sumthinfornuthin
Established Member
- Joined
- Aug 7, 2004
- Posts
- 1,596
The headline sums up my query please
unfortunately, no.
Really failing to see how this is a "FAIL" or "opportunity lost" for Virgin by not having this.
For the FF who wants to "artificially" increase their status, yes it would be annoying
I have 600,000+ Velocity points - I'd use them for JASA type flights - like I said its a lost opportunity to for Virgin to reduce their liability against outstanding points.
I have 600,000+ Velocity points - I'd use them for JASA type flights - like I said its a lost opportunity to for Virgin to reduce their liability against outstanding points.
Really failing to see how this is a "FAIL" or "opportunity lost" for Virgin by not having this.
For the FF who wants to "artificially" increase their status, yes it would be annoying
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Also I think it's lost opportunity as in the past those who wanted to do a status run had to actually buy a fare, now they're just using points that Qantas already has the revenue for.
Also, there is NO benefit to them "reducing points liability" via this method. Velocity points appear to be held in some kind of trust separate to the company balance sheet. They've already booked the profit, so redeeming them as low yield fares would be a bad decision.
Qantas already has the cash, but under the accounting rules the value of the points sit on their balance sheet as a liability and aren't recognised as revenue until you redeem the points for a Classic, ASA or Partner award.
Based on Virgin Australia's 2011 accounts, the value of the points is deferred as a liability on Virgin's balance sheet and recognised in the profit and loss statement when redeemed. Their Unearned Revenue note says that they have $539.2m of Unearned Passenger Revenue (which is probably the value of tickets people have paid them for but not yet flown) and the value of Other Unearned Revenue (a liability on their balance sheet) of $160.7m is their assessment of the value of the unredeemed Velocity points out there. If they were to institute ASA and everyone with Velocity points instantly redeemed them for ASA awards, only then could they transfer that $160.7m to the income statement as revenue.
ASA awards, Points + Pay, whatever you call it, is a good way (from an airline's perspective) to reduce the liability on their balance sheet for unredeemed points. Qantas had to give people points and SCs to encourage them to do this though.
And what need is there for Velocity to reduce their liabilities?
The best way to reduce the liability is for them to expire.
The second best way is to allow them to be redeemed at low value - ie classic awards during low season.
The worst way is to allow them to be redeemed and comparable to high value fares - ie JASAs.
They can't be recognised as profit until redeemed - however they have the CASH. They're objective should be to get more cash. (without unnecessary brand damage ie cancelling all points) I accept that only profits can be paid as dividends, but a large cash balance prevents negative shareholder value, like Virgins last capital raising.
So without a JASA option, you will never use the points.. I find that hard to believe....
The liability represents the value of points (or other redemptions) for which the airline has already received the cash (up to some years ago, depending on how long individual members have been accumulating the points), but from the airline's perspective, whenever you redeem they then have to spend the cash (fuel, staff costs etc) to fulfill the flight. As an extreme example, if one year an airline carried no passengers other than those who redeemed points from the airline's program, they would record revenue in their books, still have to spend all the cash to service the flights, but have no cash inflows. Of course an airline doesn't allow that to happen (which is why FF seat availability is limited) but it is in their interest to keep the liability at a manageable level.