Virgin Australia voluntary administration: What happens to Velocity frequent flyer points?

Virgin Australia has frozen the accounts of its 10 million Velocity frequent flyer members after the airline collapsed into voluntary administration on Tuesday.

As uncertainty swirls around the future of Australia's number two airline, members of the airline's rewards program, Velocity, have been blocked from redeeming their frequent flyer points for at least four weeks.

While Virgin's owners, creditors and staff members have the most to lose, customers with existing bookings or travel credits and the airline's loyalty program members also face a nervous wait.

Deloitte administrator Vaughan Strawbridge said anyone with a future booking "should be able to expect to fly", but said the value of travel credits from cancelled bookings would be contingent on the restructuring negotiations. 

"We can't provide a guarantee around those." 

Velocity members can still earn points and access their accounts, but have been barred from redeeming the points on flights, products or gift cards for at least a month.

"The actual frequent flyer points are not lost," Virgin chief executive Paul Scurrah said. "They are all preserved and they are still there, so there's no changes to that program at this stage other than there will be a freeze on redemptions."

After news broke on Monday afternoon that Virgin was facing imminent collapse, the Velocity website crashed as members flooded the online store to redeem their points for products and gift cards before it was too late.

By Tuesday morning the online store redirected to another page stating that "redemptions have temporarily been paused".

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The company has appointed insolvency experts at Deloitte to restructure the airline and find new owners to keep it flying, but stressed that Velocity had not collapsed.

"Although Velocity is owned by the Virgin Australia Group, it is a separate company and it is not in administration," a Velocity statement said.

Mr Strawbridge said Velocity members were "well protected" and the loyalty program would be "part of the package" of restructuring the business going forward.  

"The frequent flyer program is an incredibly good asset," Mr Strawbridge said. 

Virgin purchased the remaining 35 per cent stake in the Velocity business last year for $700 million.

In the past few weeks both Qantas and Virgin introduced measures to prevent a run on points. Qantas limited individual product purchases to two a day, while Virgin limited gift card purchases to one a day. Many gift card options disappeared altogether, while the maximum value of others dropped to $50. Virgin also suspended the option for customers to transfer points across to Singapore Airlines' loyalty program.

Internet forums have been abuzz for weeks with speculation about Virgin's future, and by extension the value of Velocity points if the airline did not survive the coronavirus-induced shutdown.

Mr Scurrah said once the airline's request for a $1.4 billion government loan was leaked to the media, Virgin lost control of its Velocity program. 

"There was a run on our frequent flyer program that we weren't able to slow down and there was an increase in people wanting refunds which was unfortunate. Despite our efforts we weren't able to slow that down. We need to make sure we preserve as much value as we can as we go through this process," he said. 

Virgin will continue flying the government-subsidised domestic and international routes to ensure Australians can return home from overseas, and to maintain air connections between capital cities. 

See also: Higher fares, fewer destinations: What Virgin's collapse would mean for travellers

See also: Qantas, Virgin join other airlines in scrapping middle seat

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