Update: As of 15 May 2020, Velocity members can use their points to book flights on some domestic routes for travel from 1 September 2020. (Terms and conditions apply.)
However, Velocity members are still in the dark about whether they will be able to redeem points to spend on many of the advertised rewards, such as the Virgin Rewards Store.
Need to know
- While Velocity is owned by the Virgin Australia Group, it is a separate company and not in administration
- The value of those points are only inherent in what you can redeem and for most people the best value is domestic flights
The serious travel restrictions put in place last month by the Australian Government to reduce the spread of COVID-19 has put significant financial pressure on airlines operating in Australia.
The first to fall victim to the financial impact of these restrictions is Virgin Australia, who entered voluntary administration on 21 April.
Uncertainty around Virgin Australia's future has resulted in confusion and uncertainty for the 9.8 million members of the airline's joint Velocity Frequent Flyer program, which has put a temporary pause on all redemptions as a result.
We've investigated what these recent developments mean for consumers with accumulated Velocity Frequent Flyer points, whether these points will remain valid and whether they will hold their value.
Velocity Frequent Flyer changes
Velocity Frequent Flyer is Virgin Australia's incentives program, which rewards customers for loyalty with accumulative points each time they fly that can be redeemed for flights or a range of products and services with the company's partners.
While Velocity is owned by the Virgin Australia Group, it is a separate company and not in administration. Velocity continues to operate, but on 21 April the company announced some temporary program changes.
"We've made the difficult decision to pause all redemptions for an initial period of four weeks, effective immediately," the statement reads. "This means our members won't be able to redeem their points for rewards during the pause."
Why the point-redemption 'pause'?
CHOICE travel expert, Jodi Bird, told ABC Radio Southern Queensland yesterday that the reasons behind the pause are understandable.
"It's probably a wise move at the moment to pause the program," Bird said. "The value of those points are only inherent in what you can redeem and for most people the best value is domestic flights."
With flight redemptions currently unavailable to members, Velocity has seen an unprecedented increase in redeeming points on products by panicked members.
"We're seeing more members use points to shop online for items such as gift cards, electronic goods, and wine," the Velocity statement reads. "This unexpected demand has made it difficult for our suppliers to provide these offers and limits the availability for all members to redeem their points."
With flight redemptions currently unavailable to members, Velocity has seen an unprecedented increase in redeeming points on products by panicked members.
Are members' Velocity points safe?
Bird says this situation is unprecedented and warns consumers should not get 'too emotionally invested' in their frequent flyer points.
"It's been difficult to get clear guidance because obviously this doesn't happen a lot," he says.
"Although in December 2019 the ACCC called for clear communication of expiry or devaluing of points. They also recommended people should have an opportunity to redeem points or be compensated ahead of any detrimental changes to a scheme. Those recommendations should still stand in this situation."
The airlines set the rules around those points and they're really a currency that they've invented
"It's probably poor consolation to people now but, generally speaking, it's best not to get too emotionally invested in those points and always just shop for bargains rather than frequent flyer points."
In their recent statement, Velocity reassured members that their frequent flyer points remain safe:
"Your points aren't going anywhere. They will remain in your account. Your existing points will not expire through this period. We will be extending the expiration period for your existing points by the timeframe of the pause. You can continue to earn points with our partners, although you won't be able to redeem them during the pause."
Unprecedented, uncertain, unknown
This is the first time in almost 20 years that a domestic airline in Australia has gone into insolvency.
"Back in 2001 when Ansett collapsed, they really just had a loyalty program to try to get you to stick with flying with that particular airline," Bird says. "But now [points] are a lot more valuable because you can also trade them for products and gift cards."
If Virgin Australia Group does find a new buyer and avoids a complete market collapse, its insolvency administrators, Deloitte's, have indicated they'd prefer to sell the Velocity program alongside the airline. If achieved, it's currently unknown whether Velocity Frequent Flyer points will retain their current value with a new owner.
Bird says that for Velocity to maintain the value of their program, the company needs to scrap the expiry date on points entirely.
"They need to scrap it until they can figure out what they are trying to do with the program so that people can redeem their points, hopefully in future, with another program – or the same program if they find some value in it."
Just how valuable are your Velocity Frequent Flyer points?
The true value of these programs, Bird says, lies not in what they offer consumers but rather the information that these companies can accumulate – and sell on.
"A lot of the value actually comes in data collection, so they collect a lot of data on yourself and your shopping habits and that data can be monetised ... they can make a lot of money on that," he says.
"They can also transfer to providers of credit cards and sell that using those frequent flyer points as a marketing tool. So they really have become quite a broad and big business for the airlines."
In the current climate, the uncertainty around the value of frequent flyer points programs isn't just limited to Velocity. Last month, the blanket travel ban also resulted in Qantas and Jetstar making changes to their loyalty programs, which they hope will preserve the value of their frequent flyer points.
Frequent flyer programs benefit the companies significantly more than the consumers who participate in them
Credit cards linked to frequent flyer programs are also reducing their reward value by removing or limiting products and services linked to travel.
A recent CHOICE review into frequent flyer programs found they benefit the companies significantly more than the consumers who participate in them.
"We always advise at CHOICE not to place too much value on [frequent flyer programs]," Bird says. "Generally speaking, from what we've found in the past, you don't get great value out of redeeming these points for products or gift cards. The best value tends to be for domestic seats."
"But overall, you're better off shopping for a bargain, whether it be airlines or just in the supermarket, rather than shopping around to try to accumulate frequent flyer points."
Stock images: Getty, unless otherwise stated.
