Editor’s View: Few flights and nowhere to go. Are frequent flyer points becoming worthless?

To say that the COVID-19 pandemic has turned the world upside down would be the world’s greatest understatement. And there has been no industry that has taken the brunt of this crisis more than the travel industry. Things that seemed so normal to us just 3 months ago, like catching a flight from A to B, or redeeming frequent flyer points for an upgrade to Business Class, suddenly became off-limits.

The prolonged period of grounding with a far from clear timetable on when travel restrictions will end has led many people to question the value of frequent flyer points and whether they should look to cash in their points now rather than wait to redeem them for flights once travel again resumes.

This Editor’s View will discuss the above dilemma faced by many frequent flyer members, and provide my take on the value of frequent flyer points into the future.

First up, let’s go back to basics

With all the disruption that has occurred to travel and the ongoing uncertainty on when travel restrictions will be lifted, it can feel like travel will never return to grace us with its beauty, especially when it comes to the overseas variety. But amidst all the fog surrounding the future, you should remind yourself that all this is temporary, and there will come a time when the resumption of travel will get back to normal.

In the coming months, this may mean that we have to settle for just domestic travel, and given the beauty of Australia, this is not a very bitter pill to swallow at all, quite sweet in fact! But eventually, international travel will also come back on-line, and all this means one thing:

‘the value proposition for frequent flyer points has not changed’.

At Point Hacks, we pride ourselves in being able to give our readers an indicative value per point for different frequent flyer, frequent guest and other loyalty programs. And we have always said that redemptions for long-haul Business and First Class flights will give you the best value per point.

The table below highlights the above point well. In a study conducted in September 2019, we examined the value you get per point from flights as well as non-flight redemptions for both the Qantas Frequent Flyer and Velocity Frequent Flyer programs.

Please note the following regarding the above table:

1. The Qantas flights between Sydney and Melbourne were for immediate travel (ie departing 1 day out and returning 3 days out), 
2. The Qantas flights between Sydney and Los Angeles were for 3 months out (pre-school-holidays and COVID-19)
3. The Virgin Australia flights between Sydney and Hong Kong were for immediate travel (ie, departing 1 day out and returning 3 days out), given Virgin Australia (pre-termination of route and COVID-19)

No matter what type of flight you were taking, be it short-haul, long-haul, Economy or Business, and whether you were using Qantas or Velocity Frequent Flyer, the value you received per point used for flight redemptions was at least 3 times more valuable than its non-flight counterpart.

Many Qantas and Velocity Frequent Flyer members have unfortunately taken a short-sighted view and rushed into redeeming their points for toasters and the like, many under the false argument of ‘may as well redeem for something, as we can’t fly anymore’. Please don’t be one of these people, as flights will resume, some sooner than others, and you want to make sure that you have points in your kitty come that time to optimise the value of your redemptions.

As an aside, many Velocity members also rushed to redeem their Velocity Points due to the current status of Virgin Australia, which is currently in Voluntary Administration. While there is clearly uncertainty surrounding this issue, at present, both Virgin Australia and Velocity are still operating as normal (albeit with a restricted domestic network) and Velocity Points can continue to be earned and redeemed at normal rates, including redemptions for domestic reward flights. We will continue to monitor the situation and make amendments to our Velocity Points valuation as and when required.

For now, though, Velocity members should continue to earn and redeem Velocity Points where they can, especially given the fact that there will be some value in these points given the public disclosure by Virgin Australia CEO Paul Scurrah that there is cash-backing for outstanding Velocity Points through a trust.

There are many benefits to using points…

Many of our readers already know the benefits of frequent flyer points but for our new readers, as well as those wondering how these benefits could be of use in the changing travel market that we are likely to encounter for at least for the next 12 months, it’s worth having a refresher.

Flexibility comes Standard on Award Redemptions

If COVID-19 has shown us anything, it is the importance of having flexibility in your ticket. And the great thing about flight award redemptions is that flexibility comes part and parcel with them.

If you want to cancel a flight booking, you need to pay a minimal fee (6,000 Qantas Points or from 4,500 Velocity Points or $45) and get the remaining frequent flyer points credited back to your account along with taxes. fees and charges refunded back to your original form of payment. Under the current COVID-19 crisis, these fees are generally getting waived.

Compare this to a non-flexible fare, that generally allows no more than a travel credit to be issued after paying a sizeable change or cancel fee, anything from $90 for the most restrictive domestic fares up to hundreds of dollars for international fares.

In the foreseeable future, as overseas travel begins to open up, we may well have situations where outbreaks in specific regions may cause a certain region to lockdown for a short period. Such a closure would unlikely cause a flight to be cancelled, yet it would be likely that travel insurance providers would not cover you for such events related to a pandemic.

For those that had booked travel using frequent flyer points for travel during the affected COVID-19 restricted travel period, they have faired particularly better than those who purchased all but the most expensive of flexible airfares.

Uncertainty in the make-up of Australian Airline Market

With the level of demand once travel restrictions still very much up in the air, it remains quite uncertain exactly how the domestic aviation market will look in the coming months. There is a risk that while in the short-term, prices are likely to be low to entice travellers back onto planes, in the longer-term, reduced supply and competition due to airlines taking a razor-sharp focus on profitability and pulling back or even out of unprofitable routes is likely to drive up prices.

While this structure has been seen on many regional routes such as Broome and Mt Isa where prices are generally quite inflated, it may well carry over to capital city routes. Using frequent flyer points for redemptions on regional routes with little to no competition, even in Economy, has always represented great value given the combination of high prices plus a distance-based award chart requiring a lower amount of points.

Therefore, if prices do increase, the increased value proposition that we have seen in regional routes may well carry through to all flights in the future.

Baggage is always included

Well, this one is just as valuable after the coronavirus as it was before, but is definitely still worth mentioning. Frequent flyer award redemptions include baggage as included. While this is not a benefit for redemptions on full-service airlines like Qantas and Virgin Australia, where baggage is provided, it is useful for redemptions on Jetstar, that don’t normally come with an included baggage allowance. This doesn’t apply to Tigerair redemptions using Velocity Points.

New benefits for members

Technology is playing an ever-important role in providing new benefits to frequent flyer members, with Qantas Frequent Flyer leading the way on this front.

Qantas softly launched the Points Club, which was scheduled for a much larger promotion that unfortunately coincided with the implementation of lockdowns across the country due to COVID-19. This program is one of the more exciting developments in the frequent flyer space, providing members who earn most of their points on the ground with the ability to reap valuable rewards such as complimentary Qantas Club membership, discounts at Qantas Hotels and Qantas Wine, and status credit rollover.

Point Hacks has written about the best strategies to qualify yourself for the Points Club program.

You can also earn Qantas Points just by staying healthy. The Qantas Wellbeing app can track your steps and earn you points the more steps you take. It can even track your sleep and issue you with Qantas points if you have uninterrupted rest!

Many of these earning opportunities were just not available even five years ago, due to technological constraints. Who knows what new initiatives will be around the corner, but one thing is for sure, if you are not a member of a frequent flyer program, you will definitely miss out.

Summing Up

At Point Hacks, we have always promoted the value of frequent flyer points. Even in normal times of flying, the ability to use points to travel somewhere new, or upgrade your travel and experience a level of service that you couldn’t otherwise afford or wish to pay for has always provided great value.

COVID-19 has shone a light on some of the forgotten benefits that come as part of a reward flight redemption and how they far exceed most purchased tickets, especially those related to the flexibility of tickets and flying on routes that have little competition at a low cost that would otherwise normally cost a mini-fortune to buy.

With frequent flyer programs still remaining as one of the most profitable divisions within airlines, it is likely that investment will continue into the foreseeable future, which can only be a good thing for members.

Far from being worthless, frequent flyer points are becoming more valuable than ever.

Check out the other Point Hacks Editor’s View articles here →

I’d love to hear your views on which direction you see the value of frequent flyer points going in the future. Please comment below.