The frequent flyer financial machine

The most instructive single fact about Qantas as a business is not its domestic profit margin, 16.1 per cent in the first half of FY24-25. ¹¹ It is not even the record underlying earnings of A$2.39 billion for the full year to June 2025. ⁶ It is what happened to Qantas Loyalty during the COVID pandemic. ¹⁴

In the financial year to June 2020, Qantas's domestic and international flying operations saw profits fall by more than 75 per cent. ¹⁶ The planes were grounded. Revenue collapsed. During the same year, Qantas Loyalty recorded underlying earnings before interest and tax of A$341 million, down only 9 per cent. [5,16]

The planes stopped flying. The points kept selling. [5,14]

That resilience reveals the business model. Qantas Loyalty is not a loyalty program in the way most people understand the term, a benefit for frequent customers, funded by the airline as a retention tool. It is a financial services business that happens to be attached to an airline. ⁵ Its primary revenue source is not customers redeeming points for flights. It is banks and retailers paying Qantas for the right to issue points to their own customers. [5,13]

01How the business model works

The mechanics are straightforward once explained. ⁵ Qantas sells Qantas Points in bulk to financial institutions and major retailers. ⁵ Banks issue credit cards that award Qantas Points on purchases. ⁵ Woolworths allows customers to convert Everyday Rewards points to Qantas Points. ¹³ BP, TripADeal, Qantas Hotels, and dozens of other partners participate in similar arrangements. [1,5]

The bank or retailer pays Qantas for every point it issues to its customers. ⁵ That payment arrives at Qantas whether or not the customer ever redeems the points. ⁵ When points are redeemed on a Qantas flight, Qantas provides a seat, usually one it could not have sold at full price. ⁵ When points expire unredeemed, which many do, Qantas keeps the revenue from selling them without ever providing the benefit. ⁵ In accounting terms, this is called 'breakage': it is structurally embedded in the economics of every loyalty program, and it creates a systematic incentive to make redemption harder. ⁵

In FY24, Qantas Loyalty generated revenue of approximately A$2.6 billion and underlying EBIT of A$511 million, a record. [1,2] That profit margin of roughly 20 per cent exceeds even the domestic flying margin of 16.1 per cent. ¹¹ The Loyalty division is the most profitable segment of the Qantas Group. ¹¹

The value of this business was explicitly recognised as early as 2008, when JPMorgan estimated the Qantas Frequent Flyer program was worth approximately A$2 billion as a standalone entity, 'more than a quarter of the total market value of Qantas' at the time. ⁴ Qantas considered floating the Loyalty business as a separately listed company that year, which would have made its financial independence from the airline explicit. ⁴ The float was deferred in September 2008, with Qantas citing volatile market conditions. ⁴ Qantas again considered floating part of the loyalty business during a strategic review in 2013 and 2014, but in August 2014 chief executive Alan Joyce said a sale was off the table. ⁴

Correction, 8 October 2026. The introduction said the airline received A$2.7 billion in taxpayer support during the pandemic; the source cited for that figure does not carry it, so the sentence has been removed. The section named ANZ, National Australia Bank, CommBank and American Express as issuers of Qantas Points credit cards; the source does not name them, so the sentence now refers to banks generally. It said the 2008 float was deferred due to the global financial crisis; the source for that sentence did not mention it. The float was deferred in September 2008, with Qantas citing volatile market conditions ⁴. The figures for the 2019-20 year (Loyalty underlying EBIT of A$341 million, down 9 per cent; Domestic down 78 per cent; International down 83 per cent) are now cited to Qantas's 2020 Annual Report ¹⁶.

Correction, 8 October 2026. This section said of the 2008 float that "It was never revived". The source cited ⁴ says Qantas again considered floating part of the loyalty business during a strategic review in 2013 and 2014, and that in August 2014 chief executive Alan Joyce said a sale was off the table. The sentence now says so.

02Half of Australia enrolled

Qantas Frequent Flyer has more than 15 million members, approximately 50 per cent of the Australian adult population. ⁴ About 20 per cent of New Zealand's population is also enrolled. ⁴ This scale is not incidental to the business model. It is the business model. [4,5]

A program with 15 million members representing half the adult population of Australia is not a niche product for frequent flyers. It is infrastructure. ⁴ The banks that issue Qantas Points co-branded cards can market those cards to essentially the entire Australian working-age population. ⁵ The retailers that offer Qantas Points accumulation can reach every household in the country. ¹³ Qantas sits at the centre of this ecosystem, collecting revenue every time a point is issued anywhere in it. ⁵

The lock-in effect is consequential for aviation competition. ⁵ A person who has accumulated years of Qantas Points, achieved Platinum or Gold status, and structured their credit card and retail spending around point accumulation faces real switching costs if they want to fly a different airline. [4,5] Those costs are not just financial; they represent the forfeiture of status benefits, lounge access, and reward seat availability built up over years. ⁴

As this series documented in Article 2, Qantas holds approximately 80 per cent of the Australian corporate travel market. ¹¹ Much of that dominance is structural, and loyalty lock-in is a key component. [5,11] A business that sends its employees on Qantas will accumulate status and points in those employees' accounts. Switching the corporate travel policy to Virgin or an international carrier means starting from zero. ⁵

03The devaluation problem

A private currency is only as valuable as the issuer is willing to make it. [4,12] Qantas, as the sole issuer and arbiter of Qantas Points, can and does change the value of those points unilaterally. [4,12]

In January 2024, Qantas announced that the cost of many Classic Flight Rewards would increase from August 2024, in some cases requiring up to 25 per cent more points to book the same seat. ¹² This was framed as a minor adjustment and the second such change in the program's history. ¹² Simultaneously, Qantas introduced the Classic Plus product: more seats available, but at much higher point costs than Classic seats. [3,12] The net effect for most members: more choice of seats, but at higher redemption costs. ¹²

A private currency is only as valuable as the issuer is willing to make it. Qantas, as the sole issuer, can and does change the value of those points unilaterally.

The ACCC's airline monitoring report noted consumer concern about loyalty program devaluation in its list of issues requiring attention. ¹⁵ The Ghost Flights scandal, in which Qantas sold approximately 8,000 tickets for flights already cancelled, added a further dimension: customers had accumulated points through a program while Qantas was simultaneously failing to deliver the service those points were meant to reward. ⁹

In February 2026, Qantas announced further changes, described as the program's 'new era,' which allow members to earn status credits through everyday spending for the first time. ⁷ The change expands the program's non-aviation revenue base. ⁷ It also raised the number of credits required to retain status tier membership. ⁷ Qantas guided that Loyalty EBIT would grow 10 to 12 per cent in FY25-26. ⁷

04The investment case: an airline, or a loyalty business?

Analysts who cover Qantas have for years made a version of the same argument. ⁵ The airline's equity is valued more as a loyalty business than as an airline; the flying operations provide distribution and brand credibility for the points program, while the program provides consistent cash flows that the volatile airline business cannot. ⁵

This framing illuminates the domestic margin comparison from Article 1. Qantas Domestic earns a 16.1 per cent margin on a concentrated, low-competition market. ¹¹ Qantas International earns 7.1 per cent on a competitive market. ¹¹ Qantas Loyalty earns approximately 20 per cent, on a business where the primary cost is issuing points and the primary risk is that members actually redeem them for flights. [1,11]

The domestic flying business is profitable because competition is limited. ¹¹ The loyalty business is profitable because 15 million Australians are enrolled in it and the terms under which they can redeem their points are determined unilaterally by Qantas. [4,5]

05The rort

The frequent flyer financial machine is not illegal. It is not even unusual; every major airline globally operates a version of the same model. ⁵ What makes the Australian version distinctive is scale and structural lock-in. [4,5]

Fifty per cent of Australians are enrolled in a private currency issued by a company that also controls 63 per cent of domestic flights, has blocked a competitor's entry to the market, and has cultivated personal relationships with 90 per cent of federal parliamentarians through a mechanism of preferential travel access. [4,6,11] The loyalty program is not separate from the airline rort. It is part of its architecture. [5,11]

A consumer who wants to accumulate points toward a free flight must fly Qantas to do it efficiently. ⁵ To fly Qantas on domestic routes is to fly in a market where competition has been systemically limited. ¹¹ The points program's value proposition depends, in part, on Qantas's domestic pricing power, the same pricing power that produces a 16.1 per cent domestic margin while the competitive international business earns 7.1 per cent. ¹¹

The loyalty program is the reward Qantas offers for participating in the market it controls.

The loyalty program is the reward Qantas offers for participating in the market it controls.

If it's a rort, we cover it.

Update, 7 October 2026. Reference ¹⁰, which pointed to the High Court's homepage, now points to the Court's judgment summary in Qantas Airways Limited v Transport Workers Union of Australia [2023] HCA 27, and states only what that summary states. No sentence in this article cites it.