Go Back  FlyerTalk Forums > Miles&Points > Airlines and Mileage Programs > Cathay Pacific | Marco Polo Club
Reload this Page >

Why doesn’t cathay lower prices and try to sell 75% empty plane seats?

Why doesn’t cathay lower prices and try to sell 75% empty plane seats?

Old Mar 12, 20, 11:31 am
  #1  
Original Poster
 
Join Date: Jun 2018
Location: Hong Kong
Programs: CX MPC Gold, Mariott Titanium
Posts: 52
Why doesn’t cathay lower prices and try to sell 75% empty plane seats?

This question is just out of curiosity more than anything. Ex HKG still seems relatively expensive, would have thought in crisis times like these, prices would be affected too?
Oneworldflyer64 is offline  
Old Mar 12, 20, 11:55 am
  #2  
 
Join Date: Sep 2005
Location: TPE / HSZ
Programs: CX MPO GO (=SPH), IHG Spire Amb, Hertz 5*, National Emerald Club
Posts: 5,156
Originally Posted by Oneworldflyer64 View Post
This question is just out of curiosity more than anything. Ex HKG still seems relatively expensive, would have thought in crisis times like these, prices would be affected too?
How much will demand increase with a lower price? How much profit will CX lose because those who would fly anyway can now pay a lower price?

If you want to read more about it, take a look at https://en.wikipedia.org/wiki/Price_...city_of_demand and https://en.wikipedia.org/wiki/Economic_surplus. If you are not into a more technical explanation, suffice to say CX thinks it will earn more by charging a higher fare even if that means the load is slightly lower. Those who are still flying will pay the premium, and this premium is what CX is going after.
ernestnywang is offline  
Old Mar 12, 20, 1:01 pm
  #3  
A FlyerTalk Posting Legend
 
Join Date: Aug 2010
Location: DCA
Programs: UA US CO AA DL FL
Posts: 49,969
Air carriers did that in 2008 during the financial crisis and many who did that failed.

The solution is to cut capacity to meet passenger demand at reasonable prices. Selling empty seats at 75% off is just cannibalizing whatever existing market there is.

Moreover, if you are not traveling due to Covid worries, would those concerns go away if the seat could be had for less?
Often1 is offline  
Old Mar 12, 20, 1:36 pm
  #4  
 
Join Date: Aug 2013
Posts: 1,109
While there might be a few bargain hunters lower prices are probably not going to get a lot of folks to fly. Increasingly, for the most part folks flying are folks that have to fly and they are just going to be less price sensitive. I would expect when things start to recover we might see lower prices to lure folks back into flying. Right now I am sitting on a fair number of Asia Miles points of which I'd love to burn some and soon (in case CX goes under). I am seeing great award space ex-US on OW carriers that I'd normally jump on but I cannot bring myself to do so because of COVID risk and more so because the situation on flights, travel bans, etc., just keeps changing. Right now low prices and/or great award availability is just not luring me into flying.

Last edited by 36902BRF; Mar 12, 20 at 2:58 pm
36902BRF is offline  
Old Mar 12, 20, 2:24 pm
  #5  
 
Join Date: Nov 2017
Location: JFK/EWR/SFO/LAX/YYZ <-> HKG, PEK, CKG
Programs: CX, Hyatt
Posts: 133
Agree with the above posters on demand being "inelastic" under current situation.

CX is not unique in this approach. Another manifest is current US3 transcon J prices remaining at the classic $649 "I" level despite Y fare levels collapsed.

In OP's defense pricing has to be in-line with market to capture remaining demand, in consideration of the situation in HK, or the perception of such.
ernestnywang likes this.
PacificSunrise is offline  
Old Mar 12, 20, 5:13 pm
  #6  
 
Join Date: Jun 2007
Location: SIN
Programs: CX DM, SQ KF Gold
Posts: 713
I’ve just come back from New York. The flight was full, as in 100% of seats were taken.

This was most likely the result of capacity reduction, not crazy demand, as I doubt if CX had continued with 4-5 daily flights from the NYC area that all of them would have been anywhere near full, not even at much lower prices.

most people won’t fly because they’re scared of catching the virus, low ticket prices won’t change that.
NetJets Germany is offline  
Old Mar 12, 20, 6:24 pm
  #7  
 
Join Date: Nov 2007
Location: Hong Kong
Programs: CX, UA, Shangri-La, Hyatt, Starwood
Posts: 7,704
Originally Posted by Oneworldflyer64 View Post
This question is just out of curiosity more than anything. Ex HKG still seems relatively expensive, would have thought in crisis times like these, prices would be affected too?
As discussed above, the idea seats should be sold for pennies on the dollar in a time of extreme crisis is a misnomer.

You just park the planes and don’t fly them.

You don’t operate a 350 seat jet - and burn $100k USD worth of jet fuel in the belly, and pay up to 17 flight attendants + pilots, and pay Russia for overflight, and pay servicing/landing/parking fees upon arrival, and pay for hotels for the FAs and pilots, and so forth - with passengers who have all paid $1 for their ticket. That $350 in revenue maybe enough to pay one of the 17 crew their per diem while in London...

Obviously thiss example is extreme, but highlights what is missed here on FT time and time again: yield matters! If yield is low enough In this case, it’s less bad to park the plane and take the hit with depreciation and/or financing costs on the airframes, than to fly them. Flying them would incur not just the depreciation and/or financing costs, but also incur all the marginal costs associated with flying.

In a normal non-corona environment, maybe we can say about 70% load factor (with large variability) is about the break-even level for many of CX’s long-haul flights. In this happy (customer perspective...) scenario if on one day, the load factor on that LHR flight happens to be 30%, it’s not like CX is going to cancel it, even though that flight is probably cash flow negative. You are just the lucky passenger who happened to hit the jackpot and fly with an empty row in economy or 1/6 in F. And hey maybe CX has a 100% full house returning from LHR, 6/6 cash passengers in F and a full house of cash pax in J, which makes flying the frame out there unprofitable on this segment, but profitable on the next...you get the idea.

But these are not those normal times.

In this kind of pessimistic coronavirus environment, keeping the old schedule the way it was would result in a system wide load factor of probably 5%! So you don’t run the flights. If you did try to run the flights like that, you’re literally lighting money on fire and probably run out of cash in a few months or less, in CX’s case.

Trying to attract customers at fire sale prices is suicidal and pointless, because you still can’t achieve the yield needed to break even. So what’s the point to burn all the cash? Are customers going to fly to LHR if we offer them prices of $3k for J class? How about 2k, and sell all the economy seats for $250? Will we will be able to fill up those planes to 90% occupancy (the break-even load factor needed now that we’re cutting prices)? In this environment, I’d say no. So let’s take it further. Do we cut all J class to $1k and economy to $100? In this case, maybe this is the break-even cash flow point where 100% of the seats must be sold to just break-even. Do we fly it then? And what if that can’t achieve 100% load factor, which I suspect would be the case? People just don’t want to fly right now. And CX has way too big a fleet than where short-term demand currently is.

So even if you have 100% load factor at $1/ticket prices, anyone can obviously see that’s not going to be profitable. So the terrible yield makes it impossible to fly.

That’s what you’re seeing now. CX is just cutting capacity by an extreme amount. As the fellow says above, he had a 100% full flight from JFK. This doesn’t mean CX is doing well. (It’s also another point to make about how deceptive it is when people report “flight is full!” Without the yield, it doesn’t matter.)

Last edited by QRC3288; Mar 12, 20 at 6:32 pm
QRC3288 is offline  
Old Mar 13, 20, 1:32 am
  #8  
FlyerTalk Evangelist
 
Join Date: Nov 2009
Location: Earth. Residency:HKG formerly:YYZ Business: ATL, PVG, PEK, CAN, SZX, MNL, SIN, KUL, BKK, SGN, CPT, UIO
Programs: CX, DL, Nexus/GE, APEC
Posts: 10,282
Originally Posted by NetJets Germany View Post
I’ve just come back from New York. The flight was full, as in 100% of seats were taken.

This was most likely the result of capacity reduction, not crazy demand, as I doubt if CX had continued with 4-5 daily flights from the NYC area that all of them would have been anywhere near full, not even at much lower prices.

most people won’t fly because they’re scared of catching the virus, low ticket prices won’t change that.
Not just JFK down from 4/day, there is also the cutbacks at BOS, IAD and ORD.

YYZ went to one every two days. AC cancelled 15/16 until end of April. So 4 777's every two days is now down to 1 A350.
I was rebooked to next day which 826 was operating and there was more occupied seat in Y on the new date according to the seat map.
tentseller is offline  
Old Mar 13, 20, 2:03 am
  #9  
 
Join Date: Apr 2007
Location: Anywhere
Posts: 4,188
Not just CX... I was flying JL and MH recently and the J cabin was barely 20% filled. Yet their prices continued to hold steady.
carrotjuice is offline  
Old Mar 13, 20, 3:42 am
  #10  
 
Join Date: Jan 2005
Location: ...
Posts: 1,024
I think there is effectively no price point for J or even F that would get me to take an incremental leisure flight now. Not even $100 for RT in F would get me on board. I wouldn't enjoy the experience, at all, in the current environment.
Jane's Addiction is offline  
Old Mar 13, 20, 7:41 am
  #11  
 
Join Date: Jun 2018
Posts: 206
It is not the price that stops people travelling. It is the travel restrictions. It is the virus. Lowering price will not make people immunized against coronavirus.
Reply1984 is offline  
Old Mar 14, 20, 1:53 pm
  #12  
 
Join Date: Feb 2013
Location: HK
Programs: BA SIlver, Virgin Silver, Hilton Diamond, Marriott Platinum Elite
Posts: 133
...
..
anonymous_third_party is offline  
Old Mar 14, 20, 4:06 pm
  #13  
 
Join Date: Dec 2005
Location: Scottsdale/Winston-Salem & The Skys
Programs: AA Executive Platinum (3 Million Mile Club), Global Entry
Posts: 73
Originally Posted by Jane's Addiction View Post
I think there is effectively no price point for J or even F that would get me to take an incremental leisure flight now. Not even $100 for RT in F would get me on board. I wouldn't enjoy the experience, at all, in the current environment.
There is certainly a price point that would get me to fly in this environment. And I agree with another poster, it’s not the fear of virus for me, it’s the constantly changing travel restrictions & the fear that I might get stranded somewhere far from home – that’s the only thing that would give me pause.
mastertrust is offline  
Old Mar 14, 20, 8:23 pm
  #14  
 
Join Date: Oct 2018
Location: Sydney
Programs: Qantas, BA
Posts: 24
I am flying CX SYD-AMS then BA to LHR for exams in May/June, I am flying class E and paid $3k au roundtrip. I noticed that J is selling for $4700au roundtrip, yet if I want to upgrade they are asking for minimum $1200 per leg and I cannot bid on the SYD-HKG and vice versa legs.
My question is if I am on the plane already and according to expert flyer all my flights are mostly empty why is there no cheaper upgrade offers that I have from BA? Isn't this basically free money for them? Granted I am BAEC silver (sapphire) and not a Marco Polo member but surely cheaper upgrades are better than selling cheap seats as a money earner?
LiveForTravel is offline  
Old Mar 15, 20, 3:42 am
  #15  
 
Join Date: Sep 2005
Location: TPE / HSZ
Programs: CX MPO GO (=SPH), IHG Spire Amb, Hertz 5*, National Emerald Club
Posts: 5,156
Originally Posted by LiveForTravel View Post
I am flying CX SYD-AMS then BA to LHR for exams in May/June, I am flying class E and paid $3k au roundtrip. I noticed that J is selling for $4700au roundtrip, yet if I want to upgrade they are asking for minimum $1200 per leg and I cannot bid on the SYD-HKG and vice versa legs.
My question is if I am on the plane already and according to expert flyer all my flights are mostly empty why is there no cheaper upgrade offers that I have from BA? Isn't this basically free money for them? Granted I am BAEC silver (sapphire) and not a Marco Polo member but surely cheaper upgrades are better than selling cheap seats as a money earner?
If you have a 3000AUD ticket and a new itinerary on the same airline, same or similar routing is selling at 4700AUD ticket, most (not all) of the time you can just pay fare difference and change fee to upgrade.
ernestnywang is offline  

Thread Tools
Search this Thread
Search Engine: