Qantas Ready To Honor $3 Billion Worth Of Frequent Flyer Miles

It’s no secret that loyalty programs are normally big money spinners for airlines. Qantas is no exception. But throughout 2020, fewer big businesses were buying points, and fewer passengers were redeeming them. All the while, Qantas Frequent Flyer members kept on accruing points at a rapid clip. So much so, that Qantas now has an AU$3 billion (US$2.35 billion) deferred revenue liability to cover those accrued points.

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Qantas is sitting on around AU$3 billion worth of accrued frequent flyer points. Photo: Qantas

A frequent flyer program with an impressive reach

At the end of 2020, the Qantas Frequent Flyer program had 13.5 million members. That might pale in comparison to say, Delta’s 92 million SkyMiles members. But what impresses about the Qantas program is its reach. Around half the Australian population is a member of the Qantas loyalty program.

In the last six months of 2020, Qantas Loyalty tipped US$355 million into the airline’s coffers. That is despite limitations on travel redemptions and a 10% decline in total credit card spending on Qantas points earning credit cards.

“Our members have continued to earn,” said Qantas Loyalty CEO Olivia Worth at an investor’s briefing last week. “Two-thirds of all points are earned on the ground. With no international flights, they haven’t been able to redeem.”

Qantas expects demand for seat redemptions to increase significantly once people start traveling again. While international flying at Qantas remains largely grounded, domestic flying is regaining ground. Qantas expects its domestic services to run at 80% of 2019 levels this quarter.

“As soon as borders reopen, we do see significant takeup of redemption seats. We do expect that will happen when we get more certainty, both domestically and internationally.” 

Qantas says right now, 50% more domestic seats than usual are available for redemption. The airline is also discounting redemption rates on certain routes, such as between Sydney and Melbourne.

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Qantas is keen for its frequent flyers to start spending those points again. Photo: Qantas

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Qantas says it’s done well generating cash for points

Getting frequent flyer members to redeem points is one way to help reduce that multi-billion-dollar deferred revenue liability at Qantas. The other way for Qantas to sell points. That’s a tougher ask now than normally. Qantas argues selling AU$450 million worth of points in the last six months of 2020 is a good achievement, considering the wider environment.

“I think a lot of airlines would love to have six months or (AU)$450 million cash contribution of loyalty points being sold,” said Qantas Group CEO, Alan Joyce at the briefing.

Big points buying customers include credit card companies, banks, insurers, even wine stores. Qantas points earning credit cards hold a 36% market share in Australia. While the credit regime is very different in Australia to say, in the United States, generous sign-up bonuses are common.

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Qantas Frequent Flyer offers many ways to earn and redeem points. Photo: Qantas

Prolonged periods at home in 2020 have boosted online shopping. Qantas can cleverly direct its frequent flyers into their own online mall, where hundreds of well-known retailers all offer the opportunity to accrue points if you shop there. One of the big success stories is Qantas Wine. Revenue there was up 74% in the last six months of 2020. No doubt that was helped along by lockdowns. The frequent 10,000 and 15,000 bonus points for buying a case of cabernet didn’t hurt either.

While most frequent flyers aren’t flying, there’s still plenty of activity on Qantas frequent flyer accounts. Qantas is keen to promote as much redemption activity as possible, whether via seat redemptions or elsewhere. Qantas accepts the inevitability of the multi-billion deferred revenue liability, seeing it as a byproduct of the travel downturn. Nonetheless, the airline remains keen to covert that multi-billion-dollar sum into recognized revenue.

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