Virgin reborn: Customers shying away from frequent flyer cards

Virgin Australia officially has a new owner, but still faces an uphill struggle to turn itself around. But the battle has only just begun.

Virgin Australia officially has a new owner, but still faces an uphill battle to turn itself around.

The airline this week officially signed off on a $3.5 billion buyout by Bain Capital after creditors agreed to it, with the deal expected to be completed within a fortnight.

But while the Bain buyout throws Virgin a lifeline, the future shape of the airline remains uncertain.

And one question at the top of many Australians’ minds: What’s going to happen with all my Velocity points?

Virgin Velocity has 10 million members. Picture: Joel Carrett/AAP

Australians are keen consumers of frequent flyer points.

Virgin’s Velocity scheme has 10 million members, while rival Qantas Frequent Flyer boasts 13 million.

Bain has said it will continue to operate Velocity, which has been a profitable business in its own right.

However, it’s yet to say whether points redemption values will change or what other alterations might be made.

Virgin’s partnerships with overseas airlines are currently on pause, which means there are fewer options for redeeming points for flights outside Australia.

While international travel is off the table for 2020, spending points on overseas reward flights historically has offered the most value.

That’s likely to be the case again once international travel is an option.

There’s some evidence that the long-running travel restrictions introduced to restrict the spread of coronavirus are already dampening our enthusiasm for frequent flyer points.

People crowded Sydney’s international departures back in March as the lockdown saw many visitors heading home. Picture: Damian Shaw

Earning points through a credit card has long been a popular strategy, used by both Virgin and Qantas.

But recent Finder research found that most people would prefer a credit card that offered non-frequent flyer rewards, such as cashback or points that can be spent on shopping.

In a surveyed group of 1000 Australians, 51 per cent said they would prefer a rewards credit card.

Just 24 per cent said they’d still rather earn frequent flyer points, while 25 per cent weren’t sure.

That’s a low percentage given the number of frequent flyer scheme members and our appetite for credit.

There are 14 million active credit cards in Australia.

Credit cards are widely used in Australia. There are 14 million active credit cards in Australia, according to Reserve Bank data.

That seems unlikely to change in the near future, with contactless card payment more widespread than ever because of the pandemic.

Virgin’s new owners will be hoping that the trend changes and more customers sign up for frequent flyer credit cards once the dust has settled on the buyout deal.

Angus Kidman is the editor-in-chief and travel guru for Finder