Ask Colin

How does Qantas make so much money from their frequent flyer scheme?

This puzzled me for a while too, but I finally worked out the answer:

Qantas sells frequent flyer points to various organisations including Qantas Airways, many other businesses that find value in offereing fequent flyer points to generate extra business. It seems that about 40% of the points are sold to Qantas Airways and 60% th other parties.

The Qantas Frequent Flyer Scheme makes a profit on the deal in three ways:

1. The benefits redeemed (flights or goods) cost less than the points were sold for.

2. Interest earned from investing the funds charged on the sale of points prior to their redenption.

3. Revenue from points that are never redeemed.