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Virgin targets Qantas frequent flyers

Virgin Australia (ASX:VAH) is luring frequent flyers away from Qantas Airways (ASX:QAN), growing its member base to near 3.7 million.

The company is still a long way behind Qantas’ 9.3 million members, but gained 500,000 members in the past year alone. In another move to lure more members to switch their allegiance, Virgin has announced a new scheme where loyalty members can earn frequent flyer points when their pets travel with them on domestic flights.

Up to 1,200 points can be earned, if members are on the platinum level and travel with two pet carriers. A member with the lowest level red membership, travelling with one cat or dog can earn 300 points.

With Qantas set to benefit from its alliance with Emirates and its Skywards members, Virgin is stepping up its battle with Qantas for lucrative business travellers – hence the new pet travel scheme. It’s a key component of Virgin’s attempts to take domestic market share away from Qantas. Australia’s second largest domestic airline has also taken a 60% stake in Tiger Airways and recently completed a takeover of regional airline Skywest.

Neil Thompson, head of Virgin’s Velocity frequent flyer program, has told Fairfax Media that Virgin was making inroads into Qantas’ dominance of the frequent flyer market. But analysts are sceptical, with flyers able to be members of both airlines’ schemes, and say it’s unclear whether the rising numbers for Virgin will translate into more flights booked.

Qantas has repeatedly stated that it wants to retain above 65% share of the domestic market. Virgin wants to capture more than the remaining 35%, and has poured its efforts into competing on several levels with Qantas. Virgin’s stake in Tiger is expected to see the budget airline take on Jetstar, while Virgin goes head-to-head with Qantas for the medium to upper level of the market, as well as business travellers and corporate accounts. The integration of SkyWest is aimed fairly and squarely at Qantas’s regional business Qantas Link.

Foolish takeaway

The big winners in the air wars will be travellers, with more features, cheaper and more frequent flights. Airlines are notoriously bad investments, with the global airline industry losing billions each year. Foolish investors could do worse than to avoid the industry altogether.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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