Qantas surveying members about spend-based status attainment

[Vic]

Lifetime Platinum on Qantas is likely considerably similar or higher, if you can average $20/SC regularly that would be about AUD $1.5M. But I suspect the kind of regular premium flyers that have a chance at LTP would be spending more than this, per SC, so actual cost of LTP is likely to be to be somewhat more.

Oh, great thought process. Based on my numbers oist up thread lifetime plat would cost me $676000.
I really should do the numbers on the next 6555 status that I've earned... Stopped tracking after LT gold, figured LT plat was unattainable.

 

[Supersonic Swinger]

I predict QF will end DSC promos long before they switch to a fully revenue based system (I’d argue it’s already a semi-revenue based system for reasons above). But they seem to be doing the opposite, with two promos this year.

I like your optimism but I don't share it.

The fact that they are surveying members about it means their financial and behavioural analysts are running their numbers over it. If there's even one favourable comment about it, they'll be able to truthfully state "we've made these changes based on the feedback of our valuable members".

 

[Lynda2475]

MY work funded travel is funded BY ME.
Many, many, many of my colleagues are EXACTLY the same - funding their work travel by themselves.

Way to take a reply to someone else out of context. The thinking that a move to revenue based SCs would benefit individuals more than businesses is flawed.

You do seem awfully determined to take this thread off topic; and assume your situation is the norm (even though most members of the workforce work for other people, companies or the public sector).

Noting even if you are a business owner, there is a difference between company earnings and expenditure and your personal income and expenditures.

If you are a sole trader (only 12% of the working population) you would have an ABN and not a ACN; but because you have an ACN then the company is a separate entity to the individual shareholders/owners and they are taxed a different rates.

This is how small business works. - NB I pay for my ACN EVERY year

So you dont claim the cost of any business travel as a company operating expense on the company books, and not a personal expense? If this is the case you need a much better accountant (and if you have a ACN you are required to have an accountant).

 

[Sabot]

I predict QF will end DSC promos long before they switch to a fully revenue based system (I’d argue it’s already a semi-revenue based system for reasons above). But they seem to be doing the opposite, with two promos this year.

QFF is far more commercialised than most non-US programs and is a huge money spinner, so I’m not sure they have the same motivation that others do.

A far more likely change is increase to the QF/JQ 4 sector requirement. It’s remarkable QF only requires -3% of SCs to be QF for WP.

Would be interesting to see if this pans out, there are a LOT of people who use DSC periods to hit the required SC thresholds each year. They need to avoid giving people a reason to look elsewhere, particularly with regard to the international business segment where they are weakest.

People (rightly) view QFF as a big moat but I don't think it's as impenetrable as it seems.

 

[justinbrett]

I like your optimism but I don't share it.

The fact that they are surveying members about it means their financial and behavioural analysts are running their numbers over it. If there's even one favourable comment about it, they'll be able to truthfully state "we've made these changes based on the feedback of our valuable members".

It would be a failure not to research this. Many airlines are doing it so QF is right to see how it would work for them.

That’s quite a leap from saying they are going to implement it. In fact, QF will see the backlash VA and BA have had to this, and that’s the last thing QF needs. QF is still recovering from a series of bad PR incidents, they simply can’t afford to do so. And for reasons already specified, they lack the motivation for doing so anyway, they don’t want to lose the huge profits they’re making from QFF.

Would be interesting to see if this pans out, there are a LOT of people who use DSC periods to hit the required SC thresholds each year. They need to avoid giving people a reason to look elsewhere, particularly with regard to the international business segment where they are weakest.

People (rightly) view QFF as a big moat but I don't think it's as impenetrable as it seems.

But that’s my point, many are saying BA is trying to reduce the number of elites but it had its own double tier point promotions, and it was possible to get OWE for £3K. A more sensible approach may have been just stopping those promos.

I don’t know how profitable BAEC was compared to QFF, it didn’t seem as commercialised (no paid lounge program, fewer ground partners, no joining fee). But this is just my observation, and if it was a big contributor to profit than this makes the recent changes even more stupid.

 

[Supersonic Swinger]

That’s quite a leap from saying they are going to implement it. In fact, QF will see the backlash VA and BA have had to this, and that’s the last thing QF needs. QF is still recovering from a series of bad PR incidents, they simply can’t afford to do so. And for reasons already specified, they lack the motivation for doing so anyway, they don’t want to lose the huge profits they’re making from QFF.

It won't change in 2025, but I would not be surprised if some version of it is launched in 2027 or 2028 after they have thoroughly analysed the response to the changes of others like BA and VA and worked out how to dress them up as positive media spin (like the 20 million extra reward seats that conveniently omitted the significantly higher associated point cost).

I think DSC promotions are less about increasing the number of status holders but driving incremental revenue. Once status is tied directly to spend, status incentives directly drive that relationship - no more taking advantage of a cheap J fare SYD-LAX to get double status credits in a DSC promotion.

 

[justinbrett]

It won't change in 2025, but I would not be surprised if some version of it is launched in 2027 or 2028 after they have thoroughly analysed the response to the changes of others like BA and VA and worked out how to dress them up as positive media spin (like the 20 million extra reward seats that conveniently omitted the significantly higher associated point cost).

I think DSC promotions are less about increasing the number of status holders but driving incremental revenue. Once status is tied directly to spend, status incentives directly drive that relationship - no more taking advantage of a cheap J fare SYD-LAX to get double status credits in a DSC promotion.

DSC may give a short term benefit of increased revenue from ticket sales, but that absolutely comes at a medium term cost of increased status, and QF knows it. What it demonstrates is that QF is not currently phased by having a high number of elites.

Move to spend based status only really achieves one thing, a reduction of elites. This would be a 180 degreee u-turn from their current strategy. Worth noting that QF doesn’t even have spend based points earn, so their strategy is completely different to BA and VA and any suggestion they are about to suddenly change strategy is quite premature.

Once again the reason QF doesn’t have the same motivation to do so is it has been much more careful in restricting partner earn (both status and points) and even for its own earn it distinguishes between fare levels within the same cabin.

Not saying there won’t be changes ahead but QF’s track record is not following the pack, it has been quite crafty in structuring the program in order to achieve its own objectives, some very unpopular with pax. With BA and VA devaluing their programs, why would QF join them when it can sit back and reap the benefits? There may be future unpopular changes, but I don’t think spend based status is one of them.

 

[moa999]

Move to spend based status only really achieves one thing, a reduction of elites.

It doesn't automatically. All depends on the relative thresholds.

QF could equally increase the number of SCs required for Gold/ Plat or say reduce Partner SC earn if it simply wanted to adjust the number of elites.

I'd think some regional flyers in Australia would be advantaged if QF shifted to a $ based system (as they currently pay a high $/SC), whereas those using indirect flights wouldn't be.

Revenue is also a relatively blunt instrument. For the airline the bottom line is more important.. it arguably wants to shift passengers onto flights that are already profitable.

 

[justinbrett]

It doesn't automatically. All depends on the relative thresholds.

QF could equally increase the number of SCs required for Gold/ Plat or say reduce Partner SC earn if it simply wanted to adjust the number of elites.

I'd think some regional flyers in Australia would be advantaged if QF shifted to a $ based system (as they currently pay a high $/SC), whereas those using indirect flights wouldn't be.

Revenue is also a relatively blunt instrument. For the airline the bottom line is more important.. it arguably wants to shift passengers onto flights that are already profitable.

If QF changed to revenue and didn’t reduce elites what on earth would be the point?

As you say the current structure is far more tailored to their needs and would be easier to tweak to further reduce partner earn or increase the QF sector requirement.

The other thing to note is unlike most oneworld airlines, QF doesn’t have cheap J seats anywhere. TT is probably the cheapest and even then you’re looking at around $10/SC without DSC. The ability to game the QF system is either through DSC or partner earn, either one far easier to fix than brining in a whole new revenue system.

 

[RooFlyer]

In fact, QF will see the backlash VA and BA have had to this, and that’s the last thing QF needs. QF is still recovering from a series of bad PR incidents, they simply can’t afford to do so. And for reasons already specified, they lack the motivation for doing so anyway, they don’t want to lose the huge profits they’re making from QFF.

Agree re recovery from bad PR, but if any FF program could sustain a backlash, its Qantas with its very sticky FFers. There would be short term backlash by elites (and I haven't heard the VA thing rumbling much lately) Vs long term benefits to the airline. Cull a few elites, but the QFF membership would remain unchanged.

If anything they should do, I'd agree with what I think you suggested earlier - increase the number of QF operated and marketed (+AY wetleases) for each status level. At the moment, I retain Plat every year with a RTW, with just one or two Qantas flights.

 

[justinbrett]

, with just one or two Qantas flights.

I assume that’s at least four.

 

[Supersonic Swinger]

If QF changed to revenue and didn’t reduce elites what on earth would be the point?

I don't think the number of elites is the issue for QF as it was with BA (with their Tier Point promos) and DL (with their MQM rollovers). The value of the loyalty program to an airline is the ability to drive customer behaviour and short of a profitability based program, a revenue based program gets closer to achieving what an airline's shareholders will be after:

- Members will have to focus on the actual dollars spent to achieve their target status level, rather than finding the cheapest (and likely least profitable) flights to achieve the required status credits
- If paying for upgrades using points counts towards revenue based requirements, members are more likely to do that and reduce the points liability sitting on the Qantas balance sheet
- The margins on ancillary spending such as credit cards, holiday packages etc are much higher than from flights and greatly improve financial metrics. The whole Points Club thing was a start (as is the Qantas for Business push), but revenue based status requirements counting these enable such high margin revenue streams to become much stickier.
- When the airline needs a short term boost to some of its' financial metrics, it just needs to run a promotion to drive exactly that outcome.

Qantas Loyalty and its' strategy and consumer behaviour consultants are no doubt running the spreadsheets on all of this and watching the AA / DL / VA / BA experiences to eventually roll this out in a way they can claim as a 'win' for their 'loyal customers'. I would not be surprised if an initial launch includes spin along the lines of "under the new program, a similar number of our valued members will continue to earn the same status as they do today". But once implemented, they will then be able to say "jump" and members will have to ask "how high?"

Believe me, as a traveler I don't want them to change, but these are businesses looking to drive continued revenue and profit growth. Most of those working for Qantas Loyalty are focussed on how can the $511 million segment EBIT for Qantas Loyalty in the last financial year grow by 20% next year and again by 20% in the years following that. Moving to revenue based status requirements is highly likely to be part of that, even if it initially doesn't alter the actual number of elites.

 

[justinbrett]

I don't think the number of elites is the issue for QF as it was with BA (with their Tier Point promos) and DL (with their MQM rollovers). The value of the loyalty program to an airline is the ability to drive customer behaviour and short of a profitability based program, a revenue based program gets closer to achieving what an airline's shareholders will be after:

- Members will have to focus on the actual dollars spent to achieve their target status level, rather than finding the cheapest (and likely least profitable) flights to achieve the required status credits
- If paying for upgrades using points counts towards revenue based requirements, members are more likely to do that and reduce the points liability sitting on the Qantas balance sheet
- The margins on ancillary spending such as credit cards, holiday packages etc are much higher than from flights and greatly improve financial metrics. The whole Points Club thing was a start (as is the Qantas for Business push), but revenue based status requirements counting these enable such high margin revenue streams to become much stickier.
- When the airline needs a short term boost to some of its' financial metrics, it just needs to run a promotion to drive exactly that outcome.

Qantas Loyalty and its' strategy and consumer behaviour consultants are no doubt running the spreadsheets on all of this and watching the AA / DL / VA / BA experiences to eventually roll this out in a way they can claim as a 'win' for their 'loyal customers'. I would not be surprised if an initial launch includes spin along the lines of "under the new program, a similar number of our valued members will continue to earn the same status as they do today". But once implemented, they will then be able to say "jump" and members will have to ask "how high?"

Believe me, as a traveler I don't want them to change, but these are businesses looking to drive continued revenue and profit growth. Most of those working for Qantas Loyalty are focussed on how can the $511 million segment EBIT for Qantas Loyalty in the last financial year grow by 20% next year and again by 20% in the years following that. Moving to revenue based status requirements is highly likely to be part of that, even if it initially doesn't alter the actual number of elites.

But again, you’ve got to stop comparing QFF with other programs and assuming they will follow the same path.

QFF is insanely profitable for an airline of such a small market. There is no motivation to screw the pooch.

 

[_TheTraveller_]

I don't think the number of elites is the issue for QF as it was with BA (with their Tier Point promos) and DL (with their MQM rollovers). The value of the loyalty program to an airline is the ability to drive customer behaviour and short of a profitability based program, a revenue based program gets closer to achieving what an airline's shareholders will be after:

- Members will have to focus on the actual dollars spent to achieve their target status level, rather than finding the cheapest (and likely least profitable) flights to achieve the required status credits
- If paying for upgrades using points counts towards revenue based requirements, members are more likely to do that and reduce the points liability sitting on the Qantas balance sheet
- The margins on ancillary spending such as credit cards, holiday packages etc are much higher than from flights and greatly improve financial metrics. The whole Points Club thing was a start (as is the Qantas for Business push), but revenue based status requirements counting these enable such high margin revenue streams to become much stickier.
- When the airline needs a short term boost to some of its' financial metrics, it just needs to run a promotion to drive exactly that outcome.

Whilst I can understand the motivation of the airline/shareholders to drive profit QF will need to navigate this carefully and I'm not sure if there is as strong as a motivation as some other markets.

1. The issue around this is in the current economic climate, when you tie status to expenditure, it becomes incredibly clear what benefits you're getting at what cost. If WP was 20-25K AUD, you can bet people would just stop chasing it and you would lose that incremental spend to competitors where possible. Yes QFF are sticky but for anyone who is flying internationally they're going to be a lot more rationale than they are under the current system as we can see with BAC/BAEC.
   • If you're flying on your business' dime then it doesn't really matter. It'll impact those who do provide incremental spend to QFF in order to chase status. But I don't really know the percentages of each group and that will be something QF will need to crunch the numbers for.
2. I'm interested to see how this would be implemented. Considering if its revenue based, surely points shouldn't be taken into account as much as we would like it to. One way I could see this being implemented is potentially some multiplier but I'm no expert.
3. Creating something like AA's LP would be interesting and PC is move in that direction but having PC and QFF status separate allows them to target each group separately.
   • There is no need for a unified program because QF can market to each group separately. There is no need to account cost for benefits for a wider group of customers when you keep each party appeased with a smaller subset of benefits.
   • Someone who earns a million points a year via CC spend and who gets WP or P1 under the new revenue model (a la AA LP) wouldn't necessary care about status. For them they just want to be able to burn their points effectively for that annual holiday as QF is allowing them to do so now.
   • So I'm not sure if there are substantial benefits for a "simpler" and unified program when QF can still drive ancillary spend via PC. To make it work, they'll need a target which seems achievable but doesn't alienate either groups.
4. Again I think people will see a direct cost against the benefits they receive. If they know that they won't reach the statuses even with the bonuses then they just won't spend. E.g. under the current DSC, someone knows that they could get 560SC if they made a quick holiday to CHC/AKL but if the ticket is only $1400 and it's doubled for qualification purposes, $2800 is a drop in the bucket (compared against 20-25K) when it was previously almost 50% of requalification for WP. Roughly 10-15% of qualification for Dom J Lounge and Intl F Lounge and other benefits.

I think QF will move but I'm just not sure a pure revenue model will be what they're striving for. Perhaps something like AA's LP model but they would need to get the numbers right so that they don't inflate their current elite pool or dissuade those on the margins to spend more. If they went with an LP model, I can imagine some putting through obscene amount of manufactured spend to achieve status. I would definitely be considering it

 

[wandering_fred]

How many people earn more QFF points with Woolworths than they do with QF domestic flying?
Or what is the point of wandering?
Fred

 

[Supersonic Swinger]

But again, you’ve got to stop comparing QFF with other programs and assuming they will follow the same path.

QFF is insanely profitable for an airline of such a small market. There is no motivation to screw the pooch.

What form it will take is impossible to predict, but I think there is motivation:

- It's a small market but the major domestic competition has just gone down this route
- For all the hand wringing on the BA Flyertalk forum (BAEC may need to walk back some of the initial changes like DL did), the UA and DL versions have now passed into acceptance
- QF are surveying members about this very thing, which means it is high on their "To Investigate" list.

Happy to be proven wrong over time, but if QF Loyalty's spreadsheets demonstrate clear motivation to screw the pooch, I don't think they will hesitate. And much like 'Simpler and Fairer' back in the 2010's, after much gnashing of teeth, we will all sadly have to move to acceptance because there is no other option.

 

[justinbrett]

- It's a small market but the major domestic competition has just gone down this route

So? Why would QF want to follow VA? QF is the market leader, and while QF and VA compete as airlines, I don’t think Velocity even holds a candle to QFF. It hasn’t followed VA before. Why start now? As the saying goes, never interrupt your opponent while they’re making a mistake. VAs changes achieve specific outcomes for VA the airline but overall it reduces value in Velocity. Quite the opposite of what QF would be seeking to do.

- For all the hand wringing on the BA Flyertalk forum (BAEC may need to walk back some of the initial changes like DL did), the UA and DL versions have now passed into acceptance

It’s been about a week and you’re calling it? Everything I’ve seen and read has been intensively negative, with large majorities saying they will either leave BA entirely or accept a status downgrade. Even BA wouldn’t know the outcome yet - neither would VA for that matter.

- QF are surveying members about this very thing, which means it is high on their "To Investigate" list.

Do you actually understand how much QF (and similar companies) research such things? Happens all the time, doesn’t mean they’re going to happen.

 

[pangwen]

It’s been about a week and you’re calling it? Everything I’ve seen and read has been intensively negative, with large majorities saying they will either leave BA entirely or accept a status downgrade. Even BA wouldn’t know the outcome yet - neither would VA for that matter.

My interpretation of Supersonic Swinger's comment (that this particular quote was in response to) was that they were calling the acceptance of the UA/DL changes, not BA/VA. The UA/DL changes were implemented a while back now...

 

[justinbrett]

My interpretation of Supersonic Swinger's comment (that this particular quote was in response to) was that they were calling the acceptance of the UA/DL changes, not BA/VA. The UA/DL changes were implemented a while back now...

It doesn’t cost A$40K on UA/DL to get OWE equivalent status. Apples and oranges.

 

[pangwen]

EDIT: nm, got my calcs wrong