UPDATE | Woolworths shoppers will once again be able to earn Qantas Frequent Flyer points, with the grocery giant set to reverse a widely-criticised decision to axe its points partnership with the airline. Read more...

PREVIOUS | Woolworths has axed its partnership with Qantas, with shoppers set to earn new 'Woolworths Dollars' instead of Qantas Frequent Flyer points.

Australia's biggest supermarket chain will stop issuing Qantas Points through its Everyday Rewards loyalty program as of December 31st.

Woolworths Dollars will be earned only at Woolworths and BWS stores – not Big W or Cellarmasters, where you can also currently earn Qantas Points.

Fuel discounts at Caltex/Woolworths petrol stations will remain in place, but there'll no longer be the option to earn two Qantas points per litre when you top up the tank in 2016.

The troubled grocery giant will rebrand its Everyday Rewards program as Woolworths Rewards and shift to offering direct at-checkout discounts

One Woolworths Dollar – earned only on selected products marked with an orange ticket, and at rates beginning at 20c ( Woolworths cents?) – will shave $1 off your bill.

Woolworths says the new program is geared around a simpler premise of giving customers "money off their shopping", although it will remove the company's massive overhead – estimated to exceed $80 million annually – from buying frequent flyer points from Qantas to give away under the Everyday Rewards scheme.

Qantas entered a series of last-ditch talks with Woolworths in an effort to keep the partnership alive in some form, and even at last Thursday's annual general meeting in Perth, Qantas CEO Alan Joyce said "We regard Woolworths as an important loyalty partner and of course Qantas would like to continue dialogue with them."

That said, Joyce also signalled that the financial impact of losing Woolworths would "not be significant" for the airline.

Update: Qantas is working on a new points-based partnership with Woolworths to take effect from January 2016. Read more...

Qantas forges its own path forward

Woolworths joined the Qantas Frequent Flyer scheme in mid-2009 and has been pivotal in driving mainstream engagement in the airline’s loyalty scheme, with Qantas Frequent Flyer membership almost doubled from 5.6 million to over 11 million over those six years.

For its part, Woolworths Everyday Rewards has some nine million members on its books.

The Qantas Loyalty division, which counts the frequent flyer program as its star attraction, has long been a rich vein of revenue for the airline. It reported an underlying pre-tax profit of $315 million over the 2014-2015 financial year, marking the sixth year of successive double-digit growth.

Qantas has spent the past two years expanding the Qantas Points partnership portfolio, primarily through an online shopping mall, while also launching loyalty spin-offs including the Qantas Cash travel money card, aQuire small business rewards program and the Qantas Golf community.

Virgin wins for points at the pump

Woolworths’ move away from Qantas also plays into the hands of Virgin Australia.

While the challenger doesn’t have a similar supermarket partnership, its Velocity points-earning alliance with BP – which is simpler than that of the Qantas-Caltex-Woolworths troika – will now be more attractive motorists used to earning frequent flyer points every time they top up the tank.

Read more: Qantas vs Virgin Australia: which is best for points on petrol?

Coles, Etihad hook up

Woolworths' prime competitor Coles has also launched a partnership with Etihad Airways, which is a major stakeholder in Qantas' challenger Virgin Australia.

The alliance enables members of Coles' Flybuys program to earn frequent flyer points but also status credits for fast-tracking towards Silver, Gold and Platinum membership and perks.

The deal covers Coles Supermarkets, Coles Online, Coles Express, Liquorland and First Choice Liquor stores.

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