QRC3288

CX is historically ruthless to people who pay serious $ to the airline, but fail to make the grade the next year. This situation (renewing at 800, and with the number of similar anecdotes that are piling up here and in other threads) is definitely a new thing. I am perhaps taking this too far a stretch, but given some of the changes that are happening on the customer side, I think Hogg must have a different leadership style / philosophy than Ivan Chu and we're seeing some effects immediately. (one other positive thing not mentioned in here: prices for staff travel were just reduced for many routes. I'm all for anything picking up staff morale, because selfishly it helps us the customer. We the paying customers ultimately pay the price when staff hate their job and don't trust the CEO).

Interestingly, I think CX is keenly aware of a Hong Kong dynamic this last decade - the total death of the expat package - on the cost side, but hasn't realized it (or is just realizing it) on the revenue side. On the cost side, obviously CX is hiring local pilots and cutting all foreign pilots to a local package. Instead of the half million USD/year packages and living on the peak old school expat pilots enjoyed (perhaps some exaggeration, but not much), which is obviously unsustainable and completely unnecessary in this day and age. But on the revenue side, how tickets are purchased have changed. It's not a hardship to get people to move to Hong Kong. And local financial firms do not have to offer the same perks to employees transferring from NY or London, even if those employees enjoy lucrative compensation privileges simply as a result of their rank and industry.

What I mean is, 10 years agoI could point to multiple banks who had more "loose" travel policies in Asia versus North America, and part of that was the internal understanding banks needed to encourage talent to travel abroad to developing markets. (It also helped that emerging markets were seen as unlimited growth potential and Asia was exotic to guys in NY, so the tolerances for absurd Asian loss-making divisions were high). You would have vice presidents and below on equity capital markets teams flying primarily economy class in the US as dictated in their contracts, yet they'd be exclusively in J class in Asia. Well, those days are ending too.

Yet CX's MPC program still is designed for expat types, as Harbour Gent alludes to above, instead of folks who either pay for their own travel or self-direct it. Hong Kong's legacy as an expat banking center is one of the reason it hasn't been too big a deal for CX to be ruthless to travelers who maybe are DM for 5 years and "pay" (aka Morgan Stanley pays) a few hundred thousand in revenues to CX, but are quickly cut to GO or SL the first year they don't make the grade. This is acceptable behavior if that traveler was a VP in derivatives at Morgan Stanley, because realistically he might've just transferred to Dubai where he'll be flying Emirates, or to a different broker with a travel different policy, or the buy side. In short this traveler is under no illusion that his DM status is nothing but a result of his job at MS. It's almost a perk of the job.

But as expat-type packages and travel policies in Asia are cut, you end up filling J class with more self-directed spenders. And for those people the relationship with CX is more personal since there isn't a middle man like the employer (or, I know of multiple firms where the employer is paying, but the staff are legitimately choosing and "paying" for their own travel out of a budget allotment, and the staff are incenvitized in various ways to save costs for the firm).