Comment: Airmiles Credit Cards: Still in Vogue?

It’s been interesting to witness how, in some parts of the world, the love affair with airmiles seems to be dying. Perhaps not in Australia, though!

Frequent flyer programmes are now into their fourth decade. Initiated by American Airlines in the early 1980s, they sparked interest all over the world. As people relished the thought of free travel, air-miles became a popular reward mechanism for all sorts of transactional activity. Consumers selected credit cards to collect air-miles, chose to shop where air-miles were offered, and switched utility bills to rack up air-miles.

The move by flagship UK carrier British Airways in November to integrate its air-miles programme with an existing programme and revert to the Avios points system has upset scores of air-mile collectors who believe their spending investment over the years to have been ruined. Free flights, it seems, are a thing of the past.

To some experts, this kind of currency transposition is a disguise for the devaluation of air-miles. Loyalty programme directors argue in turn that the variety of available options for redeeming points makes consumers better off than before.

Versatility speaks less for the value of those points however, as air-miles become swallowed into broader lifestyle reward systems.

How do air-miles, or frequent-flyer miles, scale in value? A review by consumer group Choice found that an entry level frequent flyer programme holder with Virgin would need to fly from Sydney to Los Angeles 13 times to earn enough points to make that same trip again. With Qantas, it’s just seven times.

Hence, there is a considerable difference between these 'currencies' and the rewards programmes that enable them. Each frequent flyer programme – of which there are several – needs careful assessment before embarking on a long-term air-mile rewards plan.

To Choice’s Ingrid Just, frequent flyer programmes are now designed to benefit big spenders.

"If you spend a bit of time in the pointy end of the plane and you spend big dollars on your travel and your seats, then frequent flyer programmes might work for you because you can clock up more points more quickly. But if you’re an economy traveller that travels occasionally, then you’re better off shopping around, looking for some of those really cheap fares that are on the market these days rather than getting tied up in a frequent flyer programme."

So how do Which4U’s air-miles cards compare?

Many of Which4U’s listed airmiles credit cards offer complimentary Qantas frequent flyer membership, normally worth $82.50, which is otherwise an additional cost required just to access the rewards programme. Some, such as Westpac Earth / Earth Gold, only offer this for a limited time.

Velocity

Last year, Virgin offered a considerable bonus of 20,000 Velocity points, almost enough to cover three domestic one-way flights. With that boat having sailed (for now), it’s roughly $7,000 of spending to cover the cheapest domestic flights, and $17,000 to hop over to New Zealand. A current consolation is their offer of a seat for a companion on a flight up to four times a year.

Qantas

Qantas points are very similar in scope to Velocity points. A flight from Sydney to Auckland costs 18,000 points; to Los Angeles costs 48,000; and to London costs 64,000 points. Unfortunately, only Premium Airmiles cards offer any greater rate than 1 point per dollar.

Invariably, though, complimentary Qantas Frequent Flyer membership, available on most cards, saves the $82.50 annual fee, meaning that the annual credit card fee of $95 for ANZ’s Classic more or less pays for itself.

Skywards

Citibank Emirates card is offering the ability to offer 4 Skywards airmiles per Australian Dollar until the end of March, providing that applications are made by the end of January.

Flights to New Zealand start from 25,000 miles. A spend of $1,500 per month on this credit card, accounting for the offer, would see the holder well on the way to a return trip to South East Asia [45,000] by the end of 2012.

Altitude

Westpac’s Altitude card range offers introductory bonuses of 5,000, 10,000, and 15,000 bonus points when these cards are first used for purchases. This is the main redeeming feature, as flights from Australia to Wellington cost a hefty 52,000 Altitude points.

The Altitude Gold card, after the 10,000 bonus and at 2 Altitude Points per $1, would need $21,000 of spending to earn that flight to Wellington – less competitive than Virgin. The Altitude Platinum, which has an annual fee of $295, offers 3 Altitude Points per $1, and requires a little over $12,000 of spending after the bonus to cover the cost to Wellington. Such a card does require a hefty annual salary of $65,000pa though, putting it beyond the reach of many.

Perhaps serious money is needed to make any use of current frequent flyer programmes, and occasional economy flyers may not see any benefits from airmile credit cards in 2012. But frequent flyer rewards programmes still have credibility as currency in Australia, and that's a big factor in long-term ambitions.

Plus, the bigger rewards on offer, if they can be reached, are certainly no less valuable than other forms of reward card on the market.

Keith McDonald
Which4U Editor