Finance Minister Lindsay Tanner’s attack on the perking and rorting of frequent flyer points earned on government paid flights is cause for alarm among the politicians and bureaucrats who have gorged at this particular trough for nearly two decades.

It also flirts with the taboo topic of imposing the fringe benefits tax on redemptions of flights for personal use where the points have been earned flying for work purposes in public or private industry employment

Other countries, including the US and Germany, have cracked down on these abuses for almost as long as frequent flyer schemes have given points, while Australian governments and businesses have declared it all too hard.

But it is an abuse of privilege at the expense of the economy, and those who pay prices for goods or services inflated by the costs of offering points on Qantas or Virgin Blue as an inducement to buy.

The ATO and ACCC, whose senior bureaucrats fly a lot and can accumulate massive banks of points, have been helpless in preventing points being used to generate a tax free benefit that can amount to flights with market prices soaring into tens of thousands of dollars a year for high flying individuals.

The question is will Lindsay Tanner prosecute the obvious courses of action, or is this all empty rhetoric?

Qantas mightn’t care either way. It wants to sell as many points as it can to third party buyers for real money, rather than give them away for nothing to the more than five million members of a loyalty scheme in which membership is often included as part of a corporate travel contract with a department or business.

For the airlines, the sale of points to department stores or into schemes like Woolworths’ Everyday Rewards program (which joins Qantas points to the current discount-petrol-for-paying whatever-we-want-for groceries scheme) is as close to money for nothing as it gets.

Selling Qantas points to Woolies or Harvey Norman doesn’t involve financing aircraft, paying pilots or buying fuel; it is pure profit.

Lindsay Tanner is clearly not uttering throwaway lines when he mentioned the need to get politicians and bureaucrats to use more discount fares.

One of the biggest abuses of loyalty schemes by employees is to insist when making a company or departmental booking on taking the “most convenient flight” rather than the cheapest.

The most convenient flight is always the one that generates the most points or status credits, which are critical to keeping your gold or platinum card rating, each of which inflates the basic rate at which points are awarded for miles flown. In some instances, discount flights generate no points, but can save well into the thousands of dollars for longer range flights.

One of the popular rorts is to avoid non-stop flights in favour of a “convenient time” which involves two hours at an intermediate airport, and two separate flight numbers, which in aggregate will generate more status credits for the frequent flyer member, but cost the company or department a higher total fare and lost productivity.

In private industry there is a trend to enforceable travel policies that require executives to move their schedule to capture the cheapest fare.

There is also the clearest of signals that luxury business class bookings, primarily driven by business and government, are in free fall world wide, with trips in those cabins down between 25-30% in major markets.

Which may explain rumours that Qantas is seriously contemplating a big expansion of its premium economy product at the expense of business class seats that are no longer the automatic entitlement of many sky warriors.

The author is a Qantas Frequent Flyer who has perhaps fortuitously spent most of his points. 

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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