Air NZ revamps its frequent-flyer scheme

By CHRIS DANIELS

Air New Zealand has unveiled a revolutionary change to its frequent-flyer scheme, becoming the first major airline in the world to give rewards based on ticket price instead of distance flown.

Airpoints earned under the current plan are growing at a rate of 15 per cent a year, which the airline says is becoming too much of a liability.

Points are no longer earned by the distance flown, but relate to the cost of the actual airfare. Business travellers, who pay more than twice the economy price for a ticket, will now earn twice the reward and transtasman flyers will now earn more for each flight.

An unpopular feature of frequent-flyer programmes such as the Air NZ airpoints scheme is the difficulty in redeeming rewards for flights. This has been changed, with any seat on any flight available for airpoints users.

Airpoints earned but yet to be redeemed count as a $250 million liability for Air New Zealand, not as an asset as some other airlines view them.

Air New Zealand, backed by a supplied auditors report from accountancy firm PricewaterhouseCoopers, says that 61 per cent of all flight redemptions will require fewer "equivalent airpoints". A further 15 per cent will need the same, while the rest will need more.

"Overall, the airpoints dollars required to obtain flight redemptions will be 6 per cent less than the equivalent number of airpoints required under the old programme," it says.

On November 16, all airpoints will change and all airpoints will be converted to the new airpoint dollars. Air NZ wants customers to think of them like cash in a bank account, ready to be used when buying their fares.

There will be no special airpoints seats set aside in each aircraft, but the cheapest fares always go first, so the airline says passengers using the new dollars should still book early.

Travel industry newsletter Travel Today yesterday reported the changes had been greeted by the corporate sector "with cautious optimism".

Tony Moffatt, commercial director at the House of Travel chain of travel agents, said most travellers would be better off under the new scheme, because it had been "really difficult" to redeem points in the past.

He also saw the change as an aggressive marketing pitch by Air New Zealand, seeking to gain a market advantage over its rivals. Passengers had not been happy with how hard it had been to redeem points, but had travelled anyway, sometimes with another airline that may have had cheaper fares.

Winners and Losers

Winners

* Business travellers, who fly on expensive, more flexible tickets and often redeem them for cheaper seats on family holidays.

* Transtasman travellers will earn dollars at a higher rate than points are earned now.

* People who use the internet to book their trips.

Losers

* Those in the provinces, who will now no longer get a free flight to one of the main centres when redeeming airpoints for a trip overseas.

* Those who don't travel much. A new annual fee of $30 is being introduced for all members, which is waived if a commercial fare is bought in the previous 12 months.

* Those who travel on short domestic sectors (less than 300km) but want to redeem them on longer domestic sectors.

* Those who fly on the cheapest fares on longhaul international routes.