Devaluation Coming To Cathay Pacific’s Frequent Flyer Program

In May I wrote about how Cathay Pacific may soon restrict many award seats to members of their own frequent flyer program.

Are Cathay Pacific first class awards using partner miles going away?

While the development of alliances has been one of the best things to happen to frequent flyer programs in a long time, there’s no denying that this opens many arbitrage opportunities. In other words, when programs like American AAdvantage sell miles at a discount and then their members book seats in Cathay Pacific first class, it does arguably devalue the program for Cathay Pacific’s members.

Here’s how the possible change was explained at the time:

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.

I’ll be curious to see if and how these restrictions are put into place. I wonder whether they’ll restrict premium cabin awards for members of partner programs altogether, only make the seats available to those members a certain amount of time before departure, or what. Such a restriction would no doubt be a big blow to the value of partner airline miles.

Cathay-Pacific-First-Class-777-54
Cathay Pacific first class pre-departure service

Changes coming to Cathay Pacific’s program as well

It looks like it’s not just partner frequent flyer programs which are sort of getting the boot, but also members of Cathay Pacific’s own Asia Miles and Marco Polo Club programs.

Cathay Pacific may cut benefits in their own frequent flyer program by the end of the year, per ejinsight.com.

What changes is Cathay Pacific looking at making?

Not surprisingly, they’re considering linking miles earned more closely to revenue than to miles flown, just as British Airways has recently done:

As soon as by the end of this year, the Hong Kong carrier will change the way it calculates the mileage accumulated by members of its Marco Polo Club and Asia Miles from actual flying distance, which is the current method, to one based on airfare, Apple Daily reported on Tuesday.

If the mileage calculation is based on airfare, the gap will widen further because business-class airfare is normally at least double that of the economy class.

While the planned change has been criticized as “robbing the poor to help the rich”, Cathay Pacific chief executive Ivan Chu Kwok-leung explained on the sidelines of the International Air Transport Association’s annual meeting that it is aimed at making the company’s frequent flyer program consistent with international practice.

It doesn’t necessarily sound like Cathay Pacific is going to a directly revenue based program (as the article sort of hints at), but rather that they’ll widen the gap between miles earned on discounted tickets and miles earned on higher revenue tickets.

Cathay-Pacific-Miles
Cathay Pacific’s current mileage earning rates

Furthermore, Cathay Pacific plans to limit lounge access for Marco Polo Club Silver members:

Meanwhile, the airline also plans to limit access to its VIP lounges by Marco Polo Club silver card holders, who currently enjoy unlimited use, while those holding gold and diamond cards will be unaffected.

Chu said the planned change was in response to complaints from some members who said the VIP lounges are often too crowded.

Marco Polo Club Silver is technically only oneworld Ruby status (which isn’t typically eligible for lounge access), but as an exception Cathay Pacific gives those members access to their business class lounges.

Cathay-Pacific-Tiers
Cathay Pacific’s current elite tiers

Cathay-Pacific-The-Bridge-Lounge-15
Cathay Pacific’s The Bridge Business Class Lounge Hong Kong

Cathay Pacific also gives all members priority check-in and boarding, which they’ll be eliminating as well:

As for green card holders who account for the largest portion of its members, Cathay is expected to cancel their current benefits of priority check-in and priority boarding.

Cost control is a must for all airlines amid the tough business environment, Chu said.

I’m not sure how offering priority boarding and check-in costs them anything extra, however. Everyone has to check-in and everyone has to board… no?

My thoughts on these changes

I think it goes without saying that none of this comes as a surprise. Frequent flyer programs are becoming less rewarding, and that’s simply because airlines don’t need to offer huge perks to fill seats. Airlines are wanting to do everything they can to incentivize full fare/premium tickets rather than frequent tickets, and these changes are just a further step for that.

The positive changes we’ll see with frequent flyer programs will come with the opportunities for the airlines to monetize them, like through credit cards, partnerships, etc. After all, at least in the US more than half of miles are earned through activities other than flying.

I guess the one part I found odd about all these changes is how they’re sort of being announced. Typically when airlines make changes to their frequent flyer program they’re pretty set in stone, with an exact date given. It’s a bit surprising to me how much Cathay Pacific executives are speaking “on the record” about future changes, without having an exact timeline or even all the details.

I’ll be curious to see what really happens, especially when it comes to redeeming partner miles for travel on Cathay Pacific.

Cathay-Pacific-777
Cathay Pacific 777

What do you make of these impending changes to Cathay Pacific’s program? Do you think they’ll follow through with all of them?

Comments

  1. Perhaps a sign of things to come for inventory released to partners like AA that have routes with mileage that makes it look like a fire sale.

  2. I’m curious to see how other One World airlines would react to this. If Cathay removes the ability to book award flights with them, it’s seems like other airlines may react and no longer allow Cathy awards to be booked on their airline. If that was to happen, the unintended consequence for Cathay is that their loyalty points are significantly devalued, possibly to a point where loyal customers choose other carriers.

    It’ll be interesting to see this play out.

  3. With consolidation comes the end of alliance benefits and maybe alliances, at least that’s what I expect as airlines have more control.

  4. Well, Cathay Pacific is very cautious about its frequent flyer program, after all, it’s a huge advantage compare to its stinky competitor Singapore Airlines.
    The problem is, too many reward tickets and oneworld elite members are hurting customer experience of Cathay Pacific.
    AA credit card opening bonus is one reason, another reason is status match of Airberlin leads to overcrowded lounge in HKG.
    If this situation continues, CX may have no choice but do whatever Singapore Airlines did – release award ticket only to a few partner (Lufthansa, but no United) ,make lounges available only to premium cabin passengers and leave shitty lounge to Oneworld elite.

  5. @Nate Allen
    Not really, it could just block American Airlines. Just like what Singapore Airlines did to United.

  6. It will still have economy award seats, just not premium cabin award availability. Pretty much like whatever Singapore Airlines did.

  7. “I’m not sure how offering priority boarding and check-in costs them anything extra, however. Everyone has to check-in and everyone has to board… no?”

    @Lucky, I’m surprised at your statement here. When everyone has priority, no one does. Just take a look at UA, where Credit Card holders (both the “high-end” Club card and regular Explorer card) are lumped together with Premier Gold, Premier Silver, and *G in Group 2 Premier Access “priority” boarding. At least AA/US separates CC holders from the elites for boarding, but it’s a total cluster%^&$ on UA.

    I don’t know how it works at CX, but presumably Marco Polo Club priority check-in (and perhaps boarding) is shared by Business Class, Gold/Sapphire, and Silver/Ruby, in addition to base level Green members. Yes, unlike Asia Miles, there’s a cost/barrier of entry to Marco Polo Club, but it’s still basically open to anyone with a heartbeat. I can see how that devalues the experience for the higher tiers.

    As for mileage earning rate changes, it makes sense. When I purchase a premium ticket (on a lot of carriers) and only earn 25% to 50% more miles/points than Economy, I feel shafted.

  8. Miles and points bloggers have exponentially expanded this world to excess. Airlines and credit card companies wising up and clamping down. They are getting better at the game they are currently get blasted in. My prediction is credit card companies become much more efficient at this game and economy awards start moving up in point costs

  9. Priority check-in does cost money if CX uses a higher staffing level for the priority counter than the regular counter — for example the US carriers mostly force you to use a kiosk in the regular line but will talk to you directly in the priority line. Not sure exactly what CX’s situation is but it could be something like that. Plus the exclusivity factor as @Tennen said.

  10. Cathay rarely sells out its business class. On almost every flight I took or searched for there was plenty of last day/week availability. So it’s not that their own members are priced out its that their own program sucks and their FFs probably find more value crediting paid flights to AA or AS.

  11. Here is the thing though, basically, airlines in American are freeloading on hard working Asian Airlines. Instead of improving their service and hardware product, airlines in America are get cheap cash by selling miles to credit card companies. Ironically, most of people here using miles to redeem award ticket of partner airlines in premium cabin. After all, when you get a choic to fly on British Airways or Cathay Pacific, why bother American, right? Because low fuel surcharge and better products, Asian airlines become more and more popular in award redemption. Which hurts the privacy in premium cabins.
    I would guess in future, more and more Asian airlines are going to fight back. Starting from blocking US Airlines, then limit the lounge access (oneworld / star alliance elites can only use a small tiny lounge).
    Asia miles is no doubt the best frequent flyer program in Asia Pacific. Both Qantas and Singapore are stinky.

  12. I have a vested interest in Asia Miles and am glad that there’s no mention of redemption rates increasing – particularly after we’ve seen such massive devaluation by both BA and EY!

    Lucky, would you agree, that that the given their extremely generous redemption rates in the current market, that AA must be next?

  13. Seems like the writing is on the wall with CX. Hopefully the CX award gravy train doesn’t come to an end for both First and Biz.

  14. I think CX will follow through with these changes. I think CX can fill its own premium cabins, especially with the demise of MH this past year and the fact that CX decreased the F seats to 6 in their 77W planes.
    This may change the ‘culture’ of oneworld alliance, where it is widely known to redeem miles on any cabin amongst partner airlines. In Skyteam, you can only redeem miles in economy or business class (first class redemption depends on the relationship of between each airline.) In Star Alliance, some F are blocked and some are not. As for oneworld, we’ll see what will happen. AA is known to be very stingy with its First Class award space for both its own members and partners, so why can’t CX be stingy as well? Yes, it obviously sucks for us Americans who use AAdvantage miles to redeem them on CX premium cabins when flying TPAC but it is what it is. :/

  15. @ TEX277 — Yes, I do think we’ll see an AAdvantage award chart devaluation at some point in the next year.

  16. It is notable that MPC is also the only FFP that charge its members fees just for opening an account. On one hand US 50 is a small fee to pay for unlimited priority check-in and boarding if you fly a lot with CX, on the other hand they do charge, so customers should get more than just a couple of baggage tags. If CX cancels the benefits of its green card members, I do wonder how they are going to persuade people that it makes sense to pay to be loyal, especially in the world of status matches.

  17. “Cathay Pacific also gives all members priority check-in and boarding”

    That might explain why the business class boarding line was LONGER than the regular line (assuming Green members board with business class) on my DPS-HKG flight.

  18. CX doesn’t offer any systemwide upgrades to elite flyers, so its program is already much worse than any US3 program. Even DL offers four SWU to DMs. And CX diamond requires 210,000 miles over a minimum of three years to join.

    Furthermore, typical TPAC F awards on CX require 110,000 miles one way. And your partner reward would be on AA’s famously low quality F. So AA EPs pay 67,500 to fly on world class CX F while CX diamonds pay 110,000 to fly on pedestrian AA F. And CX diamonds can’t ever bump some lousy Y business trip into J with SWUs.

    So CX customers are being punished harshly for loyalty. It’s no wonder CX wants to change things.

  19. @Norman Qantas charges for membership as well, AU$89, but it’s very easy to get it for free.

  20. LX blocks F for Star partners. If CX were to block FCL from oneworld partners, it would be nothing unusual. Yes, it might upset the AAdvantage members, but it is what it is. If you want to redeem FCL on CX, then bank the miles with CX. Yes, it takes more miles to redeem with MPC, but if you want to experience FCL, then bank it with MPC. That’s what I’ve been doing for the last few years.

    In regards to earning miles with AAdvantage in the future. I think the writing is on the wall. You’ll have an earn chart similar to BA. You get the bonus miles flying JV partners or AA, but not on oneworld airlines that aren’t part of the JV. Less miles given on sub Y fares and placing restrictions on SWU usage. That’s what I think.

  21. Seat releases on FFP redemption or discounted subclass are all part of the yield management. The current forecasting systems that are used by airlines (especially, the ones with many feeder traffic) are so sophisticated that can identify how much each pax are paying for the sector, while taking into account the whole booking will be valued to the airline, then make a decision whether give seats or not.

    As the system prediction are based on “relavent“ historical data, there are obviously certain margin of errors, or exceptions of performance cooreated with market prediction. Hence, there are chances of redemption seats available towards the departure dates.

    Also, a little tip, business travellers usually book their flights later than leisure travellers, and demand on Premium class destinated to finacial centres are usually stronger. It would be easier to have success on getting your premium class redemption seats to AMS/CNS, compare with LHR/SYD… And avoid peak seasons, as upgrading an Economy pax to BIZ creates more value than offering a BIZ redemption…

  22. I do believe Cathay awards will go the way of Qantas. You have a better chance of seeing a UFO before you get a F seat again using AA miles.

    That said I wish Cathay would have better A fares to Asia. I do not mind paying for F but not at the current rates.

    The good old days of churn and burn and over.

  23. Well CX just announced the new measurement. On 16 April 2016, this new changes will be put in place. the first impact for me is I will loose my diamond tier due to the new calculation. As I only fly Economy and I don’t buy the most expensive economy seat. Therefore I believed they will probably slashed 30% of their diamond member. One major benefit of becoming premium tier member for CX is free upgrade. By having this new calculation, they will definitely cut down plenty of free upgrade because less premium tier member now. Assuming all members still remain with the Airline and not switching to alternative airline, they will have increase number of Silver and Gold member. That also means that business class lounge will still be crowded but first class lounge will be empty.

    You may check out the changes here :-

    https://www.cathaypacific.com/cx/en_MY/frequent-flyers/changes-to-the-marco-polo-club/overview.html

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