Any rational assessment of the loyalty scheme linkup between Woolworths and Qantas which was given a 22 June start date today would suggest that it is one of the silliest ways anyone could get a ‘free’ ticket.

To get the many thousands of points usually required to fly between say Sydney and Hobart, or Melbourne to Perth, would you really preferentially spend tens of thousands of dollars on what are not necessarily the cheapest groceries around instead of just buying one for sometimes less than $100?

Mightn’t it make more sense to save $50 a week shopping at Aldi or Coles and just buy a ticket from whichever airline happens to offer you the best price and availability when you want it from the money saved?

You win three ways. You eat for less. You get to choose between airlines. And you quickly save the money for a flight that could take a very long time to get for ‘free’ accumulating points for conversion at a rate that it entirely at the whim of the airlines.

However airline loyalty schemes have never been rational from a consumer perspective. And they certainly aren’t generating tickets for ‘free’, any more than cheap petrol for paying-whatever-we-feel-like-charging-you-for-food is actually ‘cheap’.

Loyalty programs, or what Woolworths terms ‘customer engagement’ are about territory, marketing advantage and savings in the cost of recruiting and retaining customers.

This is how the partners summarise the terrain in which they wish to minimise or immunise competition.

Background notes issued before today's PR event

The other day Jetstar emailed me a $100 voucher just for booking a flight and agreeing to be on their direct marketing data base.

Which will undercut anything I could earn in terms of flights for points conversions buying groceries at Woolworths after 22 June using a Qantas Frequent Flyer linked Everyday Rewards card.

And of course Jetstar is one of the airlines where you can turn your Woolworths, Big W, BWS and Dick Smith purchases into points convertible for one of the flights, except it will take quite a lot of time.

But the Woolworths & Qantas scheme, which gains the fuel, liquor and other goods retailers later in the year is not motivated by any desire by Qantas or Woolworths to give anything away for free.

It is about getting more efficient ‘distribution’ through data base marketing and brand association. Print media advertising is hellishly costly, and print in general is in decline. Everything is wrong about it. The news cycle is too long, the operating costs are too high, and the eyeballs are looking at tiny hand helds, giant plasmas, and mid sized personal computers.

In part what Woolworths & Qantas are up to is about distribution after the presses fall silent. And it serves the airline’s long enunciated desire to by-pass independent retailing, whether by traditional agencies, or non-airline on-line booking sites.

This is an area variously quoted as being between around 20-30% of the costs of doing business as a large ‘legacy’ network carrier like Qantas. That’s a margin of cost in which airlines can these days die by paying, or survive by sharply reducing.

But most immediately the deal gives Qantas a huge likely boost to the current frequent flyer program membership of 5.6 million, a handy development while it awaits a more propitious time to spin it off as a controlled separately listed entity.

Loyalty schemes are in many senses money for nothing for an airline with a strong or respected brand. When points are sold to third parties the airline is creating money out of thin air. The business of leveraging the brand value of an airline doesn’t cost in fuel prices, doesn’t employ pilots, cabin crew and maintenance services. It doesn’t pay airport fees or navigation charges, and it doesn’t require the financing of fleets.

It is true money for nothing, in which you the consumer either buys any ticket at something less than 1 cent of the price per point, or converts to a seat which the airlines don’t expect to sell, or will release after a date which they are reasonably confident exceeds your life span.

Yet at the consumer level, it also feeds off the stupidity of those that are prepared to go along with the notion of airfares for ‘free’.

Nothing is free. Ultimately the costs of brand leveraging loyalty schemes has a negative consequence for competition and the cost of consumer transactions, and will be borne by all consumers whether they belong to the various programs or not.