How loyalty programs actually make money

Qantas Loyalty made $625 million in underlying earnings before interest and tax in the 2026 financial year, up 12%. That's from the loyalty program alone, and it makes it one of the steadiest parts of the whole Qantas Group.

Frequent flyer programs aren't a cost of running an airline. They're a business in their own right. Here's how they make money, and why understanding it helps you use your points better.

The basic model

An airline loyalty program sells points and buys rewards.

1. Partners buy points. A bank, supermarket, fuel brand or hotel pays the program for every point it gives you.
2. You earn and hold the points. Sometimes for years.
3. The program delivers the reward. When you redeem, it supplies a seat, upgrade, hotel night or gift card.

The program makes money on the gap between what partners pay for a point and what it costs to deliver the reward. Because many reward seats would otherwise fly empty, that cost can be well below what the seat would sell for.

Who buys points

• Banks are the biggest buyers in Australia. Every Qantas or Velocity point you earn on a credit card was bought by your bank.
• Supermarkets and fuel. Everyday Rewards and BP Rewards buy points to keep you shopping with them.
• Online shopping, hotels and car hire. Partners pay for the points they offer as an incentive.
• Members themselves. When you buy points directly, you're paying full price for the same thing.

The list keeps growing. Qantas says Uber was its fastest-growing partner in FY26, and Bunnings joined in July 2026.

Where the money comes from

The margin on each point. Partners pay more for a point than it typically costs the program to supply the reward.

Points that are never used. Some points expire or sit unused forever. The industry calls this breakage. It's real income, which is one reason programs set expiry rules.

The timing. Partners pay when points are issued, but the program pays for the reward only when you redeem, sometimes years later. In the meantime, it holds the cash.

Loyalty to the airline. Members fly more, pay more for fares, and stay put. That value shows up in the airline's revenue, not just the program's.

Why this matters for your points

Once you see the model, a few things make sense.

• Why earning keeps getting easier. Every new partner is a new customer for points.
• Why the best reward seats stay rationed. Every seat redeemed is a cost. The program releases enough to keep members happy, not as many as members want. Reward seats: why they're hard to find explains how.
• Why "points + pay" and gift cards are easy to find. They cost the program little and give you little per point.
• Why devaluations happen. When more points are issued than rewards can cover, prices rise. Why points get devalued covers that.

Last year Qantas members redeemed a record five million flight reward seats. The program wants you to redeem, because a member who uses points stays engaged. It just wants you to redeem in ways it can afford.

The bank side

Banks have funded much of their points spending through interchange, the fee shops pay on card purchases. With consumer interchange capped at 0.3% from 1 October 2026, banks have less to spend on buying points, which is why so many have cut earn rates or worsened transfer ratios. The card surcharge ban and your points has the details.

How a program decides what to offer you

Every offer has to pay for itself somewhere. A bonus points campaign might cost the program money on day one, but if it lifts your spending with a partner or keeps you flying, it earns that back over the following years.

That's the lens to use on any offer. Ask who's paying for the points and what they want from you. If the answer is "a bit more of your everyday spending", the deal is usually good for both sides. If it's "a big fee upfront", run the numbers.

What to do with this

1. Earn points from partners on spending you'd do anyway.
2. Redeem for rewards that are costly for the airline and valuable to you, such as Classic seats in premium cabins.
3. Treat gift cards and shopping as a last resort.
4. Don't hoard. Points are worth more to you used than held.

New to all this? Start with Loyalty points in Australia: a beginner's guide.