How to maximise rewards amid fuel price shocks
If you’re hoping to use your frequent flyer points on a big international trip soon, you may want to think again.
Experts say it will likely be harder to get a reward seat on international flights due to conflicts in the Middle East and rising fuel prices.
“Seats may be difficult to find this year as passengers will not be flying from the Middle East,” says point travel expert Steve Hui, founder of points travel consultancy iFLYflat.
In this environment where availability is a factor, redeeming points for domestic flights actually seems like a pretty smart play.
Angus Kidman, of financial comparison site Finder, said award seats on domestic flights often mean a better deal, even as international seats become harder to find.
“If ticket prices go up in the short term, points will be more valuable if you can get reward flights,” Kidman said, because points are earned at lower prices.
Kidman admits this year will be “tougher than last year” for people hoping to book a reservation. “But it requires you to have the ball.”
As fuel costs soar, Hui thinks international airlines will chase cash instead of letting people fly with points.
The war disrupted transportation for nearly 5 million passengers in the first two weeks alone, forcing airlines to abandon some routes and shift entire fleets away from the Persian Gulf, according to Cirium analytics.
Last week Qantas said there was an increase in fuel costs of up to $800 million in the second half, while Virgin said fuel costs would be $30 million to $40 million higher than expected due to the open conflict.
This week both airlines announced significant domestic sales to boost demand; Virgin today encouraged customers to book reward seats by increasing domestic ticket sales by a further 1 million tickets, up from the 500,000 announced on Monday.
No matter what, points will remain just another “piggy bank” that consumers can add to, iFLYflat’s Hui said. “Points will always be useful and can always be reused for future flights.”
Hui said it’s important to remember that points are valuable because credit cards, banks and retailers have to purchase the points.
After all, the price of the points has to be paid by someone.
Steve Hui
“Ultimately the cost of the points has to be paid by someone, either you in prices or (the businesses) in reduced margin,” he said.
Travel expert Matt Graham believes that “frequent flyer points are likely to become more valuable in the short term as the number of points required for reward flights remains constant.”
If you can get those seats.
“Until the war in the Middle East subsides, availability may become more difficult to find,” he said.
Perhaps the biggest impact on point value will come not from the market but from regulators.
The Central Bank’s changes to credit card interchange fees, which will come into force in October, will ban “tap and go” fees on debit, credit and EFTPOS cards in a bid to reduce costs for merchants. This is expected to redefine the amount of points banks and airlines offer to loyalty club members.
However, as travel conditions continue to change, the psychology of the destinations becomes more important, and history confirms this.
In 2021, even as flights were grounded due to COVID, Qantas’ loyalty program grew, contributing more than $1 billion in cash to the airline’s bottom line; The airline had an operating margin of more than 27 percent when it was minus 25.7 percent.
Speaking in February, Qantas chief loyalty officer Andrew Glance said the airline had spent a lot of time understanding what its members wanted from programmes.
Glance said the Qantas loyalty program was “a great way to get recognized for everyday behaviour”, whether it was shopping at Woolworths, picking up your car at BP or swiping a credit card.
“It’s part of the DNA of Australian culture and it’s definitely something we don’t take for granted.”
Hui notes that no matter how difficult the trip is, “selling the dream” of travel is “much more profitable” than selling the trip because “you don’t have to deliver right away.”
If an airline sells tickets, it usually has to deliver within 12 months. “But if they’re selling the dream, people have dreams for several years.”
“If you save your dreams, someone has to pay for the points and you don’t use them later, that’s a great thing for the company [airline]Hui said.
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