Virgin Australia went into administration this morning, saddled with more than A$5B in debt.
Velocity, Virgin Australia’s frequent flier program, has informed its members that all point redemptions have been paused for at least a month (indefinitely if the airline liquidates).
You can access Velocity here.
Here’s the announcement from Velocity:
Date of publish: 21 April 2020
We’re committed to keeping our members updated throughout these uncertain times of coronavirus and reduced travel.
We wanted to share some information regarding temporary changes to the Velocity program and what this means for our members.
You may be aware that some of the Virgin Australia Group companies have entered Voluntary Administration. Deloitte has been appointed as the administrators, meaning they have assumed responsibility for the business and operations of those companies in administration.
The intention of the administrators is to bring the relevant Virgin Australia Group companies out of administration as quickly as possible and return to normal operations.
Although Velocity is owned by the Virgin Australia Group, it is a separate company and it is not in administration. That means we’re still operating, but we’ve made some temporary program changes in the interests of members.
We’ve made the difficult decision to pause all redemptions for an initial period of four weeks, effective immediately. This means our members won’t be able to redeem their Points for rewards during the pause.
We know how much our members love to plan their travel and use their Points to redeem flights, however the ongoing travel restrictions and reduced flights have limited the options for them to use Points for flights. We’re seeing more members use Points to shop online for items such as gift cards, electronic goods, and wine. 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.
What our members need to know:
· 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.
· These changes take effect immediately. Although the initial timeframe for this restriction is four weeks, this period may be extended. We will come back to you with an update as soon as we can.
Velocity has a trustee in place to look after the interests of members. We will continue to assess a range of options for the program and we want that to include a continuation of our long-standing partnership with Virgin Australia.
We thank you for your patience, loyalty and understanding in these challenging times.
The Velocity Frequent Flyer team
Email that Velocity sent out to members:
Here’s Velocity’s importance to Virgin Australia:
Velocity Velocity reported a Segment EBIT of $122.2 million, an increase of $12.1 million compared to the prior financial year. Segment EBIT margin increased by 0.1 points to 29.7 per cent. The program increased revenue by 10.5 per cent to $411.0 million and attracted more than 680,000 new members. Velocity continued to drive growth opportunities and broaden its customer proposition. Member engagement remained strong, with redemption activity at its highest ever level in the current financial year.
Velocity’s segment result A$122M is close to Virgin Australia’s A$133M.
The fact that Velocity is a separate company from Virgin Australia (the airline recently paid A$700M for 35% minority share owned by private equity – read more here) won’t help if the airline doesn’t survive.
There is no need for a “frequent flier” program if there is no airline backing as Airberlin’s Topbonus found out (Etihad owned the loyalty program). Topbonus tried to survive after the airline’s demise but eventually folded as well.
Let’s hope that Virgin Australia survives merely to ensure that there is competition in domestic Australia flights.
This won’t be the only “redemption holiday” instituted by bankrupt airlines and their loyalty programs.