Heads up about program changes

[BD1959]

There's a good chance that losing money is Qantas senior management's plan anyway...

Then they would be greater fools than even I give them credit for.

It's one thing to keep it all in-house with a strategic plan to lower QFi costs by cross-subsidising JQ and then using the inflated figures to bargain-away at your labor rates, it's a totally different thing to go bleating to the Government saying that you're actually losing money because of the inequalities in the market and asking for legislative changes.

If this *were* the case, then they deserve a good gumming from that toothless tiger, ASIC.

Regards,

BD

 

[TonyHancock]

There's a good chance that losing money is Qantas senior management's plan anyway...

So given the current management's performance of late, adopting this strategy should result in a tidy profit.

 

[medhead]

Just out today $109 ADL-SYD and $95 SYD-BNE for 11 May to 24 June. More cheap sales fares out there for rorting. No need to book anymore than a couple of months in advance and then you can take advantage of the DSC offers.

Qantas is losing money; that's a fact. What I, a mere mortal, think is that their approach is akin to the "baby" and the "bath water"... I would love Qantas to prosper and I honestly wish them luck, but many years of working at senior level management and strategic planning keeps telling me otherwise. I hope I'm wrong.

Is it losing money? What did the traditional part of the airline make this year, QFd/QFi and QFF not including JQ? Sure the numbers are well down but I'd suggest a major contributor to that is the excess capacity created by the 65% line in the sand. The evidence of that situation is right there at the start of this post. The latest sale for flights in less than a month. That's unprecedented for Qantas in my experience since 2010. Some people here might think the cheap seats cost Qantas money, yet clearly Qantas seem to want to actually sell seats on their aircraft. I really don't think cutting a few hundred points handed out per flight is going to address the problem. The easy wins, the low hanging fruit has got to be in not pumping up capacity beyond demand so that you have to release Big Break Sales a month out from the travel date.

Sorry a bit of a rant, not aimed at you. I'm sick of being told that those of us buying cheap fares are killing Qantas.

I don't think you're wrong at all. We have management that seems deluded into ignoring the elephant in the room and instead are instituting a death of a thousand cuts.

I got your sarcasm, and I was following your lead Read my post again please, I was being sarcastic, with tongue firmly on the cheek :-D

You'll note I did say "may have miss read" (obviously that should be misread). I wasn't sure.

 

[AnonymousCoward]

Still trying to claim that unsold NOQES fares are profitable and selling those seats isn't profitable. At least you're persistent....

Maybe they should fly empty aircraft to maximise profit. Actually, this sounds a lot like "The Compassionate Society" episode of yes minister. The hospital that was more efficient without patients.

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Selling cheap seats to people who then consume extra services results in QF losing money on the seat.

I really find it difficult to comprehend why this is so hard to understand?

 

[TonyHancock]

Just out today $109 ADL-SYD and $95 SYD-BNE for 11 May to 24 June. More cheap sales fares out there for rorting. No need to book anymore than a couple of months in advance and then you can take advantage of the DSC offers.

Pfft and there you go again buying cheap fares. If you keep abusing the cheap fares rort you'll soon be P1. You are killing Qantas.

I'm sick of being told that those of us buying cheap fares are killing Qantas.

Whoops sorry.


#whistles innocently#

 

[lovestotravel]

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Selling cheap seats to people who then consume extra services results in QF losing money on the seat.

I really find it difficult to comprehend why this is so hard to understand?

Because you are wrong

 

[SeatBackForward]

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Selling cheap seats to people who then consume extra services results in QF losing money on the seat.

But to get those extra services, you need to have bought a *lot* of cheap seats. you don't get lounge access for buying a few red e-deals per year. You've either flown enough to have covered the cost, or you've converted enough QFF points and paid QF in that manner.

I really find it difficult to comprehend why this is so hard to understand?

Well they could abolish the QFF and only grant those "extra services" to those whos fares pay for it if it was that much of an issue.

 

[medhead]

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Selling cheap seats to people who then consume extra services results in QF losing money on the seat.

I really find it difficult to comprehend why this is so hard to understand?

This is actually the first time you've come up with this justification. Even better, now it is just the people who fly every week that are killing qantas. The unfortunate fact for your new theory is that non-status people are not there every week filling a seat. Would they rather sell a seat or fly an empty seat? Do they want to sell 2 seats or 100 seats? I think you'll find they want whatever money they can get for all of their seats.

Your theory also seems to ignore the costs that the frequent, status flyers do not consume. At the end of the day, I think those will balance out. Your presumption that status pax consume extra services is hard to support. Then there is QFF as the most profitable part of the group, who contributes most to that profit? The statused or the non-statused? As I said when all things are considered it is dubious to suggest that Qantas give a damn about the status level of the people buying the cheap seats, they just want the cash.

 

[dajop]

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Maybe the market research has shown it's the freeloaders flying domestic routes of certain lengths (ie between 600 & 750 miles and 1200 & 1500 miles) that are the real problem, hence the changes to SC earn

 

[BD1959]

As I've stated over and over again, QF would rather sell cheap seats to non-status pax, to whom QF provides no additional services that will chew into the slight profit on that seat.

Selling cheap seats to people who then consume extra services results in QF losing money on the seat.

I really find it difficult to comprehend why this is so hard to understand?

I hear you AnonymousCoward, but have difficulty with anything that's not fact-based (see the other thread on previous cuts to LHR services).

Where have QF stated that they would prefer to sell cheap seats to non-status passengers and where's the figures on the impost of a travelling status passenger?

Regards,

BD

 

[equus]

Then there is QFF as the most profitable part of the group, who contributes most to that profit? The statused or the non-statused?

Not commenting one way or the other on the flying side of things directly, but addressing the quoted question.

I suspect (with no knowledge) that it would be the non-statused who contribute the most.

The cash cow is the selling points to partners. Other than the relative minority of statused FF chasing points, the vast majority of points will be sold to organisations who then pass them on to non-statused members. Even with a lower average earn than a "serious" points chasing status holder, the vastly greater number will make the total points that QFF sell for this group higher.

Having sold the points, then comes the margin (second bite of the profit cherry) on redemption or breakage. The best profit on removing liability for outstanding points has to be breakage when inactive account points expire. Status holders are not going to be likely to be inactive, so the no -statused are more profitable in this area. Redemptions are then next. Whilst we place different values on rewards (premium cabins, upgrades, or toasters), this is not relevant to the accounting cost to QFF of providing the benefit. I will assume (but without justification) that QFF has competent accountants and cost controllers, and the internal costs are roughly equal on a per-point basis to the QFF program (possibly excepting some very cheap end of line toasters which are probably obtained for peanuts). On that basis, overall profitability of the two groups comes back to sheer gross volume again. Status flyers get a bit of a leg up in the redemption stakes, as they have a source of points from flying to add to the CC and partner earn, but I suspect this still leaves the bulk of points (and resultant margin) with the non-status flyer.

So, while QF itself probably makes a disproportionate share of its revenue and profit from its top bracket of "status" flyers, the QFF is probably the other way around.

Just my uninformed opinion.

 

[SeatBackForward]

So, while QF itself probably makes a disproportionate share of its revenue and profit from its top bracket of "status" flyers, the QFF is probably the other way around.

Agreed, and whereas the QFF programme used to be in support of the airline, I think you could argue that this is now reversed.

 

[medhead]

Not commenting one way or the other on the flying side of things directly, but addressing the quoted question.

I suspect (with no knowledge) that it would be the non-statused who contribute the most.

The cash cow is the selling points to partners. Other than the relative minority of statused FF chasing points, the vast majority of points will be sold to organisations who then pass them on to non-statused members. Even with a lower average earn than a "serious" points chasing status holder, the vastly greater number will make the total points that QFF sell for this group higher.

Having sold the points, then comes the margin (second bite of the profit cherry) on redemption or breakage. The best profit on removing liability for outstanding points has to be breakage when inactive account points expire. Status holders are not going to be likely to be inactive, so the no -statused are more profitable in this area. Redemptions are then next. Whilst we place different values on rewards (premium cabins, upgrades, or toasters), this is not relevant to the accounting cost to QFF of providing the benefit. I will assume (but without justification) that QFF has competent accountants and cost controllers, and the internal costs are roughly equal on a per-point basis to the QFF program (possibly excepting some very cheap end of line toasters which are probably obtained for peanuts). On that basis, overall profitability of the two groups comes back to sheer gross volume again. Status flyers get a bit of a leg up in the redemption stakes, as they have a source of points from flying to add to the CC and partner earn, but I suspect this still leaves the bulk of points (and resultant margin) with the non-status flyer.

So, while QF itself probably makes a disproportionate share of its revenue and profit from its top bracket of "status" flyers, the QFF is probably the other way around.

Just my uninformed opinion.

Your line about sheer gross volume is the important one. The statused flyers are earning the majority of the sheer gross volume of points sold by QFF. In the last 12 months, according to Qantas, I've earned 22 times the number of points that the other 3 people in my family have earned. Even with the breakage of expirying the 1200 points one of my children has earned (assuming I have a heart attack and let that happen) there would have to be a massive amount of margin on those 1200 points. Especially considering that 2/3rds of my points have also been sold to partners first. In fact, my children probably earn 95% of their points from flying. My wife is a different matter, but between them again they probably have a 1/3rd flying:2/3rds other earning ratio.

I also have no knowledge or answers. But I would suggest the sheer gross volume tends to count against what you suspect, simply because those who fly alot will also chase points via non-flying means. Really it could go either way, which gets to my view that Qantas does not give a damn about the status as long as they sell a seat.

 

[medhead]

Agreed, and whereas the QFF programme used to be in support of the airline, I think you could argue that this is now reversed.

Which is where I'm going in my thinking. The earning in QFF that is due to the airlines should be attributed to the airline parts of the business. While that probably breaks all accounting rules I suspect it will give a very different picture as to the contribution that each operational area makes to Qantas group.

Every one wants to use their points on QFi, people collect points because of QFi. A weak or non-existant QFi reduces the attractiveness of collecting points, with the negative implications for QFF.

 

[equus]

What we don't know is the behavior pattern of those who not only don't have status, but are not "associates" of those with status.

Even the lower status data points around AFF are not representative of the wider QFF membership.

I would definitely agree that the majority of points earned from flying are gathered by status members, and these member probably also chase and achieve above average non-flying earn.

My suspicions are that these knowledgable status holders are actually a much smaller minority than we tend to expect (given the very very skewed impression given by AFF members) - and that is without even considering the implications of non-savvy status holders.

All conjecture, though, and could go either way.

 

[equus]

Which is where I'm going in my thinking. The earning in QFF that is due to the airlines should be attributed to the airline parts of the business. While that probably breaks all accounting rules I suspect it will give a very different picture as to the contribution that each operational area makes to Qantas group.

Every one wants to use their points on QFi, people collect points because of QFi. A weak or non-existant QFi reduces the attractiveness of collecting points, with the negative implications for QFF.

Agree about QFi

Wouldn't be necessary to break accounting guidelines to publish a breakdown though, but likely to be deemed commercial-in-confidence.

[Speculation]. Such a breakdown would be what a potential buyer or investor in QFF would expect to see. No plans to sell off QFF at this stage. Draw your own conclusions. [Speculation /]

 

[medhead]

What we don't know is the behavior pattern of those who not only don't have status, but are not "associates" of those with status.

Even the lower status data points around AFF are not representative of the wider QFF membership.

I would definitely agree that the majority of points earned from flying are gathered by status members, and these member probably also chase and achieve above average non-flying earn.

My suspicions are that these knowledgeable status holders are actually a much smaller minority than we tend to expect (given the very very skewed impression given by AFF members) - and that is without even considering the implications of non-savvy status holders.

All conjecture, though, and could go either way.

Behavior in earning points is not really that important when it is a margin game and the sheer volume of points is the primary factor in making money for QFF. Playing with some numbers and it is probably very close to even. Ergo Qantas probably don't care about status as long as they sell a seat.

Anyway,
The question was originally posed in response to the suggestion that Qantas would rather sell seats to non-status passengers. It is an interesting discussion to have but I'm not sure of the point (or value) of taking it away from the reason for raising the question in the first place.

 

[amaroo]

<snip>

Every one wants to use their points on QFi, people collect points because of QFi. A weak or non-existant QFi reduces the attractiveness of collecting points, with the negative implications for QFF.

As a classic burner of many years standing - QFi is not the driver. The OW alliance is the carrot that supplements the stick...it allows QFF to manipulate the programme to suit their interests.

IMO QFF would continue to flourish without QFi......not so without OW.

 

[medhead]

As a classic burner of many years standing - QFi is not the driver. The OW alliance is the carrot that supplements the stick...it allows QFF to manipulate the programme to suit their interests.

IMO QFF would continue to flourish without QFi......not so without OW.

Agreed about the value of OW. but Getting into the informed participant versus the non-statused I'm collecting my points for 20 years to make that one big trip to London in business class participant, with this post. Like the attributed number of points to various demographics it is hard to make up an answer, but I think there are a large number of QFF members who are collecting points because of QFi.

I also wonder if the value you place on OW partners is inversely proportional to the size of the QFi network.

 

[dajop]

I think there are a large number of QFF members who are collecting points because of QFi.

Yes this would probably be true, right up to the point they want to redeem those points on QFi and can't. It's only then they start valuing oneworld :!: