Qantas looking at burn-as-you-earn loyalty program

QANTAS is looking at new ways to allow frequent flyers to burn as well as earn points as they fly.

QANTAS is looking at new ways to allow frequent flyers to burn as well as earn points as they fly.

The airline is working on integrating its expanding frequent flyer retail options with its in-flight entertainment system to allow frequent flyers to redeem points on its planes.

"The new generation of in-flight shopping will be much more dynamic with a much larger catalogue with the ability to earn and burn your points," Qantas Frequent Flyer chief executive Simon Hickey says.

"That will be something that will expand massively over time."

The retail operations of the frequent flyer program have been expanding since it was relaunched earlier this year.

It now offers more than 1000 products and 100 vouchers -- including online music downloads -- and even Christmas and summer specials.

Hickey says current forms of in-flight catalogue shopping are "clunky" and not for Qantas. He is unable to put a timeframe on upgrades but notes it will involve time-consuming and costly upgrades to the program's back office systems.

"It has to be dynamic," he says. "It has to be on the screen, you've got to be able to be earn and burn points. That's somewhere you go that leapfrogs to the next generation."

The program runs as a separate entity in the Qantas Group and Hickey and his team are continuing to build it up with a view to a partial spin-off when economic conditions improve.

It is unclear at this stage how the proposed merger talks with British Airways would affect that process and what a merger would mean for the local frequent flyer program.

However, Hickey is pleased with the way the fledgling business is heading and says it is doing well.

As well as expanding the retail offerings available to members, this year's revamp also split frequent flyer travel redemptions into two streams.

The Classic stream is the traditional program, working as it always has. Qantas says it is maintaining the number of seats in this program.

The new Any Seat option allows frequent flyers to book any seat on any Qantas or Jetstar flight according to a sliding points scale that reflects ticket prices and includes taxes and charges.

The new system raised eyebrows when it was revealed that a return, long-haul international business-class ticket could cost more than 1 million points.

Hickey says redemptions have risen about 24 per cent since the changes were introduced, with about two third of that going to Any Seat. The other third comes from retail where, unsurprisingly, iPods are the most popular item.

That's pretty much where the scheme wants to be at this time, Hickey says.

"The only comparator in terms of what we thought the impact would be was over in Canada," he says. "It hasn't been as strong as it was there, but there they had an airline that wasn't giving out as many Classic seats."

Last year the scheme distributed more than 3 million Classic seats, "and we intend to do the same this year -- or more". 

"We already had great take-up in Classic."

He also notes that sales at Qantas have brought the cost of the often-expensive Any Seat redemptions back down to Classic levels.

"When there's a sale fare with Qantas, you can go into Any Seat first and have a look because it should be reflected in the program," he says.

"So the two-for-one sale reduced Any Seat back to Classic inventory levels for all of the inventory. It was a very good time to go looking in Any Seat through that promotion period."

Hickey says it is difficult to say whether the economic crisis is prompting people to redeem points faster but notes they are a great "store of value" in hard times.

An increase in redemptions at the Frequent Flyer store could be due to the crisis or it could just be because people are becoming aware of the offers.

Classic redemptions are holding "rock steady" and Any Seat is going relatively well, he says.

He is expecting more people to start using their points as times become tough.

"People are asking where's their bonus, they've lost some money in the equities market and are not feeling as rich as they were last year," he says.

On the earnings side, Hickey says, there has been a slight drop in the number of points people are earning from both the airline and credit cards.

"In credit cards people are spending less and paying off their debt, but that's absolutely appropriate," he says. "In our members we're still seeing a relatively strong flow."

Qantas is continuing with potential partners such as supermarkets and with existing partners to bring in new options and specials that make redeeming those points more attractive.

It is also urging its members to opt in to QFF as their credit card loyalty program.

That means points earned on credit cards transfer directly to their QFF accounts rather than to a bank or other loyalty program.

Qantas benefits from this because it sees more of the points more quickly and can manage its business better.

Hickey argues that members benefit too.

"It means you know where you stand -- it goes directly into your QFF account and you don't have to ring up and get them to transfer the points and go through that rigmarole," he says.

"You know what you're getting when you take up the product. It's a competitive market because we've got every major credit card company in this country as a partner with a direct option."

An initial public offering of QFF is still on the cards, Hickey says, and the Qantas board sees value in the move.

"Obviously we wouldn't look at that in the current market," he says.

"We would look at that in the fullness of time and make sure it still drives value for shareholders."