Which Australian airline will offer Afterpay next?

Stephanie Yip 14 September 2017

Jetstar Virgin Australia planes

Jetstar now lets you pay for flights with Afterpay - so which airline will follow its footsteps? We've got the lowdown.

Yesterday, Jetstar popped a very big cherry and became the first travel merchant to offer Afterpay as a payment option.

Travel is no doubt a major focus for Afterpay at the moment, having already dominated the online retail market by teaming up with hundreds of Australian shops to offer its interest-free lay-by service.

In fact, Afterpay hinted at the move earlier this year in its annual report stating that "as a category represents a strong growth channel for the Afterpay business and a natural extension from retail".

With so many opportunities open for Afterpay in the travel space, we're already wondering what travel retailer could be next. Accommodation is a possibility being fairly priced and a travel necessity. Cruises are likely too premium though could work on short, domestic journeys.

Another Australian airline is our bet, having already secured Jetstar.

Afterpay is keeping mum on what could follow, but what we know is that the payment service is all about Australian merchants, having only one international retailer on board which is based in New Zealand. So there's a high chance the next airline will be true blue. It's also only offered on purchases up to $1,000, which is potentially why it clung onto Jetstar first being a low-cost carrier. This suggests an airline offering affordable, low-cost airfares are key to its next move.

All purchases are paid off within eight weeks - so lead time is something else that needs to be considered. That said, when it comes to flights this is not really too much of a problem as fares can generally be booked up to a year in advance.

Bearing all this in mind, let's take a look at the possibilities with Australia's main airlines.

Qantas.PlaneSunset300

Qantas

Qantas has heaps of potential to be next in line to offer Afterpay. It already has the infrastructure for it because of its partnership with Jetstar and is a well-known Australian brand.

The downside is its premium prices, which could bust the $1,000 limit fairly quickly. Plus, as Afterpay is aimed at millennials, there's potentially a smaller pool of its users who would book a Qantas flight.


VirginAustraliaTail300

Virgin Australia

Virgin Australia flights are generally priced slightly cheaper than Qantas, so it sits in that middle ground between low-cost and premium prices. On one hand, it might appeal to millennials who prefer to have all those bells and whistles when flying and provide them with the ability to indulge in life's luxuries without going broke.

As head of Afterpay Nick Molnar stated during the Jetstar partnership announcement: "At Afterpay, we are focused on offering Afterpay for life's little luxuries and we believe the demand for Afterpay in the travel market will be very strong."

That said, Virgin Australia's flights might still be too premium, and it might not see Afterpay as a benefit in its battle with Qantas for business passengers.

Virgin also offers numerous domestic flights under $1,500 which works in its favour. It also codeshares with Air New Zealand so could help Afterpay break more ground with our neighbours.


Tigerair.Plane300

Tigerair

Being Australia's other low-cost airline, Tigerair is a natural fit for Afterpay offering budget fares that could sit well with the payment service and its millennial market.

What's going to hamper Tigerair's chances to joining Afterpay is that it might be too low-cost. Right now, eligible Jetstar flights must be priced between $200 and $1,000 and considering Tigerair flights can drop as low as $24 you'll be hard-pressed to find many flights costing more than $200 - especially since Tigerair Australia only flies domestic, unlike Jetstar Australia which also offers a wide variety of international routes.

Something else that's going to stand in the way of Tigerair being an optimal choice for Afterpay is it already features an interest free repayment scheme. Similar to Jetstar, you'll be charged $10 for the privilege to use this payment option, making it even-stevens.

What tips the scales is the repayment period. To finance your flight direct with Tigerair, the minimum spend is $250. True, this is slightly higher than Afterpay's option, but you have up to six months to pay it back with Tigerair. Spend a minimum of $500 and that increases to a 12-month repayment period which is miles ahead of Afterpay's eight-week repayment period. Why change the system when you've already got a good thing going?


Rex-airlines-300

Rex

The regional airline is probably the least likely to join the Afterpay party, not least because of its limited number of flights.

Rex has always been focused on cost-recovery, charging credit card payment fees as a percentage of the flight cost rather than per booking. To use Afterpay, Jetstar charges a $10 service fee which is likely to be a standard with future airlines offering Afterpay. This added fee works against Rex's cost-recovery ethos, making it unlikely for it to offer Afterpay.


So who is next?

It's anyone's guess but one thing's for certain, Afterpay is definitely eyeing the travel market and looking to bring on more travel partners.


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