What does Virgin Australia’s administration mean for Velocity Points?

As Virgin Australia heads into administration, frequent flyers everywhere are asking just one question: what does that mean for my Velocity Points?

The answer is a lot like Miley Cyrus’ love life: it’s complicated.

And with Velocity boasting more than 10 million members, a lot of points are riding on the answer.

Virgin’s fate has looked uncertain ever since the coronavirus pandemic crippled the global airline industry.

Unlike rival Qantas, it was struggling with profitability even before the current situation developed.

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We’ve not yet seen an official statement about the fate of Velocity Points in any administration scenario.

A decision would likely take time as the administrator weighs up options for the airline.

It’s certainly quite possible the points will disappear entirely, but we haven’t reached that stage yet.

Reportedly several private investment firms are keen to buy into Virgin Australia, though the extent to which those offers depend on government support also being provided has proved a stumbling block.

Many frequent flyers have observed that Velocity on its own is actually a profitable business unit for Virgin, thanks to the banks and retailers who pay to offer Velocity Points to their customers, and that any prospective new owners will want to take advantage of that.

But the value of Velocity is crucially dependent on the ability to redeem the points earned for flights.

On its own, with no airline attached, Velocity is a less attractive proposition.

Signage for Virgin Australia is seen at Melbourne Airport in Melbourne on Monday. Picture: James RossSource:AAP

Hardened frequent flyers like myself know that flights represent the best value-for-points offers, especially if you can get a business or first-class flight overseas.

You can score anywhere between $20 and $80 in value for every 1,000 Velocity Points when redeeming for flights, while using your points in the Velocity eStore typically offers a value of $5 per 1,000 points at best.

But even before the pandemic crisis, Virgin was trimming many of its overseas flights, making those Velocity Points less appealing.

Travellers with especially long memories will recall when Ansett Australia went into administration back in 2001, points balances just vanished overnight.

Ansett’s corporate structure was different and its buyout options were more limited, so we won’t necessarily see a repeat of that scenario.

Virgin Australia employee Tony Smith (centre) speaks to the media during a press conference at Melbourne Airport in Melbourne. Picture: James RossSource:AAP

Some wary Velocity frequent flyers have been busy in recent weeks transferring their points into Singapore Airlines, which has a partnership with Velocity.

Unlike Ansett, Virgin has never been a member of any of the major global frequent flyer alliances (oneworld, Star Alliance or Flying Blue), so the Singapore partnership has been one of the few ways to attempt to “save” points and still be able to use them for flight redemptions.

However, that option disappeared in early April, when transfers between the two schemes were “temporarily” suspended.

There has also been a rush on redemptions for store gift cards using Velocity Points.

These provide a comparatively low value, with gift card deals offering at best around $5.50 in value for every 1,000 Velocity Points spent, an analysis by Finder shows.

But enough customers appear to have decided “better some value than nothing” that Velocity limited those redemptions to 1 per customer per day in early April.

Trying to do that might be an academic exercise right now; the Velocity store was overloaded with customers on Monday night, with many unable to log in.

Virgin Australia pilot Daniel Vigilante has been working for the company for almost 10 years and has now been forced to work at Optus. Picture: George SalpigtidisSource:News Corp Australia

General Manager Flybuys Adam Story and CEO Velocity Frequent Flyer Karl Schuster linking up at Coles Glen Iris. Picture: David CairdSource:News Corp Australia

The other big question mark in the future of your Velocity Points is the flybuys shopping loyalty scheme co-owned by Coles and Wesfarmers.

Converting your flybuys points into Velocity Points potentially offers much better value than simply using them for $10 off shopping vouchers.

Coles has cut back on the number of Velocity Points deals it offers to customers in recent weeks, presumably reasoning that right now there’s no value in trying to attract people into supermarkets more often.

While some deals are still around, those will have been negotiated months before the current crisis.

However, with Qantas locked into a deal with Coles’ rival Woolworths, keeping some sort of airline option will look appealing.

Realistically, at this stage if you hold a Velocity Points balance all you can really do is wait and see.

That’s frustrating, but that’s the way the points crumble.

Angus Kidman is the editor-in-chief and travel guru for Finder.com.au and has been writing about technology, travel, finance for more than 20 years.

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