FFP program once again the star of QF financials.

[kezsco]

Markis, you're right. I was originally referring to Qantas when I said that there would be hurt. But only if Qantas didn't change their program. Of course, they will change their program, so the hurt is shifted to the consumer.

I should have explained myself better.

 

[rechoboam]

Your membership ceases if you are made bankrupt previously but that has been removed, you dont give up your number, its just that your membership ceases to be active by death or by being caught breaking the rules.

I could cope with losing my home and car but being thrown out of QFF would be the ultimate humiliation.

 

[markis10]

Markis, you're right. I was originally referring to Qantas when I said that there would be hurt. But only if Qantas didn't change their program. Of course, they will change their program, so the hurt is shifted to the consumer.

I should have explained myself better.

I dont know about much shifting, the hurt has been ongoing since 1997 IMHO when they made the last big changes that were of significant benefit, mind you I like ASA's, they give you the chance to bargain hunt and allow you to accrue SCs for very little cost when compared to using a classic redemption, especially when its cheaper or same cost to fly through a port than from it as a redemption

 

[medhead]

Correct. This is the point l was trying to make on another thread some time ago, but my point was missed. The amount of people competing for redemptions has risen, and will continue to rise as more and more people gain points over the years. My mum is like your father. Doesn't fly often, but will get enough points in about 2-3 years for a free flight. Add those 1.4 million new customers into the mix and bingo, congestion for Award seats. Many members have already stated that trying to redeem Award Int J Seats, you literally need to book 350 days in advance. That's crazy..

This doesn't make sense. If people are only earning enough points every 2 or 3 years for a domestic flight that will not impact on International J awards. I'm also not sure about this claim of already needing to book 350 days in advance. Maybe if you wish to get your preferred dates or high demand days or from Australia to London. But I'm having no trouble finding International J awards in 6 months at times that roughly suit me, even using my mothers Bronze account.

Of course there is a hurt. And it's not to Qantas. They will just amend their program as they see fit.

The point is that this isn't a short term profit jump as it is based on the redemption margin, so Qantas are going to continue to make profits from redeemed points.

Qantas becomes a 3 brand operation: FFP, LCC & regional airline. Domestic yields still sees pressure | Centre for Asia Pacific Aviation - CAPA

In this case, classic redemption (the original and cheaper redemption) has decreased as they shift people onto Any seat redemption. No doubt there will be the day where the classic redemption is practically non existent, and we have to calculate all possible redemptions at the any seat rate.

So, the hurt here is for the consumer.

The ASA redemptions would have increased because they now earn points and status not because people are being forced onto them. Also ASA can be had for the same points as classic and a little bit higher cash payment (i.e. $300 vs $200) than the taxes charge for a classic award. People who choose to burn points for low value return, i.e. expensive ASAs and shop redemptions, are only hurting themselves.

 

[markis10]

This doesn't make sense. If people are only earning enough points every 2 or 3 years for a domestic flight that will not impact on International J awards.

Points + Pay takes flights from the awards pool with as little as 5K required regardless of what the total points or $$ is, that includes J and F.

 

[medhead]

Points + Pay takes flights from the awards pool with as little as 5K required regardless of what the total points or $$ is, that includes J and F.

It can't always do that because points+pay and ASA are still available after all the classic awards are gone. If the classic awards are gone that indicates that the awards pool is gone. (it is not hard to imagine that this is what happens of a fair number of flights) I then come along and do a points + pay for a seat that is available in some only fare class and I'm charged what is considered the appropriate amount based on the dollar cost of that fare. My booking then gets transferred to an award fare bucket and a paid fare bucket has one less seat. That's my theory on how it must work.

In the case where classic awards are still available then the ASA is being redeemed at the equivalent rate as per a classic award. Where my theory falls down is for points+pay, which then must be as you say in this case. But that would be strange for say a full flexible flight selection that is then paid using points+pay because you would have, like, full Y fare conditions on an (what is it?) X fare?

edit: my experience is limited in this as I've only done an ASA when there were classic available. But do the thought experiment for a flight when the classics are gone. Where would the award fare come from, as ASA and points+pay are always available? (it's only the cost that varies)

 

[Oneworldplus2]

Medhead,
I was pointing out that with 1.4million new entrants into the market over the last year alone, it will def make a difference when trying to redeem flights later down the track. I didn't specifically mean J seats, just across the board. (Family members can also "pool" their points) QF does have $2.5billion (i think) worth of planes on order, but will that be enough to accommodate the rapidly growing number of members when they start redeeming flights? I was just putting it out there.

As an example, l was looking 2 days ago, SYD-xx_-BUD and there was nothing until late Jan/early Feb. Not saying that they will run out of award seats, they still might have eg; 15 in whY, 5 in J and 2 in F on a Int flight, but if more and more people are redeeming, you have to book further out. I am in a position where booking more than 1 or 2 months ahead is almost impossible. QF quoted me 300k for a return to BUD on a ASA in whY, end of next month. shock

Also, will the number of Classic Awards available diminish over time and more ASA come on-line, which are more expensive (generally) to redeem? Thus "soaking up" the points out there?

 

[markis10]

It can't always do that because points+pay and ASA are still available after all the classic awards are gone. If the classic awards are gone that indicates that the awards pool is gone.

The awards pool is made up of all the fare buckets with priority given to the lowest fare equivalent going first, so on a J booking the classic will go first, then rededeal, supersaver etc. Mums and Dads that have not racked up enough value may use the points to lower the cost of the fare being purchased, if that happens and a classic award is available, then it disappears despite the initial purchase having come out of a rededeal bucket had points not be used as part payment. Dont forget points + pay is an award redemption. I had a recent J P&P that changed the classic availability to zero.

The post by Oneworldplus2 not only makes sense, it its a great way for Qantas to increase margin.

 

[cove]

Well we have been a QF partner for almost 10 years and the report now says there are 489 other partners.
It is all very good for QF to take the cash for points but I am unsure of the notional figures used as loyalty members redeem flights. Does anyone know how they work out the accounting for redemptions to get this "profit".
If they use 10 or 20 bucks a flight then I can see how they can be making 2 million bucks a week.
Is that the cost of stopping a use by date seat from going empty?

 

[markis10]

QF sell points to themselves and others at a cost of 1 point = 1 cent, they then allow you to redeem points at a cost of say 1 point = 0.5c of value, the difference being the margin for them (those figures are illustrative only), they would have a similar formula for flight upgrades etc that would mean QF flight ops get back value for points redeemed for upgrades etc, what they get back as that cost would be like a wholesale rate. Does that make sense, remember FF points have no value .

 

[medhead]

Medhead,
I was pointing out that with 1.4million new entrants into the market over the last year alone, it will def make a difference when trying to redeem flights later down the track. I didn't specifically mean J seats, just across the board.

Umm I didn't really get that from your post as I quoted your went from talking about families getting a flight every 2 to 3 years causing congestion for award seats to members reporting trouble getting International J awards. My fault for being to literal

The awards pool is made up of all the fare buckets with priority given to the lowest fare equivalent going first, so on a J booking the classic will go first, then rededeal, supersaver etc. Mums and Dads that have not racked up enough value may use the points to lower the cost of the fare being purchased, if that happens and a classic award is available, then it disappears despite the initial purchase having come out of a rededeal bucket had points not be used as part payment. Dont forget points + pay is an award redemption. I had a recent J P&P that changed the classic availability to zero.

Yep, as I said the one scenario where my hypothesis fails. Clearly the award bucket isn't taken if classic award are already gone. a YMMV situation.

The post by Oneworldplus2 not only makes sense, it its a great way for Qantas to increase margin.

I think I adequately explained the confusion about how it doesn't make sense, with a literal read.

QF sell points to themselves and others at a cost of 1 point = 1 cent, they then allow you to redeem points at a cost of say 1 point = 0.5c of value, the difference being the margin for them (those figures are illustrative only), they would have a similar formula for flight upgrades etc that would mean QF flight ops get back value for points redeemed for upgrades etc, what they get back as that cost would be like a wholesale rate. Does that make sense, remember FF points have no value .

Make perfect sense, but I think I took it as the 1 cent per point being offset against the wholesale flight cost. For example a Y ADL-SYD is 12000 points so they say that is $120 of income. Then FFP buys the seat from Qantas airline for $50 hence $70 profit. (again illustrative figures only)

Big question, how do they sell the points to themself. Is qantas airlines buying the points from FFP or is that just internal to the FFP? There must be accounting separation as profit is being assigned to the FFP. But the profit from points earnt by flying must only be a paper profit? :?:

 

[markis10]

Big question, how do they sell the points to themself. Is qantas airlines buying the points from FFP or is that just internal to the FFP? There must be accounting separation as profit is being assigned to the FFP. But the profit from points earnt by flying must only be a paper profit? :?:

Its a separate company:

Name QANTAS FREQUENT FLYER LIMITED ACN 129 456 908 ABN 12 129 456 908 Type Australian Public Company, Limited By Shares Registration Date 30/01/2008 Next Review Date 18/01/2011 Status Registered Locality of Registered Office Mascot NSW 2020

 

[medhead]

Its a separate company:

Name QANTAS FREQUENT FLYER LIMITED ACN 129 456 908 ABN 12 129 456 908 Type Australian Public Company, Limited By Shares Registration Date 30/01/2008 Next Review Date 18/01/2011 Status Registered Locality of Registered Office Mascot NSW 2020

Well that is normal for a a big company like Qantas with multiple separate registration and such. (when WMC demerged IIRC there was something like 100 separate entities).

But this just adds to my confusion about the transactions that are taking place. When a flight takes place who pays for the flights? Qantas Airline? So Airline pays FFP for the points. Then when redeeming FPP pays the airline the wholesale flight cost. Because FFP is making their margin that means that the Airline is paying for that profit. (Accounting trickery in play) But the airline must be including the cost of the points in the fare. So really the people who are paying are those who are not collecting points.

Just trying to think through this, so any guidance/thoughts would be welcome.

 

[markis10]

I would imagine each points provider buys points from QFF as does QF itself as you accrue, and QF has set redemption rates to get those points back for flights and upgrades that would be similar to the codeshare rates for partners, for upgrades they are a special rate since its QF only.

QF are doing some inter-company accounting (not sure its trickery at all, probably very similar to codeshare accounting with JQ) but the majority of the QFF profit is coming from the credit cards as alluded to by the results brief.

 

[cove]

I will ask the QF auditor as the profit needs to be explained seeing it is so material in the latest figures.
The last time I went to a QF Annual General Meeting it was a fully rehearsed and executed show complete with scripted answers from Margaret Jackson and Geoff Dixon.
If another carrier had to fly 8 million QF points users the cost would be considerably more than QF is allowing.

 

[markis10]

If another carrier had to fly 8 million QF points users the cost would be considerably more than QF is allowing.

I have never seen any carrier flying 8 million points .

I doubt you will get the actual costings as it would be confidential, I suspect its close to the staff travel costings but who knows, what is evident from the material released is that QF account for a margin on selling the points and again when they are redeemed, especially with ASAs.

 

[cove]

What I meant was that there are up to 8 million people with points who may have points that they may wish to redeem sometime in the future.
I guess we can look forward to QF flights being totally filled all the time.
From Qantas's point of view that is their dream.No empty seats ever.

 

[markis10]

What I meant was that there are up to 8 million people with points who may have points that they may wish to redeem sometime in the future.
I guess we can look forward to QF flights being totally filled all the time.
From Qantas's point of view that is their dream.No empty seats ever.

And those points can be redeemed for more than just flights of course, if you have a look at the QF results they actually mention how well the QFF store is going for instance.

 

[oz_mark]

I doubt you will get the actual costings as it would be confidential, I suspect its close to the staff travel costings but who knows, what is evident from the material released is that QF account for a margin on selling the points and again when they are redeemed, especially with ASAs.

Profit occurs when the points are redeemed (or maybe even when the flight is actually taken).

The sale of points to CC providers basically results in unearned revenue in the books. Good for cash flow, but no profit at that point in time.

 

[Oneworldplus2]

What I meant was that there are up to 8 million people with points who may have points that they may wish to redeem sometime in the future.
I guess we can look forward to QF flights being totally filled all the time.
From Qantas's point of view that is their dream.No empty seats ever.

This is the point l was trying to make. Sorry if l was a little bit wrong with the wording Medhead.
More and more people with points will be redeeming them in the future (as you now have more ways of earning points compared to say 5 or 10 years ago). Award tickets or people applying for upgrades (even Int travel Red eDeal tickets can be upgraded when there is a sale on) more often. Pooling points with family members, CC earns and flights in general, there is an ever increasing way of earning points now days. But only 3 ways of spending them; upgrades, award tickets or the Frequent Flyer Store. I am an example; l applied for a "Westpac Earth Gold" last year and have put about 30k through it, which l hadn't done previously. So, l have 50k extra points in my account (some were AMEX earing, $1:1.5point) that l can spend any way l wish but will be redeeming the points for flights.

So, combine the earning of points side plus the huge growth in the number of people in the Frequent Flyer Program, it could be a bottle neck in the future. Ontop of that, IMO, you will also see QF diminish the number of Classic Awards available and try to "funnel" people into using ASA's. With the high cost of ASA's (generally) and more people battling for a "Classic Award" seat, it will be harder to get an award flight for a decent price.

How QF define in their balance sheet the ASA's or total number of points and put a value on it (or otherwise), l have no idea.