Yahoo Finance Virgin Australia in trouble: What it means for your Velocity points
Virgin Australia (VAH.AX) has become the first high-profile Australian casualty of the coronavirus pandemic, leaving 16,000 workers in limbo.
Also read: Virgin Australia on brink of collapse, 16,000 jobs on the line
Also read: Richard Branson’s ominous warning in open letter to Virgin staff
Also read: Qantas, Virgin back in the air to transport Aussies, coronavirus workers
And Velocity account members are worried. Virgin froze its 10 million Velocity frequent flyer members’ accounts, with members now blocked from redeeming points for at least four weeks after members flooded and ultimately crashed the site.
“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,” a statement on the Velocity site reads.
“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.”
CEO Paul Scurrah said the decision to freeze redemptions came down to preserving value.
"There was a run on our frequent flyer program that we weren't able to slow down and there was an increase in people wanting refunds which was unfortunate,” he said.
“Despite our efforts we weren't able to slow that down. We need to make sure we preserve as much value as we can as we go through this process.”
The changes come into place immediately, with Velocity flagging that the four week period may be extended if needed.
However, it told members that their points are “safe”.
“Your points aren’t going anywhere. They will remain in your account.”
Points also won’t expire, with Virgin extending the expiration period by the length of the pause. Members can also continue to earn points, although they won’t be able to redeem them.
In its statement to the ASX this morning, Virgin Australia said Velocity - while owned by Virgin - is a separate business and as such isn’t affected by the voluntary administration.
What happens next for Velocity members?
Velocity is too valuable to Virgin to just disappear, points expert from The Champagne Mile Adele Eliseo said.
But members should brace themselves for a devaluation in points.
“With over 10 million members, the Velocity Frequent Flyer program is a highly profitable arm of Virgin Australia. It won’t necessarily disappear, even if the airline goes bust,” she said.
“I expect that the Velocity loyalty program will continue to operate in some form, even if Virgin Australia the airline folds. However, members should be prepared to see a points devaluation and changes to redemption options.”
According to financial comparison site Mozo, there are 61 cards associated with the Velocity rewards program. Of those 10 allow you to earn points directly, while 51 allow for points to be converted to Velocity points.
Card providers are now suspending applications and reducing point values.
“Until yesterday you could use your Velocity rewards points to redeem one product per day but that option is now closed off,” Mozo director Kirsty Lamont said.
“As Virgin fights hard for survival - if you have one of the 61 credit cards linked to the Velocity rewards program, whether or not you’ll be able to once again redeem your points is up in the air.”
Lamont noted that ANZ has removed the 75,000 bonus Velocity points that had been on offer with its Rewards Travel Adventure card, while Qantas-linked Jetstar initially halved its rewards return before completely suspending access to the card for new customers.
“We’re seeing a dramatic drop in rewards value as several card issuers responded to current events by adjusting or removing their travel focussed products and offers,” she said.
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