Cathay Pacific Adds First Class Award Tiers — What Are The Implications?

Cathay Pacific has one of my favorite first class products in the world, so I always try to stay on top of their award availability trends. They have just six first class seats on their 777-300ER aircraft, so it’s quite an intimate cabin. Typically in advance you can hope to score at most one first class award seat, while closer to departure you’ll reliably see them open up additional awards.

cathay-first-class-777-2

So I’m always worried when Cathay Pacific makes changes to their frequent flyer program, and what it could mean for first class redemptions.

Cathay Pacific is adding first & business class award tiers

Cathay Pacific has recently announced that they’ll be adding additional award tiers for first & business class. They introduced this a couple of years ago for economy and premium economy though this is new for first and business class.

Specifically, Cathay Pacific will be adding “Tier 1” and “Tier 2” priority awards, which are described as follows:

As part of our continual efforts to improve our service and benefits to members, we are happy to announce the introduction of Priority Awards Tier 1 and Tier 2 in First and Business Class for Cathay Pacific and Dragonair flights from 12 October 2016.

Priority Awards offer you more seat-redemption options and thus a higher chance of securing a seat when travelling on popular routes and/or during the peak travel season. They were first introduced in October 2014 to offer more redemption seats in Premium Economy and Economy Class on Cathay Pacific and Dragonair flights.

With more redemption-seat opportunities now for premium classes, we hope you can enjoy a greater flexibility and enhanced travel experience.

For some perspective, here’s what one-way award pricing now looks like between most US cities and Hong Kong through Cathay Pacific’s program:

Business Class:

  • Saver: 85,000 miles
  • Tier 1: 128,000 miles
  • Tier 2: 170,000 miles

First Class:

  • Saver: 130,000 miles
  • Tier 1: 195,000 miles
  • Tier 2: 260,000 miles

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What does this mean in practice?

Not a whole lot yet. These new higher tiers were just introduced, and I haven’t noticed a change in saver level award availability from Cathay Pacific. Long term it’s safe to assume that partner programs (like American AAdvantage) will continue to just have access to the saver level award space, and not have access to the Tier 1 and Tier 2 award space.

That being said, if Cathay Pacific isn’t in fact decreasing the number of saver level award seats, then that doesn’t really matter.

What could this mean in theory?

Cathay Pacific has been pretty upfront in suggesting that they want to change the amount of award space that they make available to partner airlines. Per an article published in the South China Morning Post last year:

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.

Of course this was just something they were considering at the time, and up until now it hasn’t come to fruition. Heck, perhaps American’s latest award chart devaluation patly took care of the issue, as the cost of Cathay Pacific first class awards between the US and Asia increased by over 60%, which will presumably greatly decrease demand among AAdvantage members as well.

So to sum it up:

  • In theory it’s possible that this new Tier 1 and Tier 2 inventory will truly be in addition to the current saver level availability
  • Long term, Cathay Pacific would just about be the first airline ever to introduce additional award tiers and not decrease the amount of space available at the lowest tier in the long run
  • It goes without saying that partner airlines will continue to have access to saver level award space
  • Long term this could lead to a decrease in partner award availability

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Bottom line

These changes don’t seem to have an immediate impact on saver level or partner award availability. However, long term I’d be shocked if this didn’t in some way impact the amount of premium cabin award space available to partner airlines. I certainly hope I’m wrong, but we’ve seen what other airlines have done over the years, and I have no reason to believe Cathay Pacific will be any different.

What do you make of Cathay Pacific introducing additional first & business class award tiers?

Comments

  1. Lucky, really great insights here – you’ve done it again, kid. Color me impressed! I just love Cathy Pacific so much with their expensive champagne and first class hand wash. And like the great comic Jay Lenoard said, in the long run, we’re all dead!

  2. Based in HK; actual Business traveler: Glad to see these restrictions against American CC pretentious travelers.

    Since in Asia we see completely zero bank competition thus no easy earning miles and no signing up awards.
    its 100% is butt in seat earned miles.
    Same goes for hotels.

    It’s simply mad, that external ‘riders” with a bunch of points from some random CC on AA account are reducing spots on CX seats.

    I’m not saying it isn’t fair, or doesn’t make sense.
    Just a little annoying and a way to show priority to actual flyers or payers would be appreciated. Long term this will fix up.
    Ironic you’re complaining since all these devaluations are exactly because of you guys.

  3. I’ve never understood why any airline gives F award seats to anyone other than its own members unless of course their own members can’t fill up the seats

  4. @Johnathan

    I want to agree with you but the fact is loyalty programs are less and less about loyalty but about making profits- and guess who wins- the one that sells miles or the one that don’t?

  5. Seats don’t seam to be loaded yet. I can’t find one extra seat in tier 1 or tier 2.

    If you do round trip F, tier 1 is 330k and tier 2 is 440k

  6. @Jonathan It’s not like we get the miles for free. There is a cost for us in order to obtain those miles, whether it be actually flying, credit card signups, or transferring points from another program. We’re just taking advantage of all possible promotions within stated terms and conditions. Cant help that it’s easiest to do in the US compared to other places around the world. With you being positioned in HK, it could make sense to buy tickets in and out of Colombo where premium cabin fares are lower and then get separate tickets to/from HK

  7. @David W I don’t think Jonathan said the miles were free. The point he makes is that the US is the easiest place to earn miles and to then add insult to injury it was until recently cheaper to redeem those miles through AA while CX members paid more miles for the same ticket.

    @Jonathan your anger should be directed at Cathay Pathetic which completely fails to look after its own members first. SQ, Swiss, LH make it next to impossible for those outside of their loyalty program to redeem in F. CX also completely fails on having a “proper” F lounge with The Pier and Wing overrun with Diamond members and OW Emeralds. I applaud QR for actually having its F and J lounges for paying customers and putting the OW and other elites in a different lounge.

  8. @Norman , @ David W
    Thanks for the replies and suggestions.

    Not saying it’s free in the US.
    nothing is free in life, just easier.
    When you Factor the amount of TIME that it takes to manage and monitor these multiple accounts and later manipulate these cards and loyalty schemes its a tremendous effort.
    I’m sure if Ben or you folks would put this same amount of time into a Business it would lead to great results over there too.

    As for Colombo, Not gonna fly 4 hours from HKG to reach a city (CMB) that will connect me to Persian Gulf (another 4 hours) and later another 3-4 hour to AMM or CAI (most promos are to there) because QR EK or EY is cutting the price on it.
    I prefer a 10 hour economy direct over that ride in C or even F.
    Or pay the extra, fly direct in C, or 10+2 in C.

    Norman, It’s true, it is about revenue short term, but long tern it is about loyalty.
    Airlines and Hotels, for years had a back Office, loyalty program that registered activity and expenditure of guests.
    FS is a clear example.

    On top of that, once you travel enough you realize a 4* boutique hotel in Paris or Marrakesh is much nicer than a luxury Hotel. It has some soul to it. That is very hard to measure, but counts a lot for me.
    In most of Europe, Morocco, Israel and East Asia I prefer to pay 200$ for a boutique Hotel,non chain, no points earned than to a 5* Chain, including their best variations like W Curio or Mgallery.
    Exclusion would probably be ME.

    Again, I love this blog, enjoy the comparisons between products and following the reviews, but many things i would do differently but i understand what Ben focuses on and that’s fair.

  9. I think the practical impact of this is that first class saver award space will be diminished. Traditionally, saver space mostly only opened up close to departure and with only 6 seats on most aircraft these are much more likely to be booked out ahead of time with tier 1 and 2 awards. The positive impact of these changes is for people who have a lot of amex points to blow. You should be able to secure a first class tier 1 or 2 seat most of the time (if Y class tier 1/2 is any indication of how F will work).

  10. @Sam,
    Great points. Thank you for that.
    As for pointing the anger to CX. Hopeless. They are in a negative spin. so is HK city BTW.
    CX have been making some major mistakes biggest one is treating their loyal ones as a given.
    A great example is the “revamped” Marco Polo Program that is completely revenue based and discourages customers that are not premium seats or full fare payers to be loyal to them.
    I fly 60 times a year to PVG,SHA,SIN, TPE,BKK and CGK (most are around 2hours) and couldn’t be bothered if it’s in C or not, but earning miles or status on that would be nice.
    The fact the region is swamped with cutting edge low costs (HKexpress, Scoot to name a few) and another dozen of the best airlines in the world would make sense for CX to focus on earning miles (distances are short anyhow)
    but they don’t. unless it’s a full fare, or close to that, you don’t earn.

    As for F exclusive for own airline like in SQ, Swiss, Or Lounges:
    That does benefit premium passengers, but what about loyalty of majority of passengers: Could you imagine you can fly 120 return trips on CX, from HKG to SIN and still not hit Diamond ?!
    That literally means fly one day to there, one day rest, next day back and repeat All Year long (calculated on a normal 350~USD common Y return ticket).
    BTW you will also only earn 96,000 miles. which with their program will take you return from HKG to MEL (not enough for Europe) in C.

    So I ‘m not against selling empty seats or miles that fill empty seats. but they are probably selling them way too low and further devaluations will probably follow.

  11. I would estimate I’ve flown in a full CX F cabin maybe 35% of the time JFK-HKG/HKG-JFK in the past four years. And I have flown CX F a ton; at least 30 segments by my estimation (rev and award). So I’m not going to buy the whole barbarians at the gates view of U.S.-based award redemptions. As long as AS redemptions don’t suffer too greatly, I’m fine with any incremental changes they need to make in the interest of Marco Polo elites.

  12. @Bobbie Dooley

    Bobbie! Darling it’s been too long! I haven’t seen you since we had dinner with Ted Bell at ‘Ted’s of Beverly Hills’

    Hmmm-mmmmmmm ……..

  13. @Jonathan without AA keep feeding CX passengers, how can CX maintain its North America high frequent flights to Asia?

  14. Cathay should eliminate first class on all routes. I’ve yet to meet a single person who actually purchased a first class seat on any Cathay flt. Instead I’ve met only people who used pts. On the other hand, I’ve met numerous people who actually paid for business class on Cathay. Eliminating first class would increase profitability on those routes.

  15. I recently checked on asiamiles.com and a Cathay Pacific RT award ticket from LAX to BKK through HKG in BC was:

    Total : 135,000 miles + HKD 1,363.00

  16. @Margaret: We had our Falltacular last weekend and let me tell YOU – it was just an absolute delight! It was our most successful yet! The girls all put on pumpkin costumes this year, designed and made by the famous designer that did the barf bag for Emirates. And we had a celebrity guest flown in on Spirit Airlines with the extra leg room seat! And then afterwards all the girls were given hugs, embraces and kisses by my husband and all the neighborhood fathers. Just really loving.

  17. An important question CX needs to clarify is the relationship between these new tiers and upgrade awards. Previously, I believe F/J upgrades were the same inventory as regular awards. Since CX did not announce similar tiers for upgrades, it practically means upgrades will remain part of the lower tier inventory. So this means MPC members can most likely kiss goodbye any chance of early upgrade confirmation, or even last-minute upgrades if CX moves last-minute inventories to the higher categories, as I fear they will.

  18. Nothing to see here.
    Other oneworld members have internal awards for their memebers with variable pricing, which may or may not be available to other oneworld memebers.

    Bottom line is that if Cathay wants to limit the number of seats that go to other alliance frequent flier members, then use different fare buckets internally vs externally (which I believe they do but I can’t confirm as I am not a Marco Polo member). Or they could increase the price paid by oneworld / Alaska. I’m not sure of the ability for them to change the oneworld coupon exchange, but should be able to with Alaska. I don’t think the increase in redemption rates for Alaska and AA were a coincidence to Asia and Middle East.

    The irony of course is that there is plenty of availability last minute, so this speculation that AA is grabbing all the seats is not true, they are readily available. Additionally, due to scheduling, AA members don’t have access to the flights when they are released so CX/BA members can grab those while AA can’t.

    If Marco Polo members have a beef, it should be with their own airline, not AA members. The root issue is CX revenue management and not releasing seats in a reasonable amount of time in advance when they are F5 considering most people don’t want to book vacations less than 2 weeks out or roll the dice on a voluntary downgrade in order well in advance to secure reasonable hotel accommodations.

    In the end it’s all business. AA sells Citi miles, Citi awards miles at lower rate than transaction fees, CX sells seat to AA that they wouldn’t have otherwise sold, AA pays less than the miles they sold to Citi. Everyone profits and has incremental revenue they wouldn’t have had otherwise. Companies are in business to make money.

    The only question in my mind is what is the requirement for being “in” an alliance regarding partner award availability? Some are completely equivalent for members and partner memebers, while others are ridiculously stingy (looking at you LAN international and to a lesser extend IB). Oneworld should hold these members accountable to a bare minimum (e.g. If your cheapest booking class has seats they must make them available for awards).

  19. “In the end it’s all business. AA sells Citi miles, …CX sells seat to AA that they wouldn’t have otherwise sold…Everyone profits and has incremental revenue they wouldn’t have had otherwise. Companies are in business to make money.”

    True. Willing buyer willing seller.

    The seller already increased prices somewhat this March, I think AA members are still finding the new rates acceptable.

    This gives CX the possibility to practice further price differentiation. Though as an MPO member I really haven’t seen any seats available in Priority 1/Priority 2 that I want and can’t get as a normal (AM) redemption.

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