Qantas and Virgin Australia have started a new front in their battle for customers, with both airlines sweetening incentives for passengers to book domestic flights as the cost-of-living crisis dampens consumer appetite for spending.
Virgin on Thursday said it will allow its Velocity club members to double their frequent flyer points or status credits on domestic flights from now until May 15. “Designed to deliver greater value,” the offer aims to give Velocity members “the flexibility to tailor rewards to their travel goals,” it said.
The airline’s offer follows a similar one rolled out by Qantas two days earlier, letting its Frequent Flyer members earn double points or status credits for domestic flights booked until May 11.
The promotions come after Virgin and Qantas have reduced their domestic capacity as fuel prices have skyrocketed in response to the war in the Middle East.
At the same time, both airlines want to keep seats full on existing flights to maximise their cash intake in an uncertain environment of slowing growth in domestic travel.
Under the terms of the Virgin deal, domestic, trans-Tasman or international short-haul Virgin Australia flights booked through the airline’s dedicated page are eligible. A one-way economy flight from Sydney to Brisbane could earn up to 1664 Velocity Points or 34 Status Credits, Virgin said.
The Qantas offer is for flights within Australia or across the Tasman, and it adds double points for customers booking Qantas Hotels & Holidays.
Customers typically must opt in to these promotions on the airlines’ apps.
In comments this week, CEO Vanessa Hudson said the frequent flyer program was “an incredibly important part” of Qantas and Jetstar’s business. While demand for travel remained strong, incentives offered through the loyalty programs were integral to managing revenue, she said.
“Revenue management is a cycle of layering in sales and activity over a twelve-month period. And what you’re seeing in terms of the tactical activity we’re doing is just a part of business as usual,” she said, noting that the loyalty business was one of Qantas’ “strongest sales initiatives”.
Adele Eliseo, who tracks the points economy for travel and finance publisher The Champagne Mile, said that “both airlines are clearly doing what they can to continue to drive forward bookings given the cost of fuel.”
“Both airlines have leaned heavily into bonus status credit promotions in recent months,” Eliseo noted.
Frequent flyer points act like an airline-issued currency you can spend on things like reward flights, upgrades, and merchandise. They are earned by flying and everyday credit card spending at stores and through online retailers. Status credits are earned but not spent, and establish the tier of membership – silver, gold, premium – and what kind of lounge access and priority service a member receives. They are reset yearly.
Eliseo notes that “Qantas has now run two such campaigns this year in relatively quick succession, while Virgin Australia ran multiple bonus status credit offers before the current double status credits promotion.”
Another motive, she said, is the RBA’s mandated reduction in card transaction fees effective October. Banks and credit card providers typically buy frequent flyer points from airlines to use as a spending incentive for customers, but with reduced transaction fees they will have less money to spend and are likely to cut the value of rewards.
In this environment, Eliseo predicts airlines are likely to push status credits “more heavily”.
In February, Qantas announced that on-the-ground status credit earning will become a “permanent part of its ecosystem”, Eliseo said. Historically, status credits could only be earned through flight bookings, making them “comparatively difficult” to collect.
“The objective is clearly to encourage spend across a broader range of Qantas partners while reducing reliance on traditional consumer credit card revenue,” she said. “So I think there is a balancing act for airlines in ensuring status still feels aspirational and worth chasing.”
In April, Qantas and Jetstar reduced domestic capacity by 5 percentage points until May – and then extended the cuts again in May until June. Virgin announced a 1 percentage point reduction.
Both airlines would be keen to get passengers on domestic flights and the wider regional areas their networks service, said aviation consultant Bill Meeke.
“The airlines are looking for ways to bolster demand when it’s headed in the opposite direction,” said Meeke. Encouraging more flying through points promotions can help sustain Virgin and Qantas’ extensive networks, he said.
At the same time, tourism in regional Australia can only benefit from bookings.
“Regional areas are losing a huge amount of tourism traffic as things have ground to a halt,” he said.
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Chris Zappone is a senior reporter covering aviation and business. He is former digital foreign editor.Connect via X, Facebook or email.
