Qantas, Virgin Australia clamp down on rewards purchases

Qantas is now limiting purchases on its rewards storeto a maximum of two of the same item per day, although you can continue to add different items to your cart. This covers everything from gift cards to toasters.

A statement on the store reads "due to high retail demand in Australia at present, we’ve introduced a limit for each member of 2 items per product per day to ensure the continued availability of products to as many members as possible."

The move comes as Virgin Australia previously clamped down on members of its Velocity Frequent Flyer scheme converting their airline points into gift cards valid for major retail outlets.

The airline's Velocity Rewards Store imposed a limit of one gift card purchase per 24 hour period.

The gift cards sell for between 3,000 and 35,000 Velocity points, with a redemption value of between $10 and $200 across some two dozen partners including Apple, David Jones, Dymocks, Endota Spa, JB Hi-Fi, The Iconic, Rebel Sports, Ticketmaster and Westfield shopping centres.

Card sharp

While using your Qantas or Velocity points balances on the respective rewards store doesn't give the best of value – the average cash return is equivalent to 0.45 cents per point – they're a popular purchase among people with a relatively low points balance or who have little opportunity to spend them as upgrades.

One of the advantages of a gift card is that it retains its value for upwards of a year and can be used to purchase goods on sale, which can increase the effective overall value of the points used to buy the card.

Read: The Virgin Australia business class upgrade guide

A notice now posted on the Velocity Rewards Store reads "Due to high demand we are limiting the number of Gift Card redemptions to 1 item per day for each member to ensure continued availability where possible. We appreciate your understanding."

Spending Velocity points on other purchases has not been rationed, however, Virgin is temporarily suspending the ability for Velocity Points to be transferred to Singapore Airlines by converting them into KrisFlyer miles.

Read: How to transfer Velocity points to Singapore Airlines' KrisFlyer

A steady earner

The Velocity Frequent Flyer scheme is fully-owned by Virgin Australia, with the airline having last year spent $700 million to repurchase a 35% stake sold to private equity firm Affinity Equity Partners in 2014 for $335 million.

With just over 10 million members, $215m in revenue for July-December 2019 and a $68.9m in pre-tax earnings – compared to $3.1bn in revenue but only $66m in earnings, and a total loss of $88m – Velocity remains a stand-out business in the Virgin Australia portfolio.

Earlier this week, Virgin Australia confirmed it has approached the Federal Government for a $1.4 billion bailout in order to survive a prolonged coronavirus grounding.

The airline is said to have sufficient cash at hand to weather up to six months in the current COVID-19 lockdown scenario, which has gutted the travel market, with Virgin Australia CEO Paul Scurrah saying the airline was asking for "temporary support, not a handout."

"We want to work with government on how best to design this but it will be a repayable loan," he told ABC Radio. It's reported that if the airline was unable to repay the loan in full within two to three years, the government would take an equity stake in the company.

However, Deputy Prime Minister and Transport Minister Michael McCormack maintains Virgin Australia will not receive any special treatment.

"Whatever we do for Virgin we are going to have to do for other companies as well. We can’t just pick and select individuals and winners out of this," McCormack said, adding that Virgin should consider raising capital from its existing shareholders, which includes Singapore Airlines and Etihad Airways.

David Flynn

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.