[QUOTE]Originally posted by ffhound:
[B] I don't agree Bruce. Because frequent flyer miles are required to be recorded as a liability in the accounting records, Ansett will have negotiated a rate per mile with United. It would not surprise me if they have used the industry standard $US0.02 per mile. It is likely the contract was written in $US. Once a year United probably draws our its chequebook and pays Ansett for the rewards redeemed on United miles. Thus Ansett gets effectively paid for those 'free' seats it is providing.
With the exchange rate the way it is, those 2 cents are valuable. Consider my trip to Perth last week. I redeemed 20,000 miles. Ansett will probably get paid $US400 for that flight which is a tidy $A800 in revenue. Even if the contract was written in Australian dollars, Ansett are still getting revenue for these seats and that helps the bottom line.
I don't think Ansett is in any hurry to renegotiate their rates. The redemption rates are also quite attractive relative to Qantas. 20,000 miles gets you a round trip ticket anywhere in Australia. 25,000 miles gets you from Australia to Bali or Fiji (20,000 from Sydney!). 10,000 miles gets you from Melbourne to Sydney. These are attractive redemption rates yet still provide an attractive revenue stream for Ansett.
Here are the United rates
http://www.ual.com/site/primary/1,10017,1184,00.html
My bet is that Qantas will be forced to reduce its redemption rates. By its own admission it has adopted the mile as its standard currency and consumers will compare how many miles they will need on Qantas with how many miles they need on United or another airline. Granted in certain circumstances one can earn more miles flying Qantas but not all the time.
Aside from this, consumers will also see that a return flight to Canberra from Melbourne is only 9,000 points whereas on Qantas it costs 20,000 miles! Ouch! If one has a choice of a Qantas linked credit card or an Ansett linked credit card it is evident that the Ansett linked card will provide cheaper flights than Qantas for flights within Australia.
Eg lets say I spend $30,000 dollars on my credit card. I could get either 30,000 GR points or 30,000 Qantas miles. Which are more valuable? Just about every domestic award is the same number of points/miles or cheaper on Ansett.
cheers Peter