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What the Virgin collapse means for your Velocity points

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With Virgin Australia now in voluntary administration, many of you have been left to wonder if those Velocity frequent flyer points you worked hard to accumulate will be grounded too.

This fear has seen Velocity members race to get vacuum cleaners, gift cards and the like, with the website crashing in the process. However, this may be a premature move.

As Virgin Australia stated in a recent press release, Velocity, while owned by Virgin Group, is a separate business and not in administration.

virgin australia voluntary administration

Still, Virgin has suspended points redemption for four weeks.

"We expect this to be extended into the future," Adele Eliseo from The Champagne Mile tells Money.

"At the moment, all people can do is wait and see what unfolds," says Eliseo.

She doesn't believe Velocity will suffer the same fate as Virgin Australia, but says the rewards program is likely to change.

"There could be a devaluation of points, and changes in the way members earn and redeem points," says Eliseo.

Code-share relationships with Singapore Airlines and others are also in question.

Eliseo also notes that Velocity, with more than 10 million members, is a highly profitable arm of Virgin Australia.

"You could see it bought by one of the major supermarkets or even one of the major banks," she says.

If history's anything to go by, frequent flyer points usually survive even if the airline they're attached to goes under.

Since the turn of the century, American Airlines, Delta, and United all declared bankruptcy, but their frequent flyer schemes lived to see another day.

The point of reference for Australians is somewhat darker, though, with the collapse of Ansett in 2001 leaving the airline's Global Rewards points worthless.

Virgin though seems unlikely to suffer the same fate as Ansett, with 10 parties reportedly in the mix to take it over.

Velocity appears to have its members at least partially protected. Virgin told Business Insider that "Velocity is set up in a way that safeguards member value by having a trustee that looks after the interests of members," while reassuring members that they "will never just lose points".

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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