Is Cathay Pacific About To Cut Off First Class Awards For Partner Airlines?

One of my favorite uses of American AAdvantage miles is for travel in Cathay Pacific first class.

Cathay Pacific first class award availability trends

Cathay Pacific only has six seats in first class on the 777-300ER, making it one of the most exclusive first class products out there.

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Back in the recession they released a ton of first class award seats, often two seats when the schedule opened, and then more seats again as the departure date approached. Unfortunately that trend has changed quite a bit, which is hardly surprising — nowadays we’re lucky to see one first class award seat when the schedule opens, and then sometimes more seats as the departure date approaches.

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Frequent flyer program arbitrage opportunities

While airlines have all kinds of partnerships and alliances, there’s no denying that the airlines are often working against one another.

For example, in the US, frequent flyer programs are hugely profitable businesses for the airlines. In most other parts of the world, frequent flyer programs are loyalty programs in the true sense of the term — they’re intended to generate incremental business and loyalty to the airline, and not be profit centers in and of themselves.

For years US Airways sold miles at huge discounts, so we endearingly referred to them as the official consolidator of Star Alliance premium cabin seats (or oneworld, once they made the switch).

Presumably Cathay Pacific makes first class awards available in advance not because they have to, but as a way to reward loyal flyers. That’s the only possible justification, given how bad award reimbursement rates are between airlines. But when those seats are filled by people who bought miles for the same they’d pay for an economy ticket, the equation becomes sort of unjustifiable.

And it looks like things might be changing as a result…

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Will Cathay Pacific restrict partner first class awards?

It’s rare for the mainstream media to pick up on the subtleties of airline frequent flyer program partnerships, but the South China Morning Post published an interesting article today, entitled “Cathay reviews loyalty scheme to give more free flights to own customers:”

Cathay Pacific is to set aside more free seats for its seasoned frequent fliers, under the latest proposal to revamp the award- winning airline’s loyalty scheme.

The plan is to slash the number of free air tickets available for partner airlines and to reallocate those to Cathay’s own Marco Polo Club members, sources close to the ongoing review say.

Cathay had been examining the feasibility of shifting its focus to members of the Marco Polo Club and another rewards scheme, Asia Miles, well before the Consumer Council criticised unnamed carriers last month for operating mileage schemes like “a lucky draw”. No decision had been made yet, the airline said.

The sources say Cathay believes it is time to stop allowing external redemptions when the airline is capable of filling aircraft with paid passengers – boosting long-term profitability.

Cathay Pacific already makes some extra award seats available to their own Marco Polo Club members, though a vast majority of award seats are also available to members of partner airline programs.

So, who are the “unnamed carriers” Cathay Pacific could be referring to? 😉

At present, Cathay lets clients of partner airlines book flights using air miles accrued through their own flier programmes. But these passengers can redeem Cathay flights at much cheaper rates than Marco Polo Club members, putting its own privileged customers at a disadvantage.

One such partner carrier is American Airlines, which at the same time gives away tens of millions of free miles to flyers each year via credit card schemes.

Now, I detest the use of the term “free miles” and “free flights.” There’s a direct opportunity cost to every mile earned, whether through credit card spend, flying, etc. That being said, they definitely have a valid point that these aren’t necessarily “valuable” customers to Cathay Pacific, and that they don’t really contribute to the airline’s profitability.

Based on the story it seems like the cost of redemptions through Cathay’s program may go up as well:

However, it is understood the number of points needed to redeem a flight will at the same time go up incrementally.

It’s not totally clear whether they’ll potentially be adding different award levels (like the US carriers have been doing for years), or if they’ll basically just be devaluing their award chart.

Cathay-Pacific-Bed

Bottom line

I think it’s important to emphasize that there’s nothing that will immediately change here. These seem to just be ideas that they’re mulling over.

Cathay Pacific wouldn’t be the first airline to (understandably) give members of partner frequent flyer programs the bird. For example, Singapore Airlines has for a long time made a vast majority of their premium cabin award space available exclusively to members of their own KrisFlyer program.

All that being said, I think this is a trend we’ll continue to see a lot more of across the board over the coming years. Airlines releasing the same amount of award space to members of partner programs as their own members has ultimately been an act of good faith, and arguably even an oversight. And that’s especially true for airlines with not-so-great frequent flyer programs, but great premium cabin products.

Presumably this is only the beginning.

Yet another reason to continuously earn and burn!

What do you make of these potential changes to Cathay Pacific first class awards?

(Tip of the hat to Miles Down Under)

Comments

  1. Serious question that may seem dumb: how would we even know? Would they make any announcements, or just change some bits in their systems and make availability essentially non-existent without telling anyone?

  2. Well, unfortunately for us not being domiciled in the US, this shows very clearly how aggressive mileage runners and currently credit card earners are exploiting the system to a level where it is now falling apart. When looking at specific Cathay Pacific, they have been very aggressive pushing their mileage program together with American Express for more than 6 months. I would not be surprised to see them completely remove first class for partners primarily to get AA earners out of their seats while changing the program and using the partnership with Amex to soften the impact of the changes to their home market.

    One can only hope that same thing will happen in other parts of the world.

  3. Ben, do you think that they might continue to release last-minute space to partners in F, while cutting off in-advance award space, a la Lufthansa? After all, if a seat is unfilled within a couple of days of the flight, they’re most likely not sacrificing revenue by giving it to partners.

  4. There have been a few long, ongoing threads about this (and other changes to Cathay’s mileage program) going on over at FT for months now.

    One of the main gripes of Cathay’s members are the American Airlines arbitrage of F class redemptions, and the patterns of AA redeemers tend to be book awards early – inevitably making it harder for Cathays own business-minded HK travelers to burn F awards within a narrower (1-3 month) window. Cathays own Asia Miles are notoriously harder to accumulate.

    Cathay staff and consultants have been interacting with the forum members.l in those threads. This does not sound like idle chat but rather an impending change.

  5. Ben, do you think they’ll continue to release last-minute space and just cut off partners in advance?

  6. Does Cathay have no control over reimbursement rates? Surely they could propose to raise rates to a point where it becomes worth their while. I’ve always heard that LH F rates are higher than most which cased USAir and LM blocking and caused United to raise their F rates to Europe to 110k each way. Why can’t CX do the same?

  7. My sources in HK tell me that F awards are in fact coming to an end. Similar to Qantas F awards. You will need to hit the lottery to find one. If you want to sit in F pay for it.

  8. Guess I’ll stick with business seats. But yes in fairness CX Marco members should have access to F class first given how difficult it is to accumulate CX Asia Miles.

  9. Does the One World alliance address the interaction between partner loyalty programs in any meaningful way?

  10. this change makes sense for them. But it sure is bad news for us. I have one reservation booked, my first cathay first class… I guess it’ll also be my last? Hopefully JAL won’t follow suit or AA miles will be even harder to use.

  11. Lately it’s already become a miracle to find their F awards, unless maybe the moment the schedule is released. Even business class is being held back until 3-4 weeks even while most of the cabin is unsold. I’m ok with business 😉

  12. Asia miles is not that bad. It is one of a few programs that have partners in Star Alliance (Air China) Skyteam (China Eastern) and Oneworld (Cathay Pacific)
    In fact it is pretty generous compare to its competitor (KrisFlyer is one of the worst FFP in the world, Singapore Airlines believe that you get what you paid for, so if you’re not on their first class cabins , you don’t deserve good lounge and lots of premium services even if you are elite members of PPS, but you can’t blame SA given it is state owned and operated by government. Emirates and Cathay are operated by Britishs. and Cathay has an inclusive culture and is quite diverse, Singapote airlines is not given its employees demographics

  13. Lucky, I’m not sure your premise is valid. If ANA gets $450 for 1 F pax JFK-NRT, why do you believe they aren’t happy with that? They got a bum in an F seat (which would otherwise be empty) and they got paid *something*, which is better than nothing. An empty seat yields them $0.

    The missing element in this discussion is *when* the seats are released.

    I was in BKK March 19, desperate for a CX J seat BKK-HKG-YYZ. I wanted to go the next day, March 20. At midnight when I went to sleep there were no seats. At 5am when I awoke (the day of travel), 5 seats were open for a 13:00 departure. I grabbed one. No problem. If I wanted an advance reservation really badly, I could pay for it or fly economy.

    I believe that CX was very happy with my booking (at a “firesale” price, via AAdvantage) that morning, preferring to carry me than for that seat to be empty. The airline has pretty good computers, telling them how many seats to release to us freeloaders, without impacting their profits much, without inconveniencing their own elites, without denying a seat to their own loyals. In this case, they didn’t release my seat until 8 hours before Wheels Up. I doubt, very much, that they need to reduce that availability to AAdvantage members. And I expect the same applies to F seats, which I could have grabbed, if they’d please please operate F service to YYZ.

    If CX tweaks their program, their biggest concern will be the increase in empty seats, reducing revenues they now enjoy from AAdvantage. The AsiaMiles collectors who “can’t get seats” all want to book months in advance, as if they were paying retail. Those very few early-release seats will probably be reallocated to favour AsiaMiles / Marco people, but there are so few of them, it’s statistically unimportant. All the sexy, cheap inventory appears last-minute, rewarding the brave.

    If you want CX F on points, pay retail, or grow a pair.

  14. @Hasse “When looking at specific Cathay Pacific, they have been very aggressive pushing their mileage program together with American Express for more than 6 months.”

    I suspect they don’t have a huge problem with this, as they are selling the miles in bulk to Amex at a price that makes sense to them. The real problem is the pittance they get paid for partner redemptions (*cough* AA *cough*)

  15. @YYZgayguy – I think your logic is a bit flawed. ANA also has to provide food and drinks to that first class passenger. And if that passenger drinks a $500 bottle of Hibiki 21 years, they’ll definitely be losing money on that.

  16. Hope it doesn’t change too soon – have HKG-JFK biz booked for myself and the wife in Oct, and am really hoping to upgrade last minute to F. Using AA miles, of course!

  17. @Steve – Your logic is right, but a bottle of Hibiki 21 Year Old is in the vicinity of $300 retail.. 😛

  18. Well…what do you expect? Americans literally fly for free with those ridiculous sign-up bonusses and manufactured spendings. In Europe it’s a different story. Here a 2-3/6 occupancy on CX flights is nothing unusual. I’ve sometimes even seen 5award seats 1-2 days before departure.

  19. Well, now a conundrum.

    Do I book my late spring 2016 trip using CX F or continue with my plan to blow all my Radisson points in the Baltic.

    I have winter 2016 already locked in RTW by Etihad F connecting to CX F. Should I give try for RT CX F instead.

    Probably won’t make any changes. Hopefully it won’t happen until the Fall at the earliest so I can book one more trip.

  20. The capacity controls are even tighter. Only 5 days with one F seat between Mar 1 and Apr 4 2016; none with two seats, for HKG-LAX and roughly the same LAX-HKG. In February, there were a couple choices for two seats.

  21. We were lucky enough to find two CX F seats on our trip back from HKG last year (we originally booked in J and upgraded about 11 days out), and I did love the Wing and the experience on Cathay was wonderful. But, in the end, it’s about the destination and getting there in a comfortable way, and business these days on CX (which we flew from TPE-HKG) still still quite nice and you are able to get some rest. Is it luxurious? No. But it it is still way better than economy!

  22. @Lukcy What we should do on transpacific award tickets?
    AA rarely release seats on HKG-DFW 77W, JL seats are even rare. Maybe we can try Malaysia Airlines (oh, they are removing long haul flights…)

  23. Ok a bit lost. Surely you can transfer SPG or Membership rewards points to get CX program miles? Or is the issue the transfer is not immediate?

  24. @Marcus

    CX charges more miles for their own members than say AA does? At least that is how I read Luckys article.

  25. @no name says:

    Yep, CX penalize it’s own member with much higher rates. It’s distance based program so East and West US falls into different zones.

    LAX/SFO-HKG RT costs 180k Asia Miles, and even more expensive if oneway, at 105k each. Compare to AA which only charge 67.5k one way. JFK is 220k RT and 130k oneway, that’s almost twice as much as AA, not to mention it’s hard to earn Asia Miles (you don’t earn anything on deep discount tickets!) On top of that, you gotta pay fuel surcharge, which in itself can cost up to >$1000.

  26. “One such partner carrier is American Airlines, which at the same time gives away tens of millions of free miles to flyers each year via credit card schemes, not unlike their own partnership with Citi Thank You cards.”

    Fixed that for them.

  27. hi ben, i am not sure you have noticed this. on my recent searches on cx award F tickets, i could barely find any on ba websites, instead, when i search through cx website, they showed up, not a lot but some. yeah, they have reduced a lot of award seats on their flights to and from hk to us even when the departure day approaches. i booked a three day trip from hk to ord and back in first just two days before departure. when i was onboard, 5 out of 6 seats were taken on both flights. japan air is not releasing much either, i am not sure what to do in the future 🙁

  28. I keep reading about (and talking to) people who got CX F award tickets. It generally sounds like they are the only people in F. If no one is flying the product other than AAdvantage redeemers, I don’t see what CX has to gain. They clearly have a pricing problem.

  29. Nowhere in the newspaper article does it mention First Class awards. My take is, ALL awards could be impacted including Business Class and Economy Class awards.

  30. The First class rewards seem a bit too cheap – especially given how much room those F seats take up. Compare a 3 class (no F) to a 4 class (with F) 77W and i’m shocked at how many more J seats can fit in the same space as 6 F seats.

    Similar to the US carriers, CX has gotten better at monetizing premium cabins. Some of the J seats are discounted quite a bit. CX does really attractive Japan->HK-> North America published fares for I class inventory. Around USD2k round trip. Not cheap, but comparable to what they want to charge for premium economy to/from HK. Probably earns them more than a F ticket reimbursed with miles.

    the J->F upgrade is the hook for the most loyal J class passengers (their J class product is top notch) – but does lack wifi, while they can fill the J cabin using discount connecting fares at a higher rate than mileage award tickets. Better economy, more paid J (rather direct or connecting).

    CX already has a mechanism to prioritize their own flyers. Asia Miles members can waitlist for a flight while other airline partners cannot. So when CX does not initially release seats, Asia Miles members can have first dibs on the award seats before other airline partners open it up. CX can also only open up availability to those flights with waitlists, taking the asia miles liability off their books without taking partner awards.

    Although Ben loves CX First – i’m more than happy redeeming my miles for CX biz

  31. I read the actual article in the SCMP yesterday, on a flight from HK.

    Points Guy covered it today (referencing this blog)… no one mentioned that Brian Kelly was actually quoted in the article: words to the effect that he thought AA awards to Asia were too cheap.

    Well, that’ll be fixed soon enough and a great redemption will be history.

  32. Bloggers ruin everything.

    This kind of devaluation is a direct and entirely predictable result of bloggers pushing these opportunities.
    Back before bloggers decided to get rich off of the game, options like this were quietly available to anyone who was willing to do a little work. Now, the circles ‘n arrows set stampede to every option that the bloggers point them to. Nobody should be surprised that every useful option is dying. Bloggers have destroyed the FF game.

  33. @ Marcus — You can, the rates are just substantially higher and they impose fuel surcharges.

  34. @ beachfan — I wouldn’t count on it happening in the immediate future, so I wouldn’t change any plans yet based on this article (yet).

  35. @ Jonathan — I doubt they’d make an official announcement, but I’m sure we’d catch on pretty quickly.

  36. Lucky. Question. Using both the BA and Qantas for F seats…..both sites show award seats available, but when I call AA to book, they say that nothing is available on the dates that both BA and Qantas show available . Is there another cross reference to finding those F seats? Why would they not show?

  37. @ arthur — I’d try hanging up and calling again, as that does the trick most of the time. If it doesn’t it could be that there’s a discrepancy. It’s rare, but it happens.

  38. It would be interesting to hear what oneworld has to say. I’ve always thought F awards are open to all oneworld members who have enough miles. Skyteam is different since each member airline has to have an agreement between the 2 airlines in which class of service are redeemable.
    As for CX changing their policy, I can see them following SQ’s model.
    From reading the other comments, I better book a QF And CX F award soon! 😉

  39. Being a Macro Polo Gold member myself, i do find it little bit wth with the gap on miles needed to redeem flights (but i do feel little bit better when i learned that AAdvantage platinum members can’t use admirals club when flying domestic stateside)

    but i think the real gap is the credit card part. So many credit card programs in the states offer promos and bonus that gives miles. I currently reside in China and the credit card programs here just can’t compare, even for Chinese carriers like China Southern/Eastern, let alone AsiaMiles. (speaking of which, loved your post on the China Southern A380. i have been avoiding taking Chinese carriers for longhaul flights since i moved here, now i can tell my staff why)

    so i think a slight adjustment is reasonable.

  40. Lucky,

    I remember when Emirates seats couldn’t be booked with Alaska miles, you had been in contact with some folks at Alaska, who then worked to restore that capability. Have you heard anything from the AA side about this issue of CX F awards being blocked from AA? I seem to be hearing more cases recently where other familiar sources (BA, JAL, etc ) are showing availability, but AA is not.

    I myself am waiting to upgrade a biz class flight (JFK-HKG), once an F seat becomes available to join my gf already in F, but things seems to be trending in the wrong direction, so I am giving a long hard look at earning and redeeming Asia Miles as a backup.

  41. @ Kenny — I don’t think it’s anything intentional, but rather there’s just a lag between systems, and in some cases it’s just phantom space on other airlines’ websites. So I don’t think there’s much to it, unfortunately.

  42. Has this policy of making awards more readily available to Marco Polo members already been implemented? I’m noticing that for flights leaving around a week from now, award space is available on CX’s own website that is not available through BA’s or Qantas’ sites. Has this always been true, or is this a recent development following CX’s promised changes discussed in this article?

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