Monday Briefing – 9 December 2019

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South African Airways Airbus A340 Aircraft
South African Airways Airbus A340 Aircraft (Image Credit: South African Airways)

Welcome to our Monday Briefing for the week beginning 9 December 2019.

South African Airways Enters Business Rescue Process

South African Airways has entered a formal process in South Africa known as “Business Rescue”.

This is a pre-insolvency process similar to Chapter 11 in the United States. A business rescue practitioner has been appointed to oversee the running of the airline and a restructuring process with the aim of avoiding a liquidation of the state owned airline.

Given South African Airways’ well documented and long-standing financial problems, this will, at a minimum, inevitably lead to substantial changes (though the process is highly political) particularly to its international network.

The Australian Competition & Consumer Commission on Loyalty Programmes

The Australian Competition & Consumer Commission published a report last week on loyalty programmes in Australia.

These of course include Qantas Frequent Flyer and Virgin Australia Velocity. The headline findings will not surprise those who are well versed in airline frequent flyer programmes, namely there’s no such thing as a free lunch and beware the fallacy of the sunk cost.

It does include specific recommendation such as greater transparency and protection against unfair contactual terms. The report also cites concerns about loyalty programmes acting as barriers to entry for new market entrants.

The report does also include some interesting comments on the psychological aspects of airline frequent flyer programmes, such as the “endowed progress effect” when members feel that as they have started on the journey towards a specific reward, they feel compelled to complete the journey to claim it.

Frequent flyer miles are of course currencies in their own rights. Around 110 billion Avios are issued across participating programmes every year. However, there is very little by way of consumer protection. Airlines can, and have, devalued frequent flyer currencies at very short notice with very little recourse.

Given the increasingly tough line regulators are adopting in favour of consumers in many territories (particularly the Competition & Markets Authority in the UK), do not rule out some form a formal regulation in the longer term.

Qantas & Air France-KLM Frequent Flyer Partnership

Staying on the theme of frequent flyer programmes, Qantas has today announced a new frequent flyer partnership with Air France-KLM.

Members of the Qantas Frequent Flyer programme will be able earn and redeem points across the entire Air France and KLM networks, as well as receive their frequent flyer benefits when flying on Air France and KLM. This follows the establishment of reciprocal codeshare last year.

Also of note this week:

The Civil Aviation Authority has appointed the consultancy Flint Global to advise on a possible break-up of Heathrow, whereby individual terminals would be operated by separate entities. (Sky News)

KLM has opened a new non-Schengen lounge at Amsterdam Schipol airport. (KLM)

Madrid Barajas airport is planning a series of changes to make the airport more welcoming to Chinese visitors such as accepting payments through WeChat Pay (UK airlines remain deeply frustrated at how the UK’s visa regime makes it much harder for Chinese visitors to come to the UK when visiting Europe). (El Pais In English)

Qantas launches a dedicated microsite to mark its centenary. (Qantas)

Late post publication updates:

[Reserved for updates throughout the day]

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