Only 17% of Ansett Global Rewards Members Feared of Airline Bankruptcy

Ansett Australia Boeing 767-200
Photo: Aero Icarus via Wikimedia Commons.

Many former members of the Ansett Global Rewards frequent flyer program still have painful memories of losing their points after Ansett went bankrupt in 2001 (then again in 2002 after a brief resumption of limited flights).

Although there were some limited opportunities to claw back a bit of value from Ansett points after the airline’s collapse, most Global Rewards members lost all of their hard-earned points.

In hindsight, people should have been more concerned about the risk of Ansett collapsing. If they’d known what was coming, most Ansett frequent flyers would have tried harder to use up their points before the airline entered voluntary administration on the 12th of September, 2001.

Of course, it’s easy to say that with the benefit of hindsight. But at the time, most Ansett Global Rewards members were blissfully unaware of the risk of losing their points.

Australian attitudes towards frequent flyer programs in the 1990s

The Ansett Frequent Flyer program, later renamed to Ansett Global Rewards, was originally launched in 1991.

In 1995, William Browne, Rex Toh and Michael Hu published a research study called Frequent-Flier Programs: The Australian Experience in the Transportation Journal (Vol. 35, No. 2, Winter 1995, pp. 35-44). These authors interviewed hundreds of travellers at Sydney Airport over the space of a week to collect data about their membership of, and views about, frequent flyer programs.

At the time, only 25% of respondents – all of whom were flying that day – were even a member of a frequent flyer program. This reflected the fact that frequent flyer programs in the 1990s were squarely aimed at business travellers. 74% of travellers who were not a member of a frequent flyer program said it was because they didn’t fly enough to make it worthwhile paying the $30 joining fee and annual account service fee.

The surveyed travellers who were members of at least one frequent flyer program were asked to rate their level of agreement with a range of statements. One of them was “I am afraid the program I am enrolled in will go bankrupt”.

Only 4% of respondents “agreed strongly” with that statement. And just 17% had any level of concern about the viability of the frequent flyer program.

53% of Australian frequent flyer program members were not concerned about this possibility, while the remainder had no opinion.

The study found that most people were not worried about their airline going bankrupt “primarily because the two major domestic airlines in Australia [were] very strong, a de facto continuation of the Two Airline Policy, although Compass went bankrupt again”.

Even in the years and months immediately prior to Ansett’s collapse, most Global Rewards members were either unconcerned about the possibility of the airline collapsing or took no action to minimise their losses.

Attitudes did change after the September 11 attacks in 2001, when it started to look like Ansett would imminently collapse. There was somewhat of a last-minute run on points at this stage, but it was too late for most people as Ansett entered voluntary administration within a day of this event.

In any case, Star Alliance did not honour most award tickets booked for travel on alliance partners using Global Rewards points in the weeks prior to Ansett’s bankruptcy.

Australian loyalty programs have become less risky since then

Today, having experienced the collapse of Ansett, Australians are a bit more cautious about losing their points. There was plenty of evidence of this in March and April 2020, when many Velocity Frequent Flyer members tried to cash out their points at the first signs Virgin Australia was in trouble.

But, learning the lessons from the past, there was a significant change to the way loyalty programs account for unredeemed points in 2008. This change in accounting standards was known as IFRIC 13.

Today, loyalty programs must set aside enough cash to pay for the expected cost of the rewards that members will redeem in the future using their unredeemed points. Airlines now account for unredeemed points as a liability on their balance sheets – something Ansett did not adequately do.

Velocity Frequent Flyer was specifically set up with the learnings from the Ansett collapse in mind. The founders not only set it up as a separate business entity, but with a trust in place to provide a cash backing for the value of unredeemed points.

When Virgin entered voluntary administration in April 2020, Velocity did suspend all redemptions for a period of time. But the points were ultimately safe and Velocity did gradually reinstate most redemptions. (First Class reward seats on Singapore Airlines, and redemptions on Virgin’s Chinese partner airlines, still haven’t returned yet.)

SYDNEY - APRIL 3: Aircrafts of the Virgin Australia fleet at Sydney Domestic Airport April 3th, 2014. Virgin Australia is Australia's second largest airline.
There was a brief run on Velocity points in 2020, but the points were ultimately safe. Photo: Adobe Stock.

So, Australian frequent flyer program members don’t need to be too concerned today about the risk of their airline going bankrupt.

That said, the value of points does diminish over time, you don’t earn interest on points, and they can expire. So, it’s still a prudent idea to avoid hoarding large quantities of points and to use them when you can. Points have no value until you redeem them!

The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 90 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil & Kazakhstan. His interests include aviation, economics & foreign languages, and he has a soft spot for good food and red wine.

You can connect with Matt by posting on the Australian Frequent Flyer community forum and tagging @AFF Editor.
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I made a cash booking with AN on 10 Sep 2001. I had to pay by 11 Sep 01 but due to the events of the day I forgot to do the bank transfer so lost the booking but none of my cash (unlike many others).

Woke up on 12 Sep to see AN had collapsed.

Back then I flew AN exclusively, but was a NZ Air points member so I didn't lose my points. Rebooked that trip on QF and joined QFF.

People love to bash the airlines for their decisions but many forget airlines going bust is a real thing. And despite what it says in this article, I would not expect to receive compensation for my points if the airline goes bust, I'm just one of millions of creditors who had a non-cash asset, I'm at the back of the line.

I used to hoard my QF points but I'm now using them as I earn - I think it's too risky.

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"most Ansett frequent flyers would have tried to use up their points before the airline entered voluntary administration on the 12th of September, 2001."

Unfortunately it wasn't so simple even for those that did use them. I had cashed in 90% of my points on a RTW award which included no Ansett flights (all legs were on United, Singapore, and AirNZ) in July.

But back in 2001 tickets were issued manually (remember those funny looking carbon books which had once sheet for each leg); and redemptions went off to a long queue prioritised by flight departure.

My redemption hadn't been ticketed and so wasn't honoured, even though the points were deducted and taxes had been paid. A friend who booked the same trip 1 day earlier than me was lucky to receive her ticket in time.

I still blame Air NZ for the collapse and as such have not spent $1 with them since.

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Well I was one of the lucky - managed to use all my AN points just a month before they went bust (by hap chance) - many of my colleagues lost millions.

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I was in the USA on work at the time, so blissfully unaware of what was happening in Oz at the time. Forget how many Ansett points I lost - but all from work flying, so easy come, easy go.

In those days Western Mining had an Ansett rep in its Melbourne head office doing bookings directly for us, so not much chance of flying the alternative 😊

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As you can see, I joined their Golden Wing early (Life Member 380) as I used to work for an Ansett non-airline subsidiary so flew them all the time, including many of their excellent J class 747 flights to HKG. (I still use their shoe bags that they distributed with amenity kits.)

I was living in Singapore in 2001 and travelling a lot so was not following the Ansett (NZ) issues until my 300k points when down the drain one day. That was a lot of travel's worth of points in those days. Lesson learnt the hard way.

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Well I was one of the lucky - managed to use all my AN points just a month before they went bust (by hap chance) - many of my colleagues lost millions.

Same for late MIL. She always flew Y with NZ, SQ, and UA - once or twice a year she would do a RTW with them to Europe and the US (and to the far flung corners of China, Russia and Africa to work in orphanages). Occasionally they would upgrade her to J and she was thrilled. She was very thankful that she used up all her points just before the collapse of AN.

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Whilst I did use some of my Ansett GR points, I did lose around 100K points from memory.

But I'm circumspect, whilst in other programs I haven't lost a single point (except a few orphaned points here and there) over the years I've lost far far more value from devaluations than I ever did when my AN GR points balance was wiped out.

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Well I was one of the lucky - managed to use all my AN points just a month before they went bust (by hap chance) - many of my colleagues lost millions.

I lost around 200,000 points when Ansett went belly up, many were earned through my Diner Club card spend. I had redeemed a lot of points for fights, especially going across to NZ. A friend lost 800,000 points that he was building up for a couple of J RTW tickets for him and his wife.

The biggest loss was the Golden Wing Lounge, which I felt was a cut above the Qantas Club.

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The biggest loss was the Golden Wing Lounge, which I felt was a cut above the Qantas Club.

Can still visit it in MEL 🙂

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I used to hoard my QF points but I'm now using them as I earn - I think it's too risky.

QF’s got your interests at heart, limiting your ability to use them on flights in order to ensure they make record profits & stay in business & your points stay viable! They’re doing it for you!!

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