Star Alliance is finally launching its credit card in Australia

Back in May, Star Alliance – the grouping of 26 airlines which includes Lufthansa, SWISS, Austrian, United, Singapore, and Thai amongst others – announced innovative plans for an alliance-wide credit card. The Star Alliance credit card is launching in Australia.

What is interesting about launching this card in Australia is that, like in Europe, there are strict caps in place on credit card interchange fees. Australia is slightly more lenient than Europe in terms of what card issuers can charge, but it is still just a fraction of what is available in other markets. This means that, if the card works in Australia, it is a model that could be rolled out to Europe.

Smartly, because the interchange fee cap restricts the pot that is available for ‘buying’ reward miles, there is a strong focus on status benefits.

Over one-third of all credit card spend in Australia earns Qantas frequent flyer points, the airline estimated in 2017.

Australia is the alliance's test market, and a relevant one. The alliance's 24% marketshare of pre-Covid international Australian passenger traffic was achieved without a locally domiciled member. Oneworld, which Qantas is part of, had a 31% share. The alliance certainly does heavy lifting: Singapore Airlines and Air New Zealand are the second- and fourth-largest airlines in the international Australian market. 

Yet Australia's largest share of passengers – 39% – do not fly on alliance members.

Alliances have changed. Qantas was early to form a broad partner base comprising members outside of OneWorld. Its Emirates alliance was a turning point. Qantas has since formed a joint venture with SkyTeam’s China Eastern and a codeshare partnership with Star Alliance's Air New Zealand.

Qantas and its frequent flyer partners flew 54% of passengers in 2019 (excluding Qatar Airways).

Virgin Australia and its current partners (including Qatar) flew 25%. The remaining 21% of international Australian passengers flew on airlines not partnered with Qantas or Virgin. This unpartnered cohort includes China Southern's 1.3m passengers, AirAsia X's 1.1m, and Thai Airways' 840k.

Star Alliance's substantial Australian presence and credit card point flexibility adds options for passengers who need carriers for Asia and Europe (e.g. Singapore Airlines) as well as North America (United and Air Canada).

The post-Covid environment is still to emerge in Australia, which is reliant on service from Asia. As capacity likely contracts and further alliance changes occur, market concentration will increase. This could prove an experiment ground for another partnership collective, perhaps centered around Rex Airlines (now interlining with Delta) or Bonza, or entirely foreign. Australians are waiting with their credit cards.