Recently in Frequent flyer Category

Much news lately has been about Virgin Australia's move upmarket to capture more of the corporate sector, but a quieter story is what is happening to the portion of the leisure market Virgin will have to give up.

The latest development is today's announcement that Jetstar has a new fare class option that will enable passengers to earn Qantas Frequent Flyer points and elite bonuses. Previously only the top-tier Jetstar fare earned status-only points and status credits.

The move is part of the carrier's overhaul of its fare structure. Gone are JetSaver Light, JetSaver, JetFlex, and JetPlus. Now domestic fares start at the "Starter" level, which is the old JetSaver Light, while international business fares start at the "Business" level. Passengers can add a "Plus" or "Max" bundle to both fares (yep, no free perks in business). "Plus" offers Qantas points and no fee changes (except for fare difference) and "Max" offers the same plus reservation of premium seats (front row and extra room seats) and more flexibility. Neither include checked luggage. On a Melbourne-Sydney flight, the "Plus" package is an extra $25 and "Max" an extra $250. The "Max" offering is similar in price to Tiger's recently introduced flexible option. To Perth, "Plus" is an extra $40 and "Max" $410. While the addition of the bundles will see Jetstar's fare sometimes surpass Qantas', the Jetstar fare will offer more flexibility over Qantas.

Jetstar will see more ancillary revenue in its choice to adopt Tiger and AirAsia's baggage model offering different weight allowances (15, 20, 25, 30, 35, and 40kg), and also charging each weight based on distance instead of its previous flat fee. Checking 20kg from Melbourne to Sydney costs $10 while to Perth it is $15, prices significantly cheaper than on Tiger. (See this chart for how much it costs to check a back in the region.)

The reckoning seems to be that with Virgin offering a higher-value product, Jetstar needs to catch up while also positioning itself more ahead of Tiger. As Qantas chief executive Alan Joyce said when announcing more aircraft for the Group's low-cost sister, "We see great opportunities for Jetstar, particularly in the domestic market as our competition changes their focus...It is an opportunity Jetstar is seizing."

The move gives greater value to Jetstar's product compared to Virgin and Tiger domestically, Virgin's possible partnership with FlyBuys, and the likes of AirAsia X and other long-haul Asian carriers with a lower cost base. Also, AirAsia is considering launching its own frequent flyer programme. Plus, offering frequent flyer points as part of a fare package gives further ancillary revenue, critical in today's air transport finances.

Some LCCs offer free frequent flyer points, notably in America, but there have been dabbles with putting a monetary value on frequent flyer points as part of tickets. Air Canada, for example, offers a variable discount on the fare if passengers elect not to earn frequent flyer points. On a Calgary-Toronto flight, about the same length of a Melbourne-Perth flight, Air Canada offers a C$3 (A$2.93) one-way discount off its cheapest fare if a passenger does not want frequent flyer points. Other airlines, such as Malaysia Airlines, offer tiered basic economy fares with the upper levels offering more frequent flyer miles as well as increased luggage allowances, but few have so basically offered frequent flyer miles for only a small increase on ticket price.

The move also supports the growing convergence between Qantas and Jetstar. Although there is a "two brand" strategy at Qantas, it is increasingly clear the newer brand, Jetstar, is pushing to be a Qantas done more cheaply. That is not a low-cost carrier per se, but rather a Qantas clone stripped of its high cost structure. Jetstar, a branded way of saying Qantas Mk II, offers a Qantas-like service--meals, IFE, frequent flyer points--for a price, while maintaining cheaper prices. (Cue the Jetstar ad: low fares, GOOD TIMES!)

Offering frequent flyer points may also placate complaints that portions of the Qantas mainline network are being taken over by inferior Jetstar, such as at the Gold Coast, Japan's Osaka, Auckland-Singapore, and future 787 routes (such as to Athens and Rome). Already the Qantas Group is placating oneworld members by offering them access to Jetstar fare inventory with the promise their full-service passengers will receive on Jetstar a luggage allowance with food and beverage service.

I fortunately was flying on Sunday and, even more fortunately, not on Virgin Blue, whose Navitaire-powered IT booking, reservations, check-in, and boarding system crashed following a hardware failure Sunday morning. The carrier later said Navitaire should have "remedied within a short period of time" the problem but for unbeknownst reasons, did not do so until Monday morning. That lack of action lead to hundreds of flight delays and cancellations affecting some 100,000 passengers, long queues at airports, and a blunt PA advising passengers on cancelled flights to "go home". (Undoubtedly one passenger would have quipped, "I'm trying.") By mid-week empty queues indicated normalcy had returned, but the incident left two key take home messages. 

First, new CEO John Borghetti is at work "Qantas-ising" Virgin by moving it up-market: Early on in the Navitaire debacle Virgin said it would reimburse delayed passengers for airport transfers and $220 a night for accommodation. All together that could stretch into the tens of millions of dollars for Virgin but sent the message that Virgin, like Qantas but unlike Jetstar and Tiger, will take care of passengers. Underpinning this was how Virgin's fragile transformation could be rocked by 100,000 displeased-"I'm-never-flying-Virgin-again" passengers.

With the compensation Virgin managed to upstage Qantas, who came a-knockin' on Wednesday morning with an e-mail from CEO Alan Joyce to Qantas frequent flyers extolling the roo's on-time performance with the note, "We are maintaining that industry-leading punctuality this year." Joyce also boasted of new menus, upgraded lounges, cabin modifications, and a growing network. In short: Dear passengers, if you've been dabbling with your carrier of choice and have been swinging with Virgin but got caught up in their delays, return to your ole friend Qantas. And to Borghetti Joyce effectively said, "Game on." 

Second, in the just saying department, the next time a Tiger A320 goes technical because of a bird strike, a Qantas 767 has a flap issue, or a Jetstar A330 has a cockpit fire, remember: $h!+ happens. Headlines like the Australian's front-page "flying shame" were not necessary in this instance. Virgin may have gotten its dose of problems all at once and its on time performance will plummet in September, but for other carriers problems lurk around the corner.

Passengers belonging to a SkyTeam frequent flyer programme (Delta, Air France/KLM, Alitalia, Aeromexico) long bemoaned there were few options for them to get to Australia both for earning and redeeming miles.

The main route from North America was with Korean Air through Seoul, a convoluted journey compared to the hops Star Alliance members could take on United or oneworld members could take on Qantas. From Europe, no simple solution existed for SkyTeam passengers, whereas Star's numerous Asian carriers (Singapore, Thai) could provide service, as could oneworld's British Airways and Qantas.

A reprieve for Delta passengers (who undoubtedly comprise the majority of SkyTeam customers in North America) came with the inking of a joint venture with V Australia. But before that, Vietnam Airlines announced it was interested in joining SkyTeam, giving hope to passengers SkyTeam's blackout in Southeast Asia and Australia would end.

Vietnam's ascension to SkyTeam, announced yesterday to occur in June, will see the blackout end and enable some travelers to fly to and from Australia. But the biggest gains for SkyTeam with Vietnam Airlines will be around Southeast Asia, where it is desperately playing catch-up.