Two years ago Cathay Pacific announced changes to its elite program.
- Premium fares would count far more towards elite status, with mid-priced coach fare flyers losing out. Most fares would count towards status, but higher tiers were likely out of reach unless you were buying the most expensive tickets.
- Top elites lost the ability to access Cathay Pacific lounges any time (‘open doors’) even when flying airlines outside the oneworld alliance.
- But other elites got the opportunity to earn lounge passes.
- And they introduced a form of family leave for elite status deferring status for a year (but without access to the benefits while status is deferred).
Travel Data Daily looked at the data and found that the airline lost 10.7% of elites as a result of the changes and this is driving an estimated HKG$62 million a year loss. That’s ‘only’ about $8 million each year, but for changes that were supposed to drive increasing profits that’s significant.
Marco Polo Club members were vocal about the changes, with a measurable “11.9% decrease in positive sentiment by Gold and Diamond members of the loyalty program after the announcement.”
They also found that complaints in social by elites were predictive of future transactional behavior (but that complaints by non-elites were not).
What we found was that when loyalty members who consistently talk about their home airline suddenly begin talking about another airline in a positive manner or asking questions related to another airline, our research suggests the propensity for this individual to book a flight or switch loyalty programs significantly increases.
Our data analysis indicates that members who match the profile of talking about other programs positively, while simultaneously speaking negatively about Marco Polo were highly likely to switch (churn) loyalty programs within 85 days of making the statements.
The airline’s yield “was down 9.2% and overall load factors down by 1.2%” after making the change to their program, though of course program changes alone weren’t the drivers. However this ‘focus on high yield passengers’ didn’t lead to higher yields. It just chased away customers buying mid-range fares.
This seems as though it might be a cautionary tale for others.
Airline loyalty program should learn from this but I doubt it. They will continue to take away benefits and claim to “enhance” the experience for their customers.
I was PLA or EXP with AA for the last 10 years, flying about 80-110 k every year,
This year, 2017 I have zero miles or flights with AA, and now flying several airlines while crediting everything to Alaska
Just bought two roundtrips to south america with aeromexico, getting 100 pct of flown miles + 100 pct bonus, so basically 30k miles on AS as opposed to 7500 on AA…..so long AA, never again….
I hope others are doing the same but as Paul says, probably they will continue with their “enhancements” instead…
I don’t step on any of the big US3 unless its an award ticket…burning leftover miles…
And now, stay tuned for JoshG’s idiotic rant and comment
Gary – I would love to see similar analyis on UA post-Smisek and of course on AA & DL as well for a period of the past 24-36 months.
It seems the point of the changes was to gain more business from “high value” customers to make up for losses of the riff raff and the increased benefits for hvcs. Apparently CX did not make up for these losses with more hvcs. What was the affect of the changes on hvcs? If the changes didn’t increase hvc traffic – big mistake.
The reason CX lost elites was not simply due to changing the rules but failing to make getting to top tier attractive enough. At the moment there is not enough difference between a OWE and CX Diamond and it is significantly easier to hit OWE in other OW FF programs. The lesson here is not do not devalue but CX failed to make Diamond sufficiently attractive for people to go the extra distance to qualify on CX.
This makes perfect sense. Business travelers were already likely to be loyal to a specific program since they traveled enough to become elites and enjoyed strong earnings already, many of those business travelers were already locked in by company contracts, living near a hub, or had picked one due to other factors such as alliance preference. All these changes have done is rewarded them more for making no changes. On the flip side though someone who travels 25,000-50,000 miles varying annually in coach now has almost no incentive to stick with any of the major airlines. That type of traveler may not earn elite status anyway with the $ spend requirements, has seen their mileage earnings cut to a pittance (coupled with devaluations and decreased availability), and may find the lower tier benefits barely noticeable anyway, if they get any thanks to the spread of Basic Economy. That type of traveler may have been willing to spend a little extra to fly with one airline, but now? Why bother? I would love to see what type of increased membership numbers AS has picked up in the past year to contrast with big 3.
I was transiting HKG over the weekend – Oneworld Emerald transfering AA J to CX J and was shocked they would not let my friend join the Pier F as my +1 Guest because he was not transferring to a OW airline. As far as I can remember I have never had a +1 asked to see boarding pass and denied admission. OWE as well coming off AA J (not that it should matter – or at least I thought). Pretty weak if you ask me on CX
I didn’t dig into the data, just looked at the charts and read the underlying article; anything I say is potentially specious. But it seems straightforward: the decrease in elite loyalty is measurable and visible, while there is no corresponding increase in non-elite loyalty. Average fliers are not influenced by the the changes in the program to shoot for “elite” status, apparently.
So while it’s potentially clear that devaluing the program drives elites away (as one might expect), giving small increases to non-elites may not incent them to become brand loyal. While many readers here might expect CX to decide for better elite rewards and/or non-elite bonuses, there’s the real possibility that management could read results as saying that there’s no reason to incent non-elites at all, and thus just measure cost savings vs. elite churn in continued devaluations.
@doug – me too. Pretty much the exact same travel pattern for last xx years – now only 2 trips (low cost) on AA this year in an attempt to use my (almost useless swu’s). EVERY other trip is booked away, including a paid business class international trip .
@Doug, Me also. I still have EXP with AA, so I still book them domestically. Usually, I check my balance constantly and by now I would have flown near 50,000 miles (I hate to leave it to the last minute). This year, I will probably fly under 25,000 miles. In 2018, it is likely to be under 3,000 miles since I will not have status after January. I used to book my international flights with revenue tickets instead of points to maintain status. This year, I don’t care about status.
I been flying cx for past 9 yrs 2012 to 2015 i was diamond member for 3 yrs in row. Flying more then 120k miles a year. But now lack of travel im a greeen member.
Cx loyality program its the worst. You can not buy miles
They only sell you certain miles to upgrade. But there require miles for upgrade and class of service is very high.
With premium economy its hard to get to business upgrade. Most of the upgrade are from american or other one world members airlines
Realy a bad program for marco polo members.and
Service is going down the drain.
Big problem for CX is those coach flying members who were loyal have been replaced by pax on deep discounts with no loyalty whatever. Result load factor high, yield down. The J class pax from HKG have plenty of choice of product usually cheaper than CX so are less loyal as well.
To be honest, I have always thought that Delta, AA, and UA revenue move is a middle finger to the “over-entitled” elites rather than a revenue generating scheme. I surmise that management was just tired of having to worry about a large class of loyal customers that they had to think about whenever they tried to make changes. Internally, I am guessing Delta, AA, and UA internal reports show the same thing as CX’s data referred to in this article.
I will fly over 200-K with OW this year. But I figure I will spend at least $12,000 LESS with AA in 2017 than in 2016 because of EXP program changes. 100% of my travel is discretionary, too. Not sure how this benefits AA but… hey, it’s their airline, they should run it how it serves them best. I’m just saying.
@Terry. LOL. I am just agreeing with you. They don’t need my money anyway!
@Flyer I suspect that United lost many ofthe traditional mid fare business travelers as well. But that’s what they wanted, after all they called these customers “over entitled”.
@Flyer-Fun, Don’t you feel that the lack of loyalty to AA is somehow freeing, and effectively is our way of giving the proverbial middle finger back to Doug Parker & Co.? Like you, I used to be the guy who checks his AA balance daily and would find any way around our corporate controls to book AA and drive my points balance. As such I have been EXP for 7+ years and have 4MM status. Last year I realized (as I NEVER had a single SWU clear before the gate in 140K miles of travel) that AA loyalty was one-way at best, useless at worst. This year I can not tell you my AA balance (I only flew them to use up my measly 4 SWUs), but I am sure it is <20K . I have noticed that this year SWUs are clearing even at time of booking, but it is too late. I have experienced the freedom which comes from lack of loyalty to AA, and now enjoy the mostly superior service of the non-domestic USA carriers.
Has there ever been an FFP that did not devalue its miles (or whatever they call their currency) over time?
The point above about CX failing to enhance its elite proposition(s) is spot on. Look at DL’s success in transitioning to a yield-based elite qualification strategy. DL has made enhancing its top tiers an ongoing priority and it is continuing to do so (just recently in fact), while its stock prices and profits continue to soar.
Great article Gary and spot on. Together with these changes for elites there was also a substantial devaluation of Asia Miles which I do think should be mentioned here. Keep in mind that in Hong Kong there are far fewer (and less attractive) co-brand credit card earning possibilities for Asia Miles so devaluations arguably hit CX in their home market even harder in terms of loyalty.
Finally, it’s worth mentioning that Qatar joined Oneworld in late 2013 which has presented very tough competition for CX on mid-range business and high-end leisure travellers (it’s routinely half the price to fly QR vs CX in business class from HKG to most European destinations), and so as other posters pointed out here CX pushed a number of elites out only to be replaced with very low yield passengers as the mid-range migrated to QR and other OW carriers.
Qantas continues down the elite-pampering route apace, having learnt no thing from the CX experience. There is much grumbling from mid-range passengers who provide bums-on-seats in Y, W and (less so) J cabins and are QFF members. Loyalty lost is notoriously difficult to recapture, something the current crop of whizkids at Qantas know nothing about.
I smiled when I read Paul2’s and Kerry’s comments. For all the obvious, well-documented reasons, I have shifted my domestic earning to the superior-in-every-way AS program. I’m proud to call myself a 75K member, whereas I could give two shoots about my lifetime Gold status on AA (1.4 MM miles over nine years as an EXP). And I am thrilled to be Qatar Gold on my way to Platinum.
QR, for anybody who isn’t in the know, has superior hard product, vastly better meals (including at least six vegetarian options in international J), a more interesting (if you’re a global nomad) selection of IFE, hotter FAs (who know how to keep their voices down in the galley, are better-trained in just about every aspect of service, and couldn’t have voted for our current president.)
You know, never say never about AA, but I also felt that loyalty had become a one-way street. I’m happy to be crediting all flying to AS and QR.