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Airlines fight to keep loyal flyers -

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Reporter: Simon Santow

ELEANOR HALL: It's not hard to see the effects of the global recession on the airline industry.

Planes are flying with more empty seats than usual and the airlines are waging a fierce battle to
hold on to their customers.

Routes and schedules are being cut back and fares are beginning to be discounted.

Now Qantas has begun an expensive and aggressive campaign to try to stop its frequent flyer
programme from being raided by its competitors.

As Simon Santow reports.

SIMON SANTOW: Gone are the days when frequent flyer programmes were all about getting points for
flying on a particular airline or partner carrier.

Credit card providers changed that notion when they developed schemes which rewarded customers for
simply spending dollars, but in the process gave customers the choice on which programme the points
could be directed towards.

That brought new meaning to the concept of loyalty, and it's prompted Qantas to launch an
aggressive campaign to lock up its frequent flyers.

SIMON HICKEY: Well what we need to do, is we need to make sure people are informed that these
changes are coming, and that you know, that they make an informed decision about what they want to

Our marketing message is to make sure people are informed that the changes are coming and not to be
caught out.

SIMON SANTOW: Simon Hickey is in charge of one of Qantas's few remaining profitable enterprises.

If it's such a good program, then why not just leave it up to your customers to decide whether they
transfer points to Qantas or whether they choose to spend it on a balloon flight, or a Virgin Blue
flight for that matter?

SIMON HICKEY: What I'm trying to do is to ensure that our card products are as competitive as they
can be to get the best value going forward for our members. They get the most number of points
they're possibly going to do, get, with Qantas frequent flyer, by being up front and by letting
people know where they stand in terms of the value they're getting.

SIMON SANTOW: Has Qantas been hurt at all by Virgin Blue's development of its Velocity program?

SIMON HICKEY: No, no we haven't seen any detriment to the Qantas frequent flyer program.

SIMON SANTOW: At the end of next month, Qantas frequent flyers will be restricted in earning points
on their credit cards.

Those points will have to come from a specially selected credit card and not one where up until now
they've been able to choose what to do with the points.

SIMON HICKEY: We really want to ensure that our members get the best value that they possibly can.

We want to be able to create a competitive market place in Qantas frequent flyer points, through
credit card program products, and for our members to be able to make informed choices about what
they get, and know exactly where they stand.

How does that gel though when currently many of your members have a choice how they spend their
points from their credit cards? They can divert them to Qantas, or they can choose one of your
competitors, or they can choose to buy a voucher at a department store?

SIMON HICKEY: What we've found over time is that many of our card partners have you know, changed
the transfer rate and so what we're trying to do is ensure that our members know exactly where they
stand, that those points go directly into their Qantas frequent flyer account so that they can use

SIMON SANTOW: Some analysts see Qantas as moving to protect a rare profitable part of its business.

BRENT MITCHELL: There is pressure on load factors, there are pressure on yields, and that pressure
extended to a major movement from business and other customers from high yield premium fares to
economy fares.

Qantas has handled that by starting to transfer a lot of services from Qantas to Jetstar brands in
a number of routes, and we see that trend continuing.

SIMON SANTOW: Brent Mitchell is a research analyst at Shaw Stockbroking.

BRENT MITCHELL: With more control over what happens at the point, they are able to attract other
retailers and groups into the frequent flyer and that will ultimately result in higher profits for
the frequent flyers programs.

ELEANOR HALL: Aviation analyst Brent Mitchell with Simon Santow.