AA_EXP09

but if an OAL issues Z/U class tickets, CX gets some revenue from that award (likely above at least variable costs.)

Gongzuokuang

Yeah, I wondered about that above in #330.

If travelling on award/redemption from AA, or AL, or BA, or whoever... CX is receiving SOME revenue. Anyone have any idea how much? I would think it would at least be several thousand dollars for J/F tix.

And to keep this on topic with the thread, I would wonder if it's worth it for MPC to consider the award travelers revenue contribution. Consider the AA award traveler that makes 1 quarterly long haul USA to HKG; even if CX only gets a few thousand per trip, they might be receiving more revenue from that award traveler than they would from the paying Y PAX following the same itinerary. The Y PAX would get status, and the redemption PAX gets nothing.

percysmith

Oh please don't feed the CX J monster I live with.

For Easter when I paid US$120x2 to switch us from CX J SYD-HKG to QF J BNE-HKG I already was treated for a lunatic for a couple of days.

Gonna go on CW in Oct that cost me HK$1,000 more YQ than had I gone back with QR. But she can't complain cos of Chanel at T3 LHR

I made her put her money where her mouth is by participating in the parknshop egg hunt yesterday morning...

KACommuter

Clearly not for some of us. I am not a business owner like the original OP but for that sum I too would switch to BA and just have for my next flight. Bluntly, the hard product in CX is great, but the BA product is good enough. The F&B in CX has been degraded to "fuel for the body" and I actually prefer BA's - they have much nicer snacks, breakfasts and wines. And I sleep equally well in both. So why pay HK$10,000 extra?

brunos

My 2 cents contribution on the topics recently raised:

1. CX needs to keep F class because 1) they do have some paid pax, 2) all of us who frequently fly in LH J for business find the miles upgrade an incentive to fly the airline.

2. Yes CX makes money on AA/BA F awards. How much each program pays for a CX F seat is a well-kept secret but rumor is in the order of 3,000 USD for Europe. As CX MPC is a small program compared to AA or BA, they receive many more awards pax than they give to AA or BA. On my flight from Europe last week, all six F pax were awards (I could easily check coz I was traveling with my wife, knew anoter couple and asked the other two pax).

3. CX J to HKG-LHR is generally more expensive from HKG (CX home base) but usually not so from LHR (BA home base). I fly this route a lot and find BA food/wine/service comparable to CX, but the seat vastly inferior now that the BA 747 is gone. Anyway CX must be doing things right in terms of pricing/product as they have 5 daily flights vs 2 for BA (OK one is a bigger A380).

MPC

This is a question for CX management to consider.

What is the difference in the "value" of a customer to your company if both customers contribute the same amount of revenue in a year, one exclusively flies F/J in long haul while the other is mainly on Y (perhaps discounted Y) in short haul?

IMHO if Cx is going to implement a revenue based loyalty program they should provide the same benefit to customers contributing the same amount of revenue to the company irrespective to the class they travelled

JALPak

Revenue is one thing but margin is another. Are you saying someone who buys exclusively fan fares week after week be treated the same as F/J flyers if the total revenue contributions are the same?

percysmith

Actually they might - fanfare is CX's rubbish bin of rubbish bins - the CDO squareds. Case in point - the Zurich fanfare this week (*after* the revaluation). Someone who buys 120K in rubbish bin seats is perhaps as valuable as a corp flyer who buys 120k on Friday evening flights for those seats are almost pure profit.

We can't measure profit but revenue in certain fare classes is a good proxy. Certainly better than miles, at least definitely in this case.

1010101

It's not as simple as picking whether they prefer F or Y passengers. Forgetting the relative profitability of each cabin:

Passenger A travels discounted economy to LHR and spends $100k per year.

Passenger B travels J to CMB and spends $100k per year.

On the face it they look like identical value customers, BUT if passenger A decides to fly with BA all of a sudden, CX do not lose out because there are plenty of other customers happy to fill A's seat.

If Passenger B decides to fly UL instead, CX may only fill half ($50k out of $100k) of B's seats on the less popular route, meaning Passenger B is actually worth $50k more than Passenger A. You have to take into account where (route & cabin) the revenue is spent before you can attribute value to each customer, and I'm sure CX management will be aware of where they can and cant fill planes easily if they change MPC.

cy1978hk

This is very CORRECT! CX must think both the revenue side and the opportunity cost side of the equation!!

MeltingAlf

I do agree (to a decent amount) that this proposition is pretty true - but it's hard to ignore that there are other factors at work.

If Passenger B decides to fly UL instead, CX will be compelled to reduce the price of their tickets on HKG-CMB or the other way back to wrest back passengers from UL on that market - essentially an aviation model of demand and supply at work. Somehow somewhere, CX will get the business they want - and if it ain't making a profit, CX would be compelled to cut the route.

Which also sounds a bit like why they offer pretty low fares on all classes out of TPE to combat China Airlines and EVA Air.

More often than not, whilst it is easy to say that "low demand service => passenger on board is more worth CX's time", it is unlikely that should be the prevailing case most of the time. If anything - CX's most popular routes (like HKG-LHR perhaps) should be those garnering in the most money as a lost full-fare-paying business passenger could be easily substituted by another one which wants the seat - and would pay higher to get it - which allows CX to raise the prices (or frequency) to reach the equilibrium point between demand and supply.

I am more convinced rather that a probable lost passenger on CX flying J to CMB may more likely probably mean a decrease in J fares to attract more people to fly on CX - such as some of the MR runners here. They might fill up the seats, but they probably aren't the most valuable customers if we were to base it on profit margins.

(I hope I didn't overcomplicate things... )

Nicc HK

The effort involved in getting a new client is far greater than the effort required to keep a client. I run a business and this is definitely true.

But I am a DM PEY/Y flyer. I rarely look at alternatives to CX on my routes, but for my travelling out of HK there are good alternatives on my frequented routes, i.e. US/UK/JP. Oz is the only place which is likely to be a small headache.

So like many others, if CX thinks the dollar value of my custom is not worth the current benefits, then I will look at the dollars I spend with CX and consider alternatives.

In some ways it might even be fun, and take me back to thinking about my travelling rather than just say to my TA 'CX to XYZ on ABC Dates'.

It is pretty clear the F/Js are not going anywhere, but the 'loyalist' PEY/Y seem to be already to be doing the math. Once they go the majority are unlikely to return because the effort involved to regain status is likely to be more painful than developing status with the new programmes they subscribe to.

It is not easy to get status on CX as it is, and already demands dollar spend.

JALPak

It is not that hard to get status on CX as it is if you are discounted Y long-haul flyers. It takes like 2 roundtrips to become a SL?

Switching to a competing FFP doesn't necessarily mean CX is losing your business though. If you switch to an alliance partner's FFP, e.g. AA, you can still fly on CX to attain you elite status and CX will still get your money.

domirule

My family and our small company have been loyal CI (China Airlines) customers for twenty something years prior to 2013 (traveling mainly ex-Taiwan)...we held Paragon/Emerald/Gold and corporate memberships for years and the vast majority of our employees and customers flew CI per our discretion. For years, however, CI chose to award Emerald/Paragon memberships only to those flying J or F, similar to what CX is apparently thinking now. We got fed up with CI's policies because despite flying so many short-haul Y's in the region, our members could never advance to the higher tiers.

So we switched from CI to CX a couple of years ago and basically transferred nearly 98% of our entire travel portfolio to CX. If CX goes with this new revenue-based scheme and top tier becomes achievable only through J/F, then we will definitely reallocate business elsewhere. I'm not saying we'll stop flying CX, but we will (1) probably just fly enough to get the middle tier instead of flying 100+ sectors a year, and (2) not always opt for the more expensive V or above fares. It's actually pretty ironic for me personally that CX is going this route...because CI just changed their policy in Dec 2014 to award Paragon membership after 80 sectors in Y, including heavily discounted Y (in a 12-month period), and Emerald after 40 sectors in Y.

In my example, CI not only lost one customer...it lost an entire company of frequent fliers, and despite changing the rules last month, it's too late because once the customer is gone, it's very difficult to get them back again.

I'm really not sure why a sophisticated company like CX is even thinking about fooling around with changes like these. I'm of the opinion that a frequent flyer program or an incentive program has little relevance to the rich or to those who mainly travel J/F. The people I know who regularly fly in J/F usually do not have the time or interest for such mundane things as the difference between a Gold or a Diamond or a Diamond Plus. On the other hand, the vast majority of flyers are cost conscious, and few will be motivated to go for Diamond or Diamond Plus if the prerequisite is J or F. If CX goes this route, that opens up a window for a traveler like me to jump ship, perhaps back to CI now that they have changed their rules.

If CX really wants to reward customers based on revenue, they can do so internally through their computer system (e.g. ranking members of the same tier based on revenue/profitability), or through special invitations such as events or other privileges. They can do things discretely instead of publicizing the changes. I just don't see the point in potentially 'rocking the boat' to alienate Y customers...especially since J/F customers' purchasing behaviors will not seem to be affected by the proposed changes.

Cathay Boy

your words to apparently not many people's ears. I think CX keep getting letters from the J/F fliers complains and whining about how Y fliers shouldn't get the same treatments as them (this forums have plenty of these examples), and after awhile someone in top management panicked and decided to go revenue-based route.

Great example about how CI lost a ton of people, count many of my relatives included. They fly a mix of Y and J and when they found out their Ys no longer mattered, they all jumped to CX. I guess like you with the recent CI change and I guess future CX change they will jump right back to CI.