The plane truth
Sydney Morning Herald
Wednesday November 25, 2009
Change is afoot in the frequent flyer industry. The frequent flyer market has been through big changes this year, following an initiative by the sector's main player, Qantas Frequent Flyer. QFF's move to what it calls direct earn membership triggered a round of developments that has made the market more competitive and potentially more rewarding for travellers.Travellers looking for a frequent flyer program will find there are new entrants in the market and new benefits.Local credit card issuers now provide access to Emirates Airlines' Skywards program and Singapore Airlines' KrisFlyer as well as QFF and Virgin Blue's Velocity Rewards. In October, Jetstar started offering a MasterCard with travel voucher program.The schemes have been expanded to include more partnership arrangements and give members more flexibility when redeeming rewards. QFF and Velocity allow members to use their points to book accommodation with an expanding range of hotel groups.Frequent flyer programs are big business. Last year Qantas took 3.4 million bookings from customers using frequent flyer points and an additional 300,000 from customers using the premium "any seat" rewards program. That is about 10 per cent of total bookings.Last year QFF announced it would change its business so it could deal directly with participants in its program rather than through credit card issuers.The change took effect at the end of March. Under the old arrangement, cardholders earned points in their card-issuer's reward program and then elected to have some or all of the points transferred into their QFF account.QFF felt this arrangement lacked transparency, was complex and created a situation where conversion rates varied from one card issuer to another.It introduced a "direct earn" system, which means when QFF participants spend money, the points earned accrue frequent flyer points directly. Card issuers now give customers the option of having their points go to the issuer's rewards program or straight into QFF.In the lead-up to this change, QFF enhanced its program with the launch of Qantas Store, which offers non-flight rewards and vouchers. It started offering "any seat" redemptions, which allow a member to pay a premium to book any flight. More recently it has extended the "any seat" offer from Qantas and Jetstar flights to partner airlines.It has formed an alliance with Woolworths that allows people to link their Woolworths Everyday Rewards program to QFF. It has signed up 200 restaurants where members can earn points and has an expanding network of hotels where they can use points to book.Velocity responded to the QFF direct-earn initiative by launching a campaign arguing it would cost reward program members flexibility and choice. In June, Velocity formed an alliance with Choice Hotels. Subsequently, members could earn and redeem points from 5800 hotels (up from 280) in 30 countries. It also allowed members to transfer points within families.Jetstar has two MasterCard options: a low-rate card at 10.99 per cent interest with $49 annual fee and a platinum card with a 17.99 per cent interest rate and $149 fee. Users of the low-rate card earn one cent per dollar spent and platinum card users earn two cents per dollar. Rewards vouchers (usually issued when $100 has been accumulated) can pay for flights.Work out the best frequent flyer optionConsumers have to consider four things when they shop for a frequent flyer program: the annual fee, the points that accrue for a given amount of spending, the rate at which those points convert into rewards and the points that can be earned on flights.ANNUAL FEESPoints accrue faster on gold and platinum cards but those cards are more expensive. Users of a Qantas American Express Card earn 1.5 Qantas Frequent Flyer points for every dollar they spend but the annual fee is $450. If they spend $30,000 a year on the card, with no bonus points, they will accumulate enough points to redeem $333 worth of shopping vouchers. If they spend $100,000 they will be able to redeem $1111 of shopping vouchers. Platinum card fees are $250 to $300 a year. For people who spend modest amounts a standard card is a better option.Commonwealth Bank's standard MasterCard rewards card costs $59 a year - spend $15,000 and get a voucher worth $47. Customers choosing a platinum card, costing $200 a year, would be $107 out of pocket.POINTSAmerican Express and its major bank partners have the best points deals in the market. Members can earn up to three points using a Westpac Amex or a Commonwealth Amex. It is important to note that three points can accrue to the issuer's rewards program but if the points are going into QFF the maximum is 1.5 points per dollar. Citibank's Emirates card has 1.5 points per dollar.CONVERSIONThe rate at which points convert varies. Travellers who want to get to London might have to use between 95,000 and 258,000 points, depending on the airline and whether they use a premium booking deal, which is more likely to give you the flight you want (see table).In a comparison by MWE Consulting, Gold QFF members earn 8000 if they fly Melbourne to Sydney return four times on discounted economy and the same points if they do the four trips on flexible economy. QFF members earn 22,474 points on a fully flexible economy-class flight to Los Angeles.Gold Velocity members earn 6440 points flying from Melbourne to Sydney four times on discounted economy and 15,400 points if they use flexible economy-class tickets. Velocity members earn 21,026 points flying to LA on flexible economy.Gold Skywards members earn 2640 points flying Melbourne to Sydney four times on discounted economy and 4875 on flexible economy. The trip to LA earns them 23,855 points.
© 2009 Sydney Morning Herald
