Air New Zealand has announced it has dropped its long-time Airpoints partner BNZ to team up with Westpac, saying the partnership would result in better earn rates for customers and BNZ saying the relationship was no longer a good fit for the bank. So is the lure of 'free' travel enough to make customers switch?
Air New Zealand was in partnership with BNZ for about 16 years according to the Herald and the partnership is due to end on April 30 at midnight. From then on, BNZ’s GlobalPlus products will no longer earn Air New Zealand related benefits.
It’s unclear exactly what this means for BNZ and the kind of loss the bank will face. According to Air New Zealand’s general manager of loyalty Hamish Rumbold, 20 percent of all credit card spend in New Zealand is on Airpoints earning credit cards, so one would naturally assume a number of customers might be tempted to switch over to another bank that offers them, especially given how easy it is to switch these days, with banks having dedicated webpages showing how to do so and regular offers trying to lure customers across.
Rumbold says Air New Zealand has other partnerships with Kiwibank, ANZ, and American Express (it also has its own range of credit cards). And in light of BNZ's departure, Kiwibank has made sure it's not being pushed into the background with a sponsored Twitter post saying: “Someone clipped your wings? We’ve been helping Kiwis fly with Airpoints credit cards for a while now—check ‘em out.” ANZ doesn't appear to have done anything to promote its association as yet.
Air New Zealand spokesperson Alisha Lewis told StopPress that BNZ and Air New Zealand were in discussion for several months in the lead up to the end of the current contract period.
“At the same time, Westpac was very interested in becoming a partner in the programme and after the decision was made not to renew the agreement with BNZ, Westpac was able to bring together a wide range of earning products at better earn rates, which is a great result for our members.”
However, Lewis would not comment on how much it cost Westpac to become a partner or confirm how many customers currently take advantage of the BNZ scheme as the information is commercially sensitive.
Perhaps embracing its 'Be Good with Money' brand, BNZ retail banking and marketing director Craig Herbison said it was about giving customers more options by giving them cash instead of Air Points.
"That's why we've gone down the route of cash, because we believe cash is king, it's more immediate for customers. If they want to fly they can go flying, if they want to buy, they can go buying and if they want to retire debt, then they can do that as well."
In simpler terms, BNZ will essentially be replacing the Airpoints scheme from May 1 with a cash-back offer, which would see customers gaining $1 for every Airpoint they would have earned under the current scheme.
“Rather than having to wait one or two years of earning Airpoints dollars and then taking a flight, they can receive cash and they can do something with that immediately,” says Herbison.
Westpac NZ chief executive David McLean estimated there are probably over 100,000 customers who won’t be able to earn Airpoints on their BNZ credit cards after April.
“We know from our research into this type of customer base, that these are people to whom earning Airpoints is really, really important.”
And it is certainly showing off the new deal, launching a new ad via DDB promoting its 3x Airpoints deal on new credit cards and running a number of sponsored posts on social.
Air New Zealand’s Airpoints programme has also grown by more than a quarter of a million members over the past 12 months to 1.8 million, the Herald reported.
Westpac has come up with some enticing new initiatives too, such as Westpac Airpoints home loan. As its website says, “From 1 May 2015 we’ll be launching our very own home loan with Airpoints. Come aboard with us and you’ll earn A1 for every $1,000 of your outstanding balance per year. Airpoints are calculated and credited monthly.”
Westpac's new products will initially include Westpac Airpoints MasterCard, Westpac Airpoints Platinum MasterCard, Westpac Airpoints World MasterCard and Westpac Airpoints Business MasterCard, according to its website.
Massey University school of economics and finance associate professor David Tripe says it’s hard to say if there will be a big loss for BNZ.
“BNZ have heavily promoted the GlobalPlus brand and the GlobalPlus brand in Fly Buys. I guess it means they’ll be pushing other Fly Buys products, rather than the Airpoints part of it [BNZ owns 25 percent of Fly Buys]. But it does also raise issues between the link between Fly Buys and the Air New Zealand Airpoints.”
Tripe says it looks good for banks to be involved with an airline that has good coverage and is relatively top-of-the-mind for most New Zealand travellers.
“From that perspective people may be encouraged to use their cards. It’s a matter of what the conversion rate to actual Airpoints is.”
He says one of the risks BNZ could face is the potential loss of customers who have a more simple Fly Buys GlobalPlus card.
“BNZ may lose some of those customers. The question is, if that’s the only product people [are using] there may not be a lot of merit in continuing with BNZ, [unless] BNZ can devise appropriate packages.”
He says in terms of the affect on BNZ, it’s a matter of “wait and see”.
"We’ll see how successful BNZ are with their redesigned products,” he says. “They have GlobalPlus links through a whole lot of their mortgages and a range of other products as well.”
When Loyalty New Zealand's chief executive Stephen England Hall was interviewd for NZ Marketing last year, he said Air New Zealand helped Fly Buys, but Airpoints isn't enough anymore.
"Within the Fly Buys universe it’s a continual evolution of how you earn your reward currencies and how you spend it. How we can provide ways to do both those things is really important. Once upon a time it was just flying, but given the relatively small number of people who fly regularly, it isn’t enough. Around 16 percent of New Zealanders above the age of 15 fly more than once a year. If you’re only flying as a reward, you’re probably going to be flying less than once a year as it will take you that long to accumulate sufficient points, whether Air Points or Fly Buys. Therefore it’s a highly valuable, but as an overall proportion of the population, it’s less attractive as a reward than it was. Then we got into the world of household goods and I’m sure that’s where the famous Fly Buys toaster came from. They want more choice. They want to earn it.”
Air New Zealand has embraced this too with its Air Points Mall, although there was some annoyance that Air New Zealand only hosted a handful of New Zealand brands, including Glassons, Hallenstein Brothers and Wildpair compared to the “100 or so international brands” like Asos and Ebay, RetailNews reported last September.
The airline said it tried to get more New Zealand brands onboard, but “some brands we approached did not choose to take up this opportunity while other retailers are unable to participate as they haven’t yet developed an online storefront.”