tomorrow they will be worth $34,620. Qantas has snatched away $3850.
If you had 100,000 points, they were worth $7694 yesterday. Tomorrow, they will be worth $6924. You’ve lost $770.
And if you have, say, two million, you would — or should — be really steamed. Qantas has ripped $15,400 out of your electronic account. That’s more than enough to buy a return flight to London — business class of course, or even first in a sale.
That’s “worth” (not wirth) on the only measure that counts — what international business class flights you can buy with your points.
All the other ways you can use your points — buying economy flights, local or international, local biz, upgrades, and most outrageously of all, the Qantas points shop — are, very simply, spectacularly profitable rip-offs.
Let me give you just one example. You can buy an Apple iPhone 7 128GB in the Qantas shop for 135,190 points. Qantas has very “generously” just cut the price from 150,220 points.
You can buy that same phone at Officeworks for $917.
To buy that phone, you would be using 135,190 points that are worth $10,300 of a return biz class flight to Los Angeles, as they are 70 per cent of the 192,000 points you need to buy that ticket.
On the website yesterday, that ticket would have cost you $14,772 cash (net of the $943 in fees Qantas would charge on using points).
Some bargain: To effectively spend $10,300 to buy a $917 phone. Sort of makes the banks look like charity operators.
I could go on. The $17,000 coffee machine, the $600 plastic takeaway coffee cup; yes, cup, singular.
And that’s before we get into economy flight fares, which Qantas is now trying to steer its FFlyers into in its new “improved” program.
But the only true measure of FF point worth is international — and I stress that word, because domestic biz class is the normal points rip-off — biz class.
So using the figures supplied by Qantas, yesterday you needed 192,000 points for a return flight to LA; tomorrow you will need 216,800 points.
Yes, you will pay slightly less in the cash charges — down from $943 to $703.
But compare all that with cash: The direct flight Melbourne-LA was priced at $15,715 return yesterday.
If you paid cash, you didn’t have those additional FF cash charges. Allowing for that, yesterday those 192,000 FF points were worth $14,772 or $76.94 per thousand.
Tomorrow they’ll only be worth $13,295 or $69.24 per thousand.
Multiply that across the billions of points that are out there and that’s a transfer of some hundreds of millions of dollars from the electronic accounts of Qantas’s customers to Qantas and its shareholders.
Alan Joyce has been a brilliant CEO; arguably the best CEO Qantas has ever had.
I personally backed him in the darkest days of 2011 when he courageously — in the correct use of that word — and appropriately grounded the fleet. And the rest would then be — up, up, and away — history.
I backed him after revealing his $25 million pay-cheque a couple of years back. He would have been cheap at twice the price.
And a couple of months back I wrote that “keeping Alan Joyce as CEO through at least 2022 and semi-publicly committing to doing so, is the smartest and easiest thing Richard Goyder is ever likely to do as chairman of Qantas”.
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And I noted we would say that, as just a few months back we at Herald Sun Business Daily had dubbed him as our CEO of the Year.
But mate — and I can call him that — this is not only ripping off your most valued clients, it’s just dumb.
I’m not saying that — statement of interest — as a FFlyer, but as an analyst. You just don’t attack any customers this way; doing it to locked-in customers is twice as bad.
Did you, your executive team and indeed your board, notice what the banks have been through for treating their customers badly?
All the nonsense about more seats and slight cuts to the (already heavily inflated) economy point seat buys are, frankly, just nonsense.
It would seem to me Qantas has two choices. To eat humble pie and walk back, New Coke style, from what it’s doing. Or “grandfather” existing points and their worth.
Otherwise it’s inviting a visit from the competition and consumer cops at the ACCC.
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