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Could the Qantas Airways Limited agreement send the share price of Woolworths Limited higher?

Credit: Woolworths

What: Woolworths Limited (ASX: WOW) appears to have rethought its plans to sever its ties with the Qantas Airways Limited (ASX: QAN) frequent flyer program.

According to a media announcement released by the supermarket retailer today, Woolworths Rewards and Qantas Frequent Flyer members will be able to convert Woolworths Dollars into Qantas Points.

This agreement continues an association which has been running for six years and will now continue to run for at least another three.

So What: The continuation of the frequent flyer program arguably gives Woolworths an edge over rival Coles – owned by Wesfarmers Ltd (ASX: WES).

Woolworths’ customers now have the option of earning loyalty dollars off their shopping bill which is the enticement also utilised by Coles, or Woolworths’ customers can utilise the option of receiving Qantas frequent flyer points.

Now What: While the announcement of this deal will primarily be viewed as a positive for Woolworths, in fact the bigger beneficiary is likely to be Qantas which has built its frequent flyer points platform into an incredibly successful profit generating business unit.

Indeed, Woolworths’ share price has failed to respond positively to the announcement today with the stock down 0.6% in mid-afternoon trade. Meanwhile, shares in Qantas have fallen 2.4% but this is more likely a reflection of investors taking profits, betting that the major gains from the lower oil price have already been factored into the airline’s stock.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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