Round 2 Australia - Credit Card vs Airline Loyalty Programs

In Australia - Qantas is the victor.  Qantas has seen a lot of press in the last 2 years with much of it focused on its Qantas Frequent Flyer program and the possibility of that being spun off.

Qantas has embraced a whole host of competitively priced non-air rewards options for its customers.  Most importantly though - it's engineered a showdown with the Aussie banks who were previously transferring points out of their credit cards programs into it's Frequent Flyer program.  Qantas no longer permit the transfer.  

Customers in these banks had to make an all or nothing choice which each of the banks had to enable.  For both choices customers are able to carry on earning points on their credit cards.  The difference is in the rewards - 

• Choice 1 - lose the option to convert credit card loyalty program points to Qantas's Frequent Flyer Program
  
• Choice 2 - retain the option to convert credit card loyalty points to Qantas's Frequent Flyer Program - but this is your only reward choice (a so called Direct Earn option) - so no more gift cards, merchandise and the like from the bank (you can now get them from the airline)
  

The difference in approach to this challenge from the Aussie banks has been interesting.  None have gone the Capital One route and completely eschewed an airline co-brand card (or Direct earn card). Most now have portfolios that offer Qantas Direct Earn (co-brand) cards and other cards on which they offer their own loyalty program. Some also offer Virgin Blue co-brands as well.  National Australia Bank (the owners of Bank of New Zealand) seems to have invented a new strategy that we didn't see played out in the American market.  Their's might be characteristed as teh opposite of Capital One - they're closing their own credit card loyalty program and going forward will only issue co-brand airline cards.

Only time will tell how well they fare.