Clamp loosens on Virgin Velocity frequent flyer points

Members’ points in Virgin’s frequent flyer program are to be unfrozen, but only for flights and not for use in the rewards store.

Velocity Frequent Flyer will again be able to use their rewards points for Velocity Frequent Flyer points on Virgin flights, if and when the airline flies again. Picture: AFP

Millions of members of collapsed Virgin Australia’s loyalty program, Velocity Frequent Flyer, will have billions of dollars worth of points unfrozen, although they will be restricted for now to discounts on Virgin flights.

Virgin said members can redeem their Velocity points to fly on some of Virgin’s most popular routes, effective today for travel from September 1.

However the Rewards Store, where points can be used to pay for gift vouchers, wine, hotels, consumer electronics and other goods, remains frozen.

The ability of members to actually take a discounted Virgin flight could rest heavily on several factors: the likelihood of the failed airline being bought and recapitalised, for any new owner to honour the Velocity program, and for state and federal governments to allow interstate travel.

The announcement came as non-binding, indicative bids for the airline were due on Friday. At least four serious bids were expected to be lodged with the administrator.

When Virgin entered into voluntary administration last month the administrators acted quickly to ring-fence its valuable frequent flyer program, Velocity, and protect it from a run on points by anxious members rushing to cash in points. The hope was the rewards program will be brought back to life if and when Virgin is restructured and relaunched.

Typically, 90 per cent of points are redeemed for cheaper airline tickets. But in the last few weeks, before Virgin’s collapse, some Velocity members panicked and tried to exchange their hoarded points for everything from gift cards to wine and furniture.

This depleted available stock from partners to the Velocity program, and administrators acted to freeze redemptions.

It was also later revealed that Velocity was a major creditor to Virgin, having lent it $150 million.

The administrators have maintained that a strong and vibrant frequent flyer program would be a valuable component of a restructured and recapitalised Virgin, as bidders line up to consider a purchase of the airline.

“Velocity is pleased to resume offering Virgin Australia domestic flight redemptions for our members for travel to some of our most popular domestic redemption destinations from September 1 this year,’’ a spokeswoman for Virgin said on Friday.

“We’re hopeful that domestic travel restrictions and state and territory border lockdowns ease by September and for many of us, a local holiday and catching up with interstate family and friends will be well overdue.”

If Velocity members book a Virgin Australia Reward Seat or any seat before September 1 for travel after this time Virgin said it will waive fees for any changes or cancellations made until September 1 2020. If the consumer or Virgin cancel the flight before September 1 the airline will refund points/cash in full to the original form of payment (except for any booking or credit card fees).

Although there is no public disclosure of the total value of Velocity points that remain in circulation, it is estimated by some industry experts to be as much as $2 billion.

The last full-year report from Virgin listed $497.1m worth of points issued but as yet not redeemed.