Virgin administrator says Velocity won't be stripped down, sold off

The Velocity frequent flyer program will be a key part of the Virgin Mk II package offered to the airline's new owner.

By David Flynn, April 21 2020
Virgin administrator says Velocity won't be stripped down, sold off

The 10 million members of Virgin Australia's Velocity rewards program can stand easy about the fate of their frequent flyer points, says airline-appointed administrator Vaughan Strawbridge of Deloitte, who has ruled out selling off the program "as an individual asset."

Speaking to media following this morning's confirmation that the airline had moved into voluntary administration, Strawbridge stressed that Velocity would be offered to Virgin's new owner as part of the overall airline deal.

"Velocity is an important part of the group and it's intended that as we go through the restructuring process that we offer that up as part of the package... there is no intent to run a separate process to look at selling that."

Lauding Velocity as "an incredibly good asset", Vaughan added that the scheme was "a key part of how this business is restructured and comes out of administration."

However, Virgin Australia CEO Paul Scurrah says a recent "run" on Velocity points, sparked by initial reports of the airline's request for a $1.4 billion Government bailout, has led to points redemptions being suspended until late May.

What sparked the run on Velocity points

The four-week freeze is intended "to stop the issue caused by a reduction on confidence" in the airline, Scurrah said. "I think there's a positive step today, which should give a bit of confidence, but we need to make sure we preserve as much value as we can as we get through this process."

"When our original request to the Government made its way into the newspapers there was a run on our frequent flyer program that we weren’t t able to slow down, and there was an increase on people wanting refunds, which was unfortunate, and despite our efforts we weren't able to to slow that down."

Deloitte's Strawbridge says he hopes to take "initial expressions of interest" in the new-look Virgin Australia "in the next three weeks", with a timetable to lock down a deal "a further four to five weeks" after that.

But the actual power of those Velocity Frequent Flyer points will be a choice for the airline's new owner, who could launch a spreadsheet-friendly if goodwill-killing devaluation of the program by increasing the number of points needed for an upgrade or a free flight.

Read more: What happens to your frequent flyer points if an airline goes bust?

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

23 Oct 2014

Total posts 164

Great news Virgin Australia, fantastic for all members.

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1189

Let's not put up the bunting just yet shall we.

Singapore Airlines - KrisFlyer

08 Jun 2018

Total posts 90

Let's wait and see, suspect a new owner (assuming it isn't bought by another airline) may well keep the program, even though public confidence in it will take a hammering. If / when they do fly again the enthusiasm for new owners to provide heaps of ‘free' reward seats for the benefit of those who acquired the rights under previous ownership may be extremely limited. They are likely to want seats filled with people paying in cash, not velocity points. It will be an interesting time. It does stagger me when you hear some stories of how many points some people have. Why can they not see there is no protection on these things.

06 Feb 2014

Total posts 10

Its amazing how many people will just stockpile with no given goal in site. We didn't have too many points left after using them a couple of years back to upgrade on Singapore Air - so at best we'll get some wine out of it, at worst we will have lost ~50K of points. But some people had soooo many points built up.

My take is that whatever comes out the other end will seek to gain loyalty of the people who were high flyers under velocity (Status matches and whatever else), but likely to almost 'start again' as far as preferable with the points side of it.

Singapore Airlines - KrisFlyer

08 Jun 2018

Total posts 90

I agree with this, the new owners may want to keep it as they may view that there is a trade off to providing some value to existing points if they believe it will engender a degree of loyalty to the new airline. I can see them providing matched status, etc. What they are unlikely to want to do is essentially take on the liability that is the current velocity balance for members and allow them to roll this over into a new (almost certainly smaller) entity, in terms of 'free' flights, etc. People will need to remember this will be a wholly new entity, even in the event that it retains the VA name. It will only pick up the bits of Velocity that it views as being of value to it going forward, it has no obligation, moral or legal, to stand on the commitments made by another entity in the past.

Virgin Australia - Velocity Rewards

30 Aug 2018

Total posts 6

As I understand it (from the press conference this morning), the Velocity trust has the cash value of points stored in it, so there would be no reason for them to disappear or be written down.

What probably will happen is a devaluation by cutting earn and redeem rates, keeping in mind they still have to compete with QFF - so you can't cut too hard.

Qantas - Qantas Frequent Flyer

29 May 2013

Total posts 48

I am certainly waiting the outcome, as I am one of these people with a large balance of points (over 700k). I hope they are still there when Virgin is relaunched as they were going to be used for a Europe trip in 2022 for the missus' 50th. If they aren't then that's a bugger but c'est la vie we will work something else out.

Qantas - Qantas Frequent Flyer

24 Jan 2018

Total posts 191

I'll bet you a craft beer, ideally an IPA beer, that they'll be there. :-)

Velocity

23 Feb 2016

Total posts 17

Fully expecting these points to be seriously devalued. Somehow I managed to burn most of my points on Monday night battling a constantly crashing website - feeling I may be vindicated down the line once new owners take over the program.

Virgin Australia - Velocity Rewards

15 May 2015

Total posts 7

Problem is the "trustee" of Velocity loaned Virgin $150M five years ago and not ONE CENT has been paid back and no interest received. They are now having to line up as a creditor. That $150M was the cash that is supposed to stand behind the members points, so Velocity may well start off under Virgin mk2 with a $150M+ hole in it. Good work by the trustee NOT


Hi Guest, join in the discussion on Virgin administrator says Velocity won't be stripped down, sold off