Shares of Qantas Airways Ltd [ASX:QAN] have wriggled this morning, following changes made to their Frequent Flyer program.
Qantas will be making a $25 million investment in order to bring down the price of carrier charges, and for more seats to be made available for loyal customers — a reward program improving how returning passengers are recognised.
But what should have been welcome news for shareholders has instead had an opposite effect, with the share price stumbling to a -2.5% low. At time of writing, the airline giant is trading at $5.41 a share.
Why did Qantas’ share price suffer?
As part of this new system, Qantas aim to introduce a new ‘points plane’, in which every seat on a flight between Melbourne and Tokyo will be especially reserved for customers using collected points.
However, this also means that business class upgrades will be harder to obtain for point collectors.
According to Bloomberg, the number of points which will be needed to buy a business class seat on either a domestic or international flight will increase by 15% in September this year. Points required for an upgrade from economy will be increased by 9%.
This will be, according to Qantas, the first price increase in 15 years, but remains firm in the fact air travel has improved dramatically in that time.
The number of points required for international economy seats will be cut by 10%, and carrier charges are said to be cut by 50% on international bookings made with points.
What does this mean for investors?
Some people just don’t like change. Especially after being faithful to one airline. But today’s small price movement isn’t necessarily indicative of investor disapproval. Reviews of services are inevitable and necessary, and not always set in stone.
Qantas CEO Alan Joyce reiterated this morning:
‘This is one of the most popular areas for people to redeem points… […] this is the first time in 15 years that we’ve done that.’
An announcement like this may take a few days to settle before we see the bigger picture.
For Money Morning
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