Will frequent flyer points be worth less in the future?

Before 2020, frequent flyer points were one of the best ways for Australians to score free travel and other goodies.

Credit card sign-up bonuses and supermarket-points conversions meant that it was relatively easy to build up a huge bank of points and then redeem those for flights.

But in a post-pandemic world, with profits plunging and Virgin Australia one of the many airlines going into administration, will those points suddenly be worth a lot less?

Some Australian experts are taking a gloomy view on that issue.

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Qantas Frequent Flyer program has millions of members around the country.Source:Supplied

Virgin Australia members can redeem points for domestic flights from September 2020. Picture: AAP Image/Claudia Baxter.Source:News Corp Australia

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In Finder’s monthly survey of economists, 68% said they expected frequent flyer points to drop in value in the future, with airlines reducing the volume of reward seats available and potentially jacking up the number of points needed for flights to help preserve their margins.

That fear has been underscored by recent changes in the rules for how points can be redeemed.

During its first month in administration, Virgin Australia stopped all redemptions.

While you can now redeem points for domestic flights from September 2020, international flights are still off the menu.

Business or first-class redemptions provide the best value for your points, so that’s a telling omission.

68 per cent of economists interviewed by Finder said they expected frequent flyer points to drop in value in the future.Source:Supplied

With that said, the one-third of economists in the survey who think points will continue to retain their value may well be onto something in my view.

Frequent flyer schemes are a lucrative activity for airlines.

Both Qantas Frequent Flyer and Virgin Australia Velocity are profitable in their own right, with income pouring in from banks and retailers who pay to offer points for cardholders and purchasers.

Airlines won’t want to undermine that with massive cuts to their points’ value.

The value of points is also heavily dependent on how you spend them.

The best value comes from business or first-class flights, and the worst comes from using the points for a toaster.

With international travel likely off the cards until 2021, it makes more sense to accumulate those points with a view to redeeming them in 2021 or beyond. Picture: AAP/Mark Brake.Source:News Corp Australia

That was true in 2019, and I expect it to be true in 2021.

The bottom line: it’s still possible to earn points, and those points will still be valuable if you redeem them for flights.

But in 2020, it makes more sense to accumulate those points with a view to redeeming them in 2021 or beyond when more flights will be operating and airline lounges will have returned (albeit with some modified services).

If you’re using a credit card that earns points and you’re keeping the balance paid off, your everyday spending will make a big contribution to that total, especially if you find a card with a healthy sign-up bonus.

Angus Kidman is the editor-in-chief and travel guru for Finder.

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