Hudson said on Monday that travellers would be able to use the new Classic Plus rewards program on international flights from July and it would vary as with normal airfares,meaning passengers would require more points during peak travel periods such as school holidays and fewer during non-peak times.
Qantas CEO Vanessa Hudson unveiled the changes on Monday.Louise Kennerley
The scheme will be rolled out on domestic flights from the end of 2024. It adds 20 million reward seats to the frequent flyer program and a third way to redeem points,in addition to Classic Rewards and Points Plus Pay.
“This is about providing more access to more seats on more flights across more time periods. It’s also about making sure we do that sustainably,” Hudson said when asked why the airline had created a third tier,instead of making more Classic Rewards seats available.
Qantas has about 5 million Classic Rewards seats available on Qantas,Jetstar and partner airline flights and has not changed the number of points needed to redeem these seats since 2019.
More than half of the country are members of Qantas’ frequent flyer program,with almost 16 million members,so it can be difficult to redeem these points for a flight.
Until now,travellers have been able to secure Classic Rewards seats in exchange for a set number of points,or use some points and pay the remainder of a fare. Fewer points are required to obtain a Classic Rewards seat than a Points Plus Play seat,but they are often difficult to find.
Classic Plus seems to be an attempt by the airline to address complaints some frequent flyers have made regarding the scarcity of Classic Rewards seats. It will not be available for bookings on Jetstar or partner airlines.
Hudson said there were no changes in the pipeline for Classic Rewards and ruled out a rise in the number of points required to redeem a seat.
Qantas has been battling to regain the trust of customers since traveller discontent reached an all-time high last year after it revealed record profits amid furore over slipping standards and poor service. Part of customers’ frustration has been centred on the frequent flyer program,for which travellers have had difficulty redeeming points since flying resumed after COVID-19.
The revamp is the first test for newly minted Qantas loyalty boss Andrew Glance,who took over from Olivia Wirth last month. Wirth left Qantas after narrowly missing out on being appointed group chief executive and has recently been appointed executive chair of Myer.
Qantas’ share price jumped almost 6 per cent on the news and closed at $5.69. The stock remains 14 per cent lower than where it was a year ago as the airline works to balance the needs of its investors,workers and customers.
The market had been anticipating a more sweeping reform to the frequent flyer program,which would have resulted in a bigger hit to Qantas’ bottom line.
The airline is targeting $1 billion in earnings from the program in FY30,up from $500 million in 2023. The Classic Plus program represents a $120 million investment in FY25,excluding the benefits from the program. Qantas said the cost would be managed within the $230 million customer investment for FY25 it flagged earlier this year.
Multiple analysts,who were not authorised to speak publicly,said they had expected the revamp to come with much larger implementation costs than the $120 million announced on Monday. They were also surprised the revamp had been contained within the existing customer provisions and did not come with other balance sheet implications.
Qantas told analysts in an investor call the released seats would not compete against the typical fare structures. This means it is likely Qantas will use Classic Plus redemptions instead of fare discounts on certain flights.
The loyalty division was targeting earnings of up to $550 million in February,but the target was downgraded by $25 million on Monday. The airline said it would return to about 10 per cent growth in underlying earnings before interest and taxes from 2025 and remained committed to meeting its 2030 EBIT target.
Qantas confirmed an on-market share buyback of up to $448 million to be completed by June 30.
The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion..