Frequent flyer points addicts take note. Lindsay Tanner’s deal in which politicians no longer get frequent flyer points is another pointer to a situation that will anger many sky warriors.

One in which airlines make their “loyalty” points into selling opportunities rather than rewards, which they have been doing by stealth for some time.

But the savings Tanner has also won can’t be pinned to cutting out points. There is no real value to a frequent flyer point in hard money terms. Try to pin it down and you are like a quantum atomic physicist trying to value a quark, or find the Higgs boson, or trap dark matter long enough to find out what it really is.

It evaporates as soon as it is observed. The value of a point is whatever an airline says it is at any moment. It used to be worth up to six cents if sold to a hotel or retailer, although most have become smart enough not to pay anything like that anymore.  Yet simultaneously one point, or mile, (which are not necessarily one for one these days) can also be worth less than one cent if used to “buy” a reward fare.

Airlines no longer want to reward you by giving their seats away for nothing. They want to sell their points, plucked out of thin air, to third parties selling refrigerators, or fresh food, or insurance policies, for whatever they can get for them.

Selling points is pure gold to airlines. They don’t need jet fuel, they don’t need pilots or flight attendants, they don’t need expensive support systems. They just need suckers, and a continuation of the fairytale that there is something out there for nothing.

Imagine “redeeming” 500,000 points earned from buying stuff, most likely for a small business, with a credit card on which you have spent between say  one quarter to one half of a million dollars plus thousands of dollars in card membership fees and interest on monthly balances only to get an economy seat that the airline says is valued at say $4000 but which you can see advertised at travel shops or on line for $1800.

It is the same situation with domestic fares. Why on earth would you spend $20,000 on groceries at Woolworths, and ignore the benefits of cheaper food at other outlets, for a few “free” seats to somewhere Qantas still actually flies to for a holiday in the Queensland sun, when $200 could get the entire family to the Gold Coast on Tiger?

In other words, you give us your loyalty and we will screw you.

The situation is even more absurd when your credit card annual fee includes a higher level for rewards with airline points, say $100 more a year, meaning you are being had by your bank for what is the typical sale price of a discount fare on at least three of the four major domestic brands.  Explain re-w-a-r-d again!

Many companies and a high proportion of the federal and state public services have already done deals in which the fares they access through travel contracts do not generate points.

Tanner’s symbolic severance of politician travel from points raises for those companies that do allow their staff to keep frequent flyer points the obvious question…Why shouldn’t we ask for a point free travel deal too?

But there is another level of reward rampant in the airline business Tanner didn’t mention, and that is of enormous importance to politicians, public servants and company executives.

And that is the Qantas Chairman’s Lounge. The CL is where politicians and celebrities can hide from the riff-raff in the Qantas Club. Can you imagine Tanner, or Tony Abbott, or just about any public figure, willingly mixing it with those members of the public that access the “ordinary” lounges?

The CL is there to buy influence for Qantas. Membership is by invitation only, and is entirely free but at huge cost to the management. It is extended to all elected members of Australian parliaments, and a comprehensive list of  senior managers in companies, public bodies and to trophy celebrities.

It is also a place where industrial relations judges, union officials, competing company executives and those who are supposed to regulate or adjudicate in public life can all … bump into each other … in the course of catching flights … complete with conference rooms, fine wines and quiet corners, without seeking prior approval from the ACCC or causing an ICAC investigation.

It delivers proximity, if not access, that lobbyists charge thousands of dollars to arrange in other places.

All of which no penny pinching politician dares touch.

What Tanner has done is throw a spotlight onto the reality that for most flyers, the days of “free” are ending. Lounges and rewards schemes are only going to survive as profit centres.

They will survive, but more as a discretionary value-added purchase and less as an executive benefit.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey