Hi All,

The decision to switch from kms to miles as a form of calculating the number of points members earn for flying is getting a bit of tongue-in-cheek flak this morning in the press. The decision brings QF inline with our international partners/competitors. I thought I would give you more of an overview on why just about all the airlines use miles.

Firstly it is important to have a basic understanding of how you can earn points for flying,

First choice is how are points are distributed for flying – miles versus kilometres. Although what currency you use to distribute points has nothing to do with the worth or value of the points. A good example of this is the recently announced changes to the Qantas’ programme (which includes moving from kilometres to miles). What is the outcome? They will give away more points for the same amount of flying. So a mile is not necessarily worth more than a kilometre.

Award pricing (burning),

The critical thing (as discussed in many previous posts) is how earn rates interact with burn rates – how many times do I have to fly a route to get a free redemption or the % of a free trip earned for each paid one.

Now think about partner pricing (for flying on QF or AN),

Now given the above you would think when negotiating points pricing for partner agreements you would consider not the currency but the relationship between the earning and burning. Let me give you an example of what I am getting to:

Lets take Ansett and United:
United: minimum earn 500 points, 100% earn in economy, miles, tier bonuses, cabin bonuses
Ansett: no minimum earn, 70% earn in most economy seats, kms, cabin bonuses

Net impact is you would on average get more points (regardless of currency) for the same distance flown on United when comparing to Ansett.

Ansett then prices their rewards with “their earn” rates in mind – that is they consider the number of trips to get a free one and how the number of points compares with dollars values charged of these routes.

Then finally they get around to negotiating a rate for United – United says something like “you guys are using kms we are using miles so our redemption rates should be 2/3s of yours” – conveniently forgetting the fact that they give away more points for the same amount of flying (so how can their currency be worth 1.5 of Ansett’s). So interrelationship between the two programs gets doubly uncompetitive (earn rates and burn rates are set independent of each other across the airlines). This becomes plainly evident when United’s base redemption in the US is 25,000 points but you can get a redemption of Ansett for 20,000 – cheaper than in their home market!

The same example can be done in reverse - that is how much it costs an AN member to get a domestic award on UA. You will see the AN rates are much higher than the UA member rates.

The impact is that airlines in Australia and New Zealand (QF, AN and NZ) subsidies rewards to all their partner airlines. All of them have had the wool pooled over their eyes in relation to redemption pricing for partners.

This is why I think you will see UAL’s rates for redemptions on Ansett go up (just as soon as AN realise they are subsidising the UAL programme).

Once you are all operating in the same currency you get rid of most of these problems. You can then use your partner’s redemption table when your members want to redeem a flight on your partner (no need to keep a separate table for every partner – just refer your FF members to the partners table).

Hopefully this gives you some insight into the complexities when partner airlines operate in different currencies and one of the reasons Qantas has chosen to align to the rest of the world and move to frequent flyer miles. It wouldn’t be a problem if only one partner operated in miles but when you consider BA, AA and CX all operate in miles it makes QF the odd one out.

Cheers… Bruce

[This message has been edited by bruceb (edited 03-16-2001).]