Qantas Airways Limited (ASX: QAN) shares are under the spotlight after the airline revealed an expanded frequent flyer program.
Rewards program expanded
Qantas shares are up 3% after the airline announced frequent flyers will have access to over 20 million more reward seats with the launch of its ‘classic plus flight rewards’, which it described as a new way for members to use their Qantas points to book flights.
The airline said the change is one of the biggest ever expansion of the frequent flyer program in its 35-year history and it “will make it easier to travel to places like London, Tokyo, New York and Singapore with Qantas points, even during peak times”.
These ‘classic plus’ seats will represent “some of the best value across the frequent flyer program with much wider availability. Classic plus reward seats are also eligible for upgrades.”
The points required to book classic plus reward seats will vary like normal airfares, which means they’ll be lower during off-peak periods or when booking early, and higher during peak periods.
These new reward seats can be booked from today on Qantas international flights departing Australia for travel from 1 July 2024 and will be rolled out across the rest of the airline’s international and domestic network on Qantas-operated flights by the end of the year.
Qantas said it would continue to offer more than 5 million existing classic reward seats across Qantas, Jetstar and 45 partner airlines, with no change to the points required to book these seats since 2019.
Management commentary
The Qantas CEO Vanessa Hudson said:
The Qantas Frequent Flyer program is an integral part of Qantas and has always been about recognising our customers for their loyalty. We’ve spent a lot of time listening to members about how we can better reward them.
The growth and success of Qantas Loyalty is driven by engaged members who earn and redeem points across the frequent flyer program, including with our partners, and that’s why we’re investing in making more seats available to book with points.
Financial update
Qantas said the program changes are expected to deliver a “substantial improvement in member engagement and will help drive the long-term growth of Qantas Loyalty as it continues to target $800 million – $1 billion” of underlying EBIT (EBIT explained) by FY30. This could help drive the Qantas share price higher, if it can grow underlying EBIT to this range.
The classic plus product represents an investment of approximately $120 million in FY25, excluding benefits of the program. The investment includes the value of displaced seat revenue in the airlines as well as other financial aspects of the plan.
Qantas said the combined investment will be managed within the existing planned customer investment of $230 million for FY25.
After the launch of the new product, Qantas Loyalty is now expected to deliver between $500 million to $525 million of underlying EBIT in FY24 before returning to growth of around 10% in FY25.
The airline also said the on-market share buyback will resume now that it has announced this news.
Qantas seems to think this is the right move, which may ultimately help the Qantas share price over time.
