Why Qantas frequent flyer engagement soared last year but Loyalty earnings didn’t

Qantas frequent flyers are earning and redeeming a lot more points but the airline’s Loyalty profits have gone backwards. Is Classic Plus to blame?

Qantas’ powerhouse Loyalty business has taken a rare hit with its earnings slipping, despite solid increases in points redeemed and earned, and a million more frequent flyer members.

The airline’s interim results showed Loyalty earnings fell 6 per cent to $255m in the December half.

Frequent flyers earned 109 billion points in the six months, up from 99 billion in the previous corresponding period, and redeemed 87 billion points, up from 82 billion.

At the same time frequent flyer numbers grew from 15.8 million at the end of 2023 to a whopping 17 million a year later.

Qantas explained the dip in earnings as being due to the start-up costs of Classic Plus Rewards, the new frequent flyer offering launched last April, to give members more opportunity to use points in the cabin and flight of their choosing.

The Loyalty results suggested Classic Plus was off to a roaring start, inspiring thousands of members to book a rewards flight, 20 per cent of whom had not done so in the past five years.

Frequent flyer expert Adele Eliseo of the Champagne Mile said using points for rewards flights as opposed to other uses such as gift cards or goods, was definitely a better value proposition for members but possibly more costly for Qantas.

“You’ve got this group of people who were at one time redeeming their points for a tenth of a cent and now they’re getting as much as 5c a point, so it’s a bit of a balancing act for Qantas I suspect,” Ms Eliseo said.

Frequent flyer expert Adele Eliseo of The Champagne Mile has delved into Qantas Loyalty results.

Helping to tip the scales was an upcoming increase in the number of points needed for Classic Rewards seats and upgrades from August this year.

As an example, 63,500 points will be needed for a Sydney-London economy seat, up from 55,200, and 19,300 points for Sydney-Melbourne in business class, instead of 18,400.

Ms Eliseo said it appeared the move was designed to recapture some of that Loyalty profit with Qantas targeting about 10 per cent growth in full-year earnings for the business.

“To be fair, we’ve seen a number of airlines devalue (points) in recent times; Velocity has also just rolled out point pricing increases as well for their rewards, so it was not unexpected,” she said.

“I suspect they will be using this (points increase) to try to boost profits, and that’s obviously the intention behind the changes.”

Although there continued to be some frustration among frequent flyers about the availability of “cheaper” Classic Reward seats, Ms Eliseo said it appeared that the introduction of Classic Plus was delivering for Qantas.

She pointed to the airline’s claim there had been a 31 per cent increase in points transferred from other proprietary credit card programs for flight redemptions since the program’s launch.

“These are cards such as American Express membership rewards, that have the advantage of being able to use points for any loyalty program,” Ms Eliseo said.

“I find it really interesting that people are choosing to transfer those points to Qantas for Classic Plus because typically people who use those programs are quite savvy, and globally there are some airline programs that offer exceptional value for reward seats.”

Qantas would not reveal how many of its 17 million frequent flyer members were “active” with the airline, including long dormant accounts with zero points in the count.

However Loyalty chief executive Andrew Glance told an investor briefing there had been an 11 per cent increase in active members in the half.

“That really reinforces the engagement and value that we as a program generate,” Mr Glance said.

“A lot of that is then fed through the product range and depth and value more broadly but ultimately drives both earn and burn.”

Originally published as Why Qantas frequent flyer engagement soared last year but Loyalty earnings didn’t