Coles inks frequent flyer deal with Virgin Australia Holdings Ltd

Consumers can now earn frequent flyer points and even status credits when they shop at Coles – owned by Wesfarmers Ltd (ASX: WES).

The new deal is similar to the one between Woolworths Limited (ASX: WOW) and Qantas Airways Limited (ASX: QAN). The exchange rate of Flybuys’ points is 2,000 points to 870 Virgin Australia Holdings Ltd (ASX: VAH) Velocity Frequent Flyer points – the same rate used by Woolies and Qantas.

From today, members of Coles’ Flybuys program can swap points earned at Coles supermarkets, Coles Express, First Choice Liquor, Kmart, Liquorland, Target, AGL Energy Ltd (ASX: AGL), Telstra Corporation Ltd (ASX: TLS), Medibank Private Limited (ASX: MPL), National Australia Bank Ltd (ASX: NAB), Goodlife gyms amongst many others – for Velocity points and status credits.

There are a few conditions, though.

Velocity members can only redeem a maximum of 138,000 Flybuys points (~60,000 Velocity points) each year.

Each $100 spent in total will also earn Flybuys members 1 Velocity status credit, capped at ten status credits per month. That means a maximum of 120 status credits per year so that shoppers won’t be going from the entry-level Velocity Red membership to Velocity Platinum (top-tier) in a short space of time.

Status credits are the points that allow members to gain access to higher membership levels that have benefits such as lounge access, access to better seats, upgrades and more.

To reach the first step up level, Velocity Silver level requires 250 status credits, and to have flown two eligible sectors. Members then need to earn 200 status credits every 12 months to keep silver. Using Flybuys points alone won’t get you there.

Velocity Platinum membership requires 1,000 status credits and having flown eight eligible sectors. To maintain Platinum requires earning 800 status credits within 12 months and flying eight eligible sectors.

Therefore, the Flybuys scheme is not designed to get more shoppers into higher Velocity membership levels, but to be used more as a means for Velocity frequent flyers to supplement their existing points – without having to book additional flights.

But it does mean that shoppers have an extra incentive to shop at either Coles or Woolworths rather than the discounters IGA and Aldi.

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Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga

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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