Direct was released T-82 hours before departure. I omitted to waitlist for that flight but when it showed up today I snapped it up.

Please stay on topic discussing potential changes to MPO.

sxc
Cathay Pacific Moderator

Well it's still tied to how we were talking about CX likes to sell J dear, and then releasing them as upgrade/redemption availability in the last minute when it's obvious they aren't going to be able to sell them at the prices they want.

Thanks to everyone for all their comments and feedback on this, it’s a great thread.

I’ve been fairly quiet up to this point, but would like to jump in with some opinions of my own. I’d like to strongly stress these are my own views as both a loyalty industry professional and as a frequent traveller. These are not from CX or the Marco Polo Club and not any sort of official line from them. Nor is it any sort of defense, purely my views.

• Revenue recognition is the way to go. Almost every other industry (hotels, retailers, banks) rewards and recognizes spend / revenue, so why should an airline be different. We all know that miles are a poor measure of revenue and as we have seen in the airline industry, that is changing. I would expect most of us work in business, and in a business (which CX is) we are all trying to encourage revenue.
• Whilst a very good programme, I disagree with the PPS model of not providing any recognition of Economy Class travel. As someone that travels predominant in Economy class, I believe that it should be recognized. But let’s get real, a 25% mileage/sector bonus in Business Class over Economy comes nowhere close to recognizing the value of the business traveller vs. the economy traveller. This is an industry legacy from way back and the recognition of class of travel needs to align to revenue delivery for the entire airline industry. (Incidentally over the same period an airline industry that has changed beyond recognition)
• In the same vein, if a member is buying their tickets ex-TPE at perhaps half the cost of the same ticket ex-HKG, it seems odd that the TPE ticket holder can actually get more mileage credits, and thus more status credits, than the HKG ticket holder.
• In any industry, a loyalty programme needs to act to increase loyalty (mostly yield and share). From personal experience, I think the club does a good job at that, but if someone is going to buy the lowest market fare, or ticket ex-TPE, both on a superior product, the loyalty programme should be looking to act to change that behaviour, for example by trading up fare types. Otherwise, it does not play a relevant role in the transaction. If the programme has no effect why is it being offered? After all, its relatively easy for any airline to sell market fares without the need for any loyalty
• If you look at a tier like Gold, it’s a very, very broad tier in terms of member revenue delivery, so you have a very broad group of members enjoying the same set of benefits, without any differentiation. That does not feel right to me.
• To get anywhere in the club in Economy class you need to have a lot of frequency. Debatably, there is a difference between recognizing value / revenue delivery vs. rewarding high frequency. Anyone who lives in Hong Kong will recognize this anomaly whenever they go into any branch of HSBC Premier (typically very crowded). And perhaps programmes like Asia Miles are better vehicles for rewarding that frequency, after all with your miles you can still access things like lounges, upgrades etc.

In closing, and perhaps this is for the benefit of the media (so they can report this a little more accurately), my understanding is that nothing has been decided at CX and this evaluation is an ongoing process which is being done very, very carefully for all the obvious reasons. And you can be sure that every post on this important thread is being followed with interest at Cathay City.

Look forward to continuing to read this thread.

I'm not a stakeholder cos I am not a status member now and probably will not be even if MPO is changed. I'll answer in the save your first point til last. Let me play armchair airline CEO for a minute or two.

Agree - you're rewarding someone generating about 250% of Economy profit with 125% of Club Miles. Obviously not.

True. But you need to reward proportionally more to ex-TPE - these guys have discretion!

Agree.

If you mean making the club more exclusive, fine. Push the lower yield members to other OW FFPs - make them (over)pay for what will probably still be CX's business.

Well, if we do away with miles, I don't see why frequency will matter. But see below.

I know a lot of keystrokes have been wasted on this topic in other forums on this. I confess to probably not having read all of it, probably not as much as you.

At first I agreed with arguments for keeping the original mileage-based or tier points-based systems, arguing it is better for improving incremental revenue http://viewfromthewing.boardingarea....revenue-based/ .

But then again I have revised my opinions after considering what a revenue-based program combined with a minimum spending threshhold will do, and CX (combining KA into it) is the premium player.

Start with my co. Some colleagues run a weekly commute to our PRC locations - not that they will move to CA or HU anytime soon, but this change will make sure they really don't take the CA codeshare.

The globetrotting executives/senior management. A lot of their travel has to be CX, just because they're HK-based. Some can't be - e.g. going from one meeting in London to another in Boston. But when they come back? This program will make them stick to CX more to make sure they hit their threshholds.

The HK-based 1%: Honestly I don't think this lot were thinking about BA/AC/UA/AA much. Maybe it'll make them more willing to fly? This group will probably qualify no matter how you set the FFP though, hard to come up with any objective measure that will exclude them.


I still have my reservations though.

Overseas-based 1%: Err. Are they going to meet the threshholds? Perhaps CX's attitude is - either meet my higher requirements as if you're a HKer or go back to where you come from (AAdvantage, BA Gold, WP et al)

Discretion, self-paid travellers like QRC3288: threshhold will drive them off to the other OW programs. Or go over to the dark side altogether.


I'm getting seeing the bright sides of this program can be a plus to CX. But only in good times - if the economy goes belly-up tomorrow I really think CX will need some way to reach out to the latter two categories again.

But then why only penalize SL? Why can't it be apply accross the board?

Personally I disagree. Anyway, the cheap ticket does not earn club sectors, which means will not count toward next year renewal. If one this flight, it means it gives CX revenue (althought not much) yet you are losing a sector to requalify being SL in this case.

If he keeps doing it, he will lose the benefit anyway next year.

Just wish to weigh in on this. Sourcing from many conversations with my parents, and many parents of my friends, and my friends themselves (went to well known int'l school and top UK public schools). We are now mostly in our 20s.

The biggest misconception is that people in the top 1% or 0.1% spend whatever, and don't care about price. You really don't stay in this bracket by spending, and many, many, parents and the kids are price conscious, save for a few nouveau riche types with attention problems.

Yes most of us will travel F, J. But the amount of times I hear someone redeem far exceeds someone buying. We get credit card points too, and given that we spend so much in our daily lives already, we have a lot of points to burn through.

Many of these parents are lower profile but very well-estblished society figures, or are one of the big families in Hong Kong (landlords...etc.). A ticket may seem like nothing to us, but our parents still care about what the value is. I have friends who choose to fly BA simply because their club world is cheaper at times than CX J.

But at the same time, yes myself, my parents, my friends, friends' parents are all existing MPO members, with many DMs, but those usually stem from their business/company spendings, and not personal necessarily personal travels. Parents who accompanied my friends to university, parents only bought J, and the kid flew in PEY. Some flew in J, and some redeemed F. But there is never a mentality of 'oh I have the money, who cares if a ticket to LHR is 44k or 38k'.

Whether as a HKG based frequently flyer or as a very minor CX shareholder (I own 1 lot only ;)) I agree with this.

8 round trip TPE-xHKG-PVG I will reach GO... However this may generate even less revenue than a SL... If one is not rich enough to take I, just take one / two more trip in V will also do... Then maybe a HKG based GR flying once a quarter to PVG in Y generates more revenue than the GO...

Actually talking about lounge congestion TPE lounge is even more serious than HKG lounge in my opinion... However TPE based flyers (and many other outport based flyers) seems are much more price sensitive and much more dependent on the Club to retain their loyalty... Without them, how CX can keep the flight frequency with satisfactory loading to satisfy the frequency sensitive HKG based high roller is another side of the coin that need to consider...

About benefit. I think benefit can be refined further, like transit lounge access v. hometown lounge access v. boarding priority v. disembarking priority (i.e. seats that can be taken by different class of members / flyers, say only allow to pick B/D/E/J seat in advance seat reservation in front Y section) etc etc... This really needs a much more creative brain to design a better program...

p.s. Just track record told us CX never done things right the first hit...

That's what pps club (singapore airlines) does! It tracks ur ticket revenue with Singapore airlines first and business class tickets , regardless of which Ffp youmbank your miles into. It makes perfect sense, you can bank your miles anywhere but the revenue for your premier travel is earned by Singapore airlines. So a member cam bank your miles in any oneworld airlines, but the revenue which isbeasily tracked when you buy tickets from cx, can track your "premier travel spendings" and determine your "civ" score to accord you a premier status. For instance, a cx y traveler with 80 sectors in cx flight but spent only $25000 will be given Asia miles gold plus status but not recognized as cx premier club member. But some j traveller clocking only 25 sectors in cx flughts but who had sent $50000 ought to be given premier status as he is a fast revenue generator. That's how pps works. So asia miles tracks your miles and oneworld status while mpo tracks ur revenue in first/business class revenues.

It is never excessive. Cx just need to track your revenue against your name since i is the carrier. That's what pps club (singapore airlines) does! It tracks ur ticket revenue with Singapore airlines first and business class tickets , regardless of which Ffp youmbank your miles into. It makes perfect sense, you can bank your miles anywhere but the revenue for your premier travel is earned by Singapore airlines. So a member cam bank your miles in any oneworld airlines, but the revenue which isbeasily tracked when you buy tickets from cx, can track your "premier travel spendings" and determine your "civ" score to accord you a premier status. For instance, a cx y traveler with 80 sectors in cx flight but spent only $25000 will be given Asia miles gold plus status but not recognized as cx premier club member. But some j traveller clocking only 25 sectors in cx flughts but who had sent $50000 ought to be given premier status as he is a fast revenue generator. That's how pps works. So asia miles tracks your miles and oneworld status while mpo tracks ur revenue in first/business class revenues.

I don't think my family or their friends makes the 1% cut. J is still perfectly within their means. However they act exactly the same way.

Er.... no? Hotels (at least the ones in USA) chains are pretty standard in giving status based on nights and stays spent (some chains started to add revenue, but only as an additional qualification factor and not a replacement), so in essence instead of replacing something that works well and offend an entire segment of customers, they simply added a way to make big spenders happy, perhaps something CX should look into?

Again no, or depends on how you breakdown the data into useful information. If you are only comparing ONE Y flier vs. ONE J flier then yes, it's no comparison. But if you look at the market potential of the entire Y fliers market, vs. market potential for J fliers, you will quickly realized the economy of scale favors Y fliers, or in another words quantity Y flier out weights the few premium fliers.

Put it this way, if you wish to have one more tycoon spending $15,000 but sacrifice 100 regulars spending $1,000, that is not smart business model at all. Airlines, the nature of its business, is not simply about quality, but also quantity, that's why for a full-frills airline like CX it is so hard to balance the two, and much easier for no-frills airlines that only going after Y market to have an easier time, but the solution is by no means abandon the Y market for the sake of a little increase in premium markets, because the number of spenders in the premium markets grows at a much slower rate than its counterparts at Y markets.

Again, it shouldn't be a single person vs. a single person comparison but market segment vs. market segment. Trust me, if any airlines think they can dump Y and only provide premium seats and make money they will do so in a heart-beat (those that tried in the past all failed miserably).

Giving Y recognition is not about recognizing the individual of their individual contribution (it is light), but giving thanks to the ENTIRE Y COMMUNITY that an airline such as CX values THEIR REVENUES AS A WHOLE, and rewards them as such.

I would notion a hypothetical bet that if CX all of a sudden loses all of their premium pax they would struggle, but would get by. But if CX all of a sudden loses all of their Y fliers, they would go bankrupt in a month.

I do not quite agree on that if CX all of a sudden loses all of their Y fliers, they would go bankrupt in a month. On a 77H, a full J/F cabin from revenue passengers should provide more revenue than that from a full Y cabin. However, I do feel that CX may indeed lose quite some Y passengers because of this:
* My family, including myself, fly Y/PEY on personal travels. We choose CX because of my status - lounge accesses (but all of us have other lounge access cards too), seat guarantee/easier to confirm waitlist, and also easier to upgrade with my miles, etc. If my status is no longer useful, all airlines are the same to us.
* I may not be able to travel J all the time depending on my travel budget. I would love to stick with CX for Y/PEY if I can renew DM. Otherwise I may stop at GO and travel on other airlines.

This was an interesting exercise. I looked at the published ticket cost from CX website for ORD --> HKG, 6/3 - 6/10. I looked on SeatGuru to get the seat count per class.

http://www.seatguru.com/airlines/Cat...77-300ER_A.php

Assuming 100% full at published prices, it looks like the front of the plane carries half the revenue.

All of you will be more likely to adjust ticket prices and load factors.


..........Ticket $.....Seats......Total Rev.......Rev%
Y.......$1,639.68.....182.......$298,421.76.....34 .3%
PE......$2,749.68......34........$93,489.12.....10 .7%
J........$6,909.00.......53.......$366,177.00..... 42.0%
F......$18,849.00........6.......$113,094.00...... 13.0%
.......................................$871,181.88

(pardon the look... there does not seem to be an easy table tool in the editor.)

Yes, and CX's net profit margin for 2013 was just 3%. Lose just 10% of the Y passengers on the flight above and you're 3.4% down. Alternatively if average Y selling price drops 10%, you're also 3.4% down.

This is an oversimplification, but it illustrates why Y passengers matter to the overall P&L - they absorb costs. And what matters to Y passengers to get them to pay every extra 1% above the rock bottom discount price is a complex mix of factors: seat quality, IFE, flight timing, safety, being treated nicely, food and (surprise) FFP loyalty.

It is always easy to be dazzled by the premium customer's margins and forget the mass market. But unlike other industries e.g. cars, apparel, food etc. it is not possible to focus on premium customers to the exclusion of the masses as capacity is lumpy. How would you build a twice daily ORD/HKG J only non-stop service with 53 seats per flight?