👉 Background: Qantas spent the last couple of years in full-blown damage control after their back-to-back scandals that includes illegally sacking staff, allowing customers to book ghost flights and delays on more than 40% of its flights.

👉 What happened: The reputation-repairing seemed to work last year because Qantas’ share price was up nearly 70%. As part of this rep-rebuild, Qantas revamped their Frequent Flyer program and opened up 20 million new seats for Frequent Flyer members under its new 'Classic Plus' offering - a more expensive version of the traditional, Classic Rewards (but with more seats available).

👉 What else: Now, the trusty Classic Rewards system is getting a shake-up too. Qantas has announced it’ll cost more points to book flights under its Classic tier – anywhere from 5% to 20% more. In effect, this will devalue the current Frequent Flyer points which should reduce Qantas’ deferred revenue liability.

What's the key learning?

💡Deferred revenue liability is when a company gets paid upfront for a product or service it hasn’t delivered yet. In accounting terms, It’s added to the balance sheet as a liability.

💡 In Qantas' case, it still owes its customers flights or other ways to redeem these points in the future. And, Qantas customers have been earning points at an increasing rate over the past few years, and they haven’t been able to burn these points at the same rate — meaning Qantas’ deferred revenue liability keeps growing and growing and growing.

💡Get this: the number of total Frequent Flyer points in the world was up 13 per cent in the six months to December 2023. So now, Qantas has devalued the points of its Classic Reward system to encourage its customers to burn more points and ultimately reduce their deferred revenue liability.