Airline loyalty members pay 8pc more for flights on Qantas, Virgin in status tier chase
Airline loyalty members pay more for flights when chasing status perks, with some going into debt to unlock bonus points, the consumer watchdog reveals.
Qantas and Virgin Australia’s loyalty programs are so influential, members pay on average 8 per cent more for flights if they are within reach of a new status tier, the consumer watchdog has revealed.
The Australian Competition & Consumer Commission’s latest airline monitoring report examined frequent flyer programs, finding some members spend more than they should in pursuit of points and status credits.
With Qantas Frequent Flyer boasting 17 million members and Virgin Australia’s Velocity close to 13 million, the ACCC said loyalty was a factor in as many as 71 per cent of flight bookings.
That influence was even greater when a “frequent flyer” was within reach of a higher status tier, the report said.
“A US-based academic study found that because they are less likely to choose alternative flight options, loyalty program members on average paid 8 per cent more than others when they are close to the target tier,” the ACCC said.
“This influence can be even stronger if the cost of the flight is being met by the travellers’ employer.”
In addition, the report said frequent flyer-linked credit cards led to holders spending more than they otherwise would to unlock bonus points.
A Finder survey found frequent flyer points were the second-most common reason for getting a new credit card, but around 14 per cent of cardholders failed to meet the minimum spending requirements.
“Eleven per cent ended up in debt to meet the minimum spend (to unlock bonus points),” the report said.
Both Qantas Frequent Flyer and Velocity generated huge earnings for the airlines, of $511m and $115m respectively.
ACCC Commissioner Anna Brakey said the programs could offer appealing benefits to consumers, in the form of reward flights, seat upgrades and lounge access, but they also came with “certain drawbacks”.
“We encourage consumers to look into how frequent flyer programs operate and weigh the potential benefits of frequent flyer points or status credits against the cost of flights when choosing fares,” she said.
“Points may lose value, expire or be difficult to redeem. Similarly, airlines can change the number of status credits required to reach or maintain a higher tier.”
A Qantas spokesman said the airline continued to see record levels of engagement from frequent flyers, “demonstrating the significant value our program continues to deliver”.
The quarterly report also highlighted how capacity constraints by the major players were helping to keep airfares elevated.
Although domestic passenger numbers returned to 2019 levels in June, there were 2.8 per cent fewer seats available, largely due to the demise of Tigerair in 2020.
As a result, load factors had increased to an average 80 per cent on major city routes, which the report warned could “negatively impact consumers”.
“For example, with less spare seats on flights, passengers may be waiting longer to be re-accommodated on a new flight in the event of a cancellation,” the report said.
Airfares had also crept up in June compared to the same month last year, despite a 12.3 per cent drop in jet fuel prices in the same period.
On some routes, airfares had doubled in price including Sydney-Townsville, which was up 99.7 per cent to $573; Ayers Rock-Sydney climbed 82.1 per cent to $781; Brisbane-Hobart leapt 74.8 per cent to $762, and; Adelaide-Brisbane jumped 69.1 per cent to $504.
Other routes saw airfares fall, including Melbourne-Gold Coast, which was down 41.4 per cent to $208; Avalon-Gold Coast dropped 30.9 per cent to $357, and; Melbourne-Newcastle fell 30.4 per cent to $158.
Qantas disputed the figures quoted in the report, saying they did not represent average fares paid by customers on those routes, rather they were a snapshot of fares on an individual day each month.
The report said the fares were unlikely to have been impacted by school holidays, as the data collected fell outside mid-year breaks.
Both Qantas and Virgin Australia pointed out the frequent sales staged by both airline groups, offering “highly competitive fares”.
A Virgin Australia spokeswoman said they also worked hard to deliver a reliable schedule, and had maintained an average on-time performance of 82.1 per cent and average completion rate of 98.1 per cent.
Qantas retained its position as the domestic market leader, carrying 37.8 per cent of travellers within Australia, compared to Virgin Australia’s 33.1 per cent.
Jetstar serviced 27.4 per cent of the market, and Rex just 1.7 per cent.
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Originally published as Airline loyalty members pay 8pc more for flights on Qantas, Virgin in status tier chase
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