Qantas results confirm that spending frequent flyer points on airline tickets is what 90% of Frequent Flyers do - and that it is the most cost effective use of the points.
The Frequent Flyer program, far from costing Qantas money to make its customers more 'sticky' (loyal) actually earns money by charging partnering organisations (the latest being Optus) to supply their customers with points - at a rate that far outweighs the cost to Qantas of providing the flights.
Through this method - and by changed accounting methods in 2009 (which allows it to recognise the gains it makes per point before the 'point' is spent) it added $161 million to its Frequent Flyer earnings in the tax year ending 2010.
Qantas also benefits, as it gets paid approximately 2 years before the average Frequent Flyer member spends their points. Also - approx 8 per cent of the points expire without being used.
You also get the best value for money by redeeming those Qantas Frequent Flyer points on Qantas Classic rewards - particularly if you use them for Business Class travel. In fact the best value for money is using the 'Points Plus Pay' option on Qantas.
Source: SMH, Macquarie