When COVID-19 lockdowns and border closures decimated the travel industry in 2020, airlines and hotels worldwide were left scrambling to find new sources of income. With millions of customers demanding refunds and revenue from new bookings plummeting, many turned to their profitable loyalty programs to try to generate some extra cash flow.
Unlike many airlines, most frequent flyer programs are consistently profitable. As well as keeping customers loyal to a particular brand, they make money in their own right by selling points to third parties such as banks, retailers and car rental companies. As long as the loyalty program is being managed properly, the revenue earned from selling points should exceed the cost of supplying rewards to members.
But when the pandemic hit, most frequent flyer programs and hotel loyalty programs also took revenue hits as fewer points were being sold to third parties. Fewer people were earning points from travelling, and credit card spending dropped too resulting in fewer points being sold to banks.
Many airlines & hotels began selling points directly to members
To try to make up for some of this lost revenue, more airlines began selling their points or miles directly to the public. And many of the programs that were already doing this released more generous discounts, bonus points and other incentives to encourage members to buy more points.
It’s not new for airlines and hotels to sell points directly to the public. In fact, for years this has already been a significant source of revenue for schemes like American Airlines AAdvantage, which earned USD538m (approximately $700 million) in 2019 by selling miles to members that could be redeemed for flights on American Airlines and Oneworld partners including Qantas. This is also a crucial part of the business model of Avianca’s LifeMiles program, which sells heavily discounted miles redeemable for Business and First class flights across the Star Alliance network.
Even before the pandemic, Australian Frequent Flyer regularly covered “buy miles” promotions from programs like AAdvantage, LifeMiles, United MileagePlus, Etihad Guest and Alaska Airlines Mileage Plan. That’s because buying miles during a promotion, then redeeming them for a high-value reward such as a long-haul Business class flight, can be a clever way to save thousands on airfares.
But with many frequent flyers losing their appetite to earn points during COVID-19 lockdowns – let alone pay money for them – airlines had to get creative to entice members to continue buying points. After all, this was exactly when loyalty programs needed that extra revenue more than ever.
Offers have become much more generous
As a result, many loyalty programs have offered record amounts of bonus points or discounts in recent times. For example – and perhaps in a sign of desperation – Virgin Australia offered 100% bonus Velocity points on purchases in October 2020.
Avianca LifeMiles offered 200% bonus miles last year, effectively bringing the cost of LifeMiles down to USD11 (~$14) per thousand. Meanwhile, TAP Air Portugal’s Miles&Go program holds the record for the best offer last year with a “buy 20,000 miles, receive 100,000 miles” offer!
Over the past year we’ve also seen airlines begin to sell points for the first time, such as Air Canada, as well as discounts and bonuses from airlines that had never offered them before.
Since April 2020, Emirates, Virgin Atlantic, Turkish Airlines, SriLankan Airlines, Garuda Indonesia, Qatar Airways and Saudia have all offered rare bonus miles to customers who bought them directly from the airline. Even Qantas Frequent Flyer gave a 10-50% bonus on top-up Qantas points purchased in December 2020 (although in the case of Qantas, that still wasn’t enough to make buying points worthwhile).
Some frequent flyer programs, including Air Canada, Emirates, Etihad, Alitalia and Finnair, have even thrown in their equivalent of status credits when members bought miles during special promotions.
Not to miss out, almost every major hotel loyalty program has also been offering bonus points or discounts lately when members buy points. IHG Rewards, Hilton Honors and Radisson Rewards have all recently offered up to 100% bonus points. Marriott Bonvoy, Choice Privileges, Shangri-La Golden Circle, World of Hyatt and Wyndham Rewards have also run promotions.
Mixed success for loyalty programs
American Airlines AAdvantage, which has run very regular “buy miles” promotions for many years, told investors recently that it sold 60% fewer miles in 2020 compared to 2019.
But the Finnair Plus program managed to run its most successful points sale ever in November 2020, when it offered 100% bonus points and 25% of purchased points as elite-qualifying “tier points” which count towards Finnair Plus (and Oneworld) status. Finnair has publicly said that 3,000 members bought an average of 72,000 points each during this promotion, which LoyaltyLobby estimates earned Finnair around €3 million (approximately $5 million) – a significant amount for a relatively small airline like Finnair.
New opportunities for frequent flyer program members
It doesn’t necessarily make sense to buy points speculatively – in other words, when you don’t have an immediate use for them. The frequent flyer points could get devalued over time, they could expire, or as anyone who had points with Ansett in 2001 would know, the airline could even go bankrupt before you get around to using them.
But if you don’t mind accepting that risk, and you believe you’ll be able to get good value from your points in the long run, there continues to be exceptional deals for point hunters.
Even if you aren’t ready to buy points now, these offers are likely to continue for some time, as more airlines and hotels realise they can make immediate and profitable income by selling directly to the public. It’s worth keeping an eye on these offers so you’re ready to buy points and redeem them for great value rewards when borders open up again.
The newly-relaunched Air Canada Aeroplan program, which began selling miles in May 2020, is particularly interesting. In addition to being a part of Star Alliance, Air Canada now partners with Virgin Australia and Etihad Airways. So after buying Aeroplan points at a discount, you could redeem them to fly Star Alliance or Etihad Business or First class to Europe. And there are no fuel surcharges to pay – just genuine taxes and a CAD39 (~$40) partner airline award fee.
As an example, when 75% bonus points are offered it would cost CAD2,250 (~$2,322) to buy the 130,000 Aeroplan points needed for an Etihad First Class award ticket from Sydney to London. After buying the points, you’d then just need to pay another CAD142 (~$146) in taxes when redeeming the ticket and you’ve got yourself a First Class ticket to London for under $2,500. That’s considerably less than the normal retail airfare!
Aeroplan points can also be used to book flights to Asia, North America, the Middle East or even within Australia & New Zealand, at competitive rates. You can even combine Virgin Australia and Star Alliance award flights onto the same ticket. Plus, you can add a stopover to any one-way award for just 5,000 Aeroplan points.
