Price beats air miles flown

By CHRIS DANIELS

Air New Zealand's new-look frequent flyer plan is designed to turn around a scheme that has morphed from a loyalty programme into a "rewards scheme" since it was set up in 1991.

The airline says it is the first in the world to give benefits linked to the amount spent on a ticket, rather than how far is travelled.

By doing this it is hoping to give greater benefit to business travellers - especially those flying the Tasman and domestically.

Air New Zealand's route structure means many points are earned by those flying long distances, to Asia, the United States and Europe, on cheap discounted tickets. These travellers will be worst-affected by the changes.

Under the new scheme, more dollars are earned the more expensive a ticket is. They are banked, then redeemed on any flight that a traveller can book on.

The business worth of loyalty programmes has been a subject of debate in the High Court at Auckland in the past two weeks, during Air NZ's appeal against the Commerce Commission's decision last year to reject its application to form an alliance with Qantas.

Such schemes are designed to make it less attractive to switch airlines, since passengers do not want to lose status or points by flying on a competitor.

Air NZ argues that the barriers to entry for any new airline are low, so if it is allowed to join with Qantas, putting up fares will be too risky.

But the airpoints scheme has proved as much a curse as a blessing, with points accumulating on Air NZ's books at 15 per cent annual growth rate, now accounting for a liability of $250 million.

The capacity increase - of new seats in planes - was just 2.1 per cent, but an average of 5 per cent of all Air NZ passengers are flying on reward tickets.

Chief executive Ralph Norris said other airlines sometimes viewed airpoints as an asset, but he did not.

The new plan is expected to cost the airline extra in its first year, but no more than the present scheme after that. By allowing frequent flyers to use their points like money, a level of complexity for the airline has been removed, since it no longer has to put seats aside on flights for those redeeming airpoints.

Changing its plan also gives the airline a chance to reconnect with its business travellers, who were annoyed late last year when it axed hot food from its Tasman flights. The hot food was re-introduced just two weeks later.

* The BNZ, which runs the GlobalPlus credit card scheme that is linked with Air NZ's frequent flyer scheme, says it will introduce new "earning rates" for its American Express card from November 16.

It is also increasing its annual fees. Earning rates for its Visa and Mastercard versions will remain the same.

The bank's general manager of cards, Pradeep Roy, said most GlobalPlus customers would enjoy "reward-earning rates" that were either equal to or better than those available now.