Will the Flying Kangaroo sell its golden goose?
Qantas's warning of an interim loss of up to A$300 million ($329 million) and even tougher times ahead, coupled with a downgrade to a "junk" credit rating, has set rumours of a sell-off of the Qantas Frequent Flyer scheme swirling.
In the past week, not a day has gone by without friends and worried frequent flyers asking me if they should spend all of their Qantas points now, booking a handful of trips or even one around-the-world first class junket to empty their account ahead of some impending points apocalypse.
So what's the story? Where do you and your precious Qantas points stand?
It's true that Qantas CEO Alan Joyce has declared that "all options are on the table", including putting part or all of the airline's lucrative frequent flyer programme on the auction block.
And if Joyce is looking for a quick way to inject cash into the Flying Kangaroo, the Qantas Frequent Flyer scheme is perhaps the shiniest silverware in the drawer.
With almost 10 million members on the books, the scheme's parent Qantas Loyalty division took a record A$1.2 billion in billings across the 2013 financial year to contribute A$260m (before interest and tax) to the Qantas purse.
That's a much-needed river of revenue when Qantas is facing a high tide of red ink.
But the haul from selling the entire scheme, or even a sizeable chunk of it, would be many magnitudes greater and provide a quick fix for Qantas' financial woes.
John O'Shea, analyst with Bell Potter Securities, believes that as a stand-alone business, Qantas Frequent Flyer would be valued at "somewhere in the A$1.5b to A$2.5b range", he told High Flyer.
That's a staggering amount in anybody's terms. How can a frequent flyer programme possibly be worth so much?
If you consider points as currency - and Qantas Points are Australia's de facto second currency, after the Aussie dollar - then a frequent flyer scheme is effectively a license to print money.
The airline creates the points, conjuring them up from thin air at the press of a spreadsheet key to sell to retail partners - credit card companies, supermarkets, hotel chains, insurance and utility suppliers, restaurants and so on.
Those businesses dangle the bait of earning points for every dollar you spend as a way to attract customers.
Having amassed a sackful of points, those customers swap them back to the airline for free flights, business class upgrades and assorted products sold through the airline's online frequent flyer store.
In short, this is a closed economy over which the airline has total control.
It determines the price of points sold to partners as well as the "exchange rate" when it comes to the public trading in their points.
And one can't help but get the impression that they're the least messy part of running an airline.
There are no pesky passengers, no expensive planes with their bothersome fuel bills and unionised cabin crew ... just the whoosh of credit cards dispatching invisible frequent flyer points from Qantas to businesses to shoppers and, in the end, back to Qantas again.
They're also unparalleled for data-mining, with Qantas's Frequent Flyer scheme sitting on arguably Australia's largest and richest database of customer details and spending patterns.
Little wonder, then, that a well-run frequent flyer scheme is not just a cash cow but a super-profitable businesses in its own right, and one that's ripe fruit for the plucking.
So what's the forecast for Qantas Frequent Flyer?
A full sale might deliver a A$2.5b windfall for Qantas, but Commonwealth Bank analyst Matt Crowe considers this is unlikely.
"Qantas Frequent Flyer is totally reliant on Qantas for seats so it makes sense for it to remain a subsidiary of the Qantas Group," he told High Flyer.
"Any potential owner would face the risk that Qantas increases the 'price' at which it supplies seats or even cuts off the supply of seats altogether."
For the same reason it's felt that a minority stake in QFF would also be less attractive, as it would deliver a reliable income stream but without any real control over the vital supply side of the business.
Qantas isn't expected to announce any asset sale plans until February 2014, and at this stage nobody knows exactly what shape they'll take.
But if you're puzzled over the fate of your Qantas points, I suggest staying calm. Book some trips if you plan on travelling, but I don't see any need to panic over your points.
Sydney Morning Herald