The,Classic Plus,is Hudson’s bet that giving customers a better deal on points pricing will add some shine to the brand halo that has been so tarnished in the post-COVID restart.
Vanessa Hudson looks to restore fractured relationship with Qantas loyalty members.Supplied
Since at Qantas,Hudson has taken on the Herculean task of attempting to restore its relationship with customers and staff and reweight the division of the spoils between these groups and shareholders. It is a work in progress,but the overhaul of loyalty is a positive move.
Qantas has been made abundantly aware that the price of loyalty fares has been what it calls a “pain point” for customers.
At its heart,this loyalty strategy is pretty simple – it is effectively discounting points airfares and improving availability by introducing a third loyalty product with 20 million seats on offer.
The Points Plus Pay scheme had enough available seats but at various times had been charging north of 1 million points and up to 2 million points for a seat on some long-haul flights at the pointy end of the plane. And even those rare customers with a lazy couple of million points were loath to use them because they represented such poor value.
The gamble for Hudson is that effectively lowering the price of this product will reduce Qantas Loyalty’s revenue and profit,at least in the short term.
In premium cabins,a Classic Plus redemption is worth 1.5¢ a point compared with the 0.6¢ offered by the Points Plus Pay product.
The new scheme will allow customers to get the same seat for roughly half the number of points. It will be available across all cabins,domestic and international,but it especially hits the sweet spot for international business class passengers – the cohort that was particularly outraged by the price of points using the Points Plus Pay scheme.
The Classic Plus fares will move around in line with the price of normal airfares.
In a general sense,the Classic Plus will be more expensive than the original Classic scheme (with 5 million seats) but with 20 million seats on offer they will be easier to find.
The gamble for Hudson is that effectively lowering the price of this product will reduce Qantas Loyalty’s revenue and profit,at least in the short term. Qantas says this new scheme represents a $120 million investment in 2025 and will take the gloss off this division’s 2024 earnings,which were previously expected to hit up to $550 million in the 2024 financial year and are now forecast to come in at between $500 million and $525 million.
That still represents good growth over the loyalty business’ 2023 earnings of $451 million,but not the same rate of improvement — in 2023 this business grew 54 per cent.
The logic of giving customers this sugar hit,which is only part of a $230 million Hudson package of goodies she has promised to spend on making customers happier (and includes improved food and lounges),is that it will increase the use of the scheme in the longer term.
Qantas said the new scheme was expected to improve member engagement and the growth in members,and drive momentum and strengthen the value of the program for its partners such as Woolworths.
Hudson said the benefits would outweigh the cost by the first half of 2026 financial year.
While some large shareholders had previously voiced some scepticism about the cost of Hudson’s campaign to win back customer support,the sharp share price gain on the back of Monday’s announcement suggested investors were supportive of her risk/reward balancing act.
And while the new forecasts for the loyalty business represent a small downgrade on what analysts had pencilled in,Hudson has not trimmed the stretch target for loyalty to hit the $1 billion in earnings mark in 2030.
This makes the loyalty business especially valuable and a much-needed ballast to earnings of the more volatile flying businesses. There are 16 million members to keep happy.
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