SYDNEY, June 5 (Reuters) - The launch of Qantas Airways Ltd's first-ever credit card of its own will boost cross-selling opportunities as it targets up to a 73 percent rise in earnings from its frequent flyer division over the next five years, executives said on Monday.
Qantas is also looking to the credit card to lessen a revenue dip expected this year as a result of the Reserve Bank of Australia's decision to cut fees paid between banks on certain credit cards starting on July 1. That has led some credit card issuers to slash the number of frequent flyer points they purchase from Qantas to reward their customers.
"We are expecting some softening in FY18," Qantas Loyalty Chief Executive Lesley Grant told media of revenue from credit card issuers in the financial year ending June 30, 2018. "But we also can see that is going to pick up for FY19 and beyond.”
Qantas earns more ancillary revenue per passenger from its loyalty programme than any other major airline globally, according to travel consultancy IdeaWorksCompany, giving it a steady earnings base in an otherwise volatile aviation market. Around 35 percent of the A$303 billion ($225.07 billion) of annual credit card spending in Australia earns Qantas frequent flyer points.
The Australian carrier on Monday launched a new credit card in partnership with Citibank and MasterCard Inc which gives it a financial interest in a card for the first time.
There are around 50 cards issued by banks that offer Qantas frequent flyer points, but until now the airline has not had direct access to the card spending data to help it better target cross-selling offers to customers.
"The data informs us around what offers are relevant. Relevant offers are a key success factor in marketing," Qantas Loyalty Executive Manager Brian Funston said.
Qantas has more than doubled earnings before interest and tax from its loyalty division since 2008, in part by focusing on opportunities to earn points for activities beyond flying such as health insurance, a prepaid travel money card, wine purchases and playing golf.
The division has reported steady rises in annual earnings over time, making it a far less volatile contributor than the flying businesses.
At a divisional level, however, the profits ranked behind Qantas Domestic, Jetstar Group and Qantas International in the first half ended Dec. 31 because a cost-cutting drive has turned around earnings at those businesses, which have far higher revenues. ($1 = A$1.346) (Reporting by Jamie Freed; Editing by Nick Macfie)