By Jamie Freed
SINGAPORE (Reuters) – Hong Kong’s Cathay Pacific Airways <0293.HK> has made the biggest overhaul to its loyalty programme in a decade, with airfares paid now playing a larger part in determining customer rewards, the head of the business said on Thursday.
The move comes as Cathay is looking to increase revenue and cut costs as part of a three-year transformation programme designed to make it more efficient against aggressive competition from mainland Chinese rivals and Middle Eastern carriers.
Since 2015, there has been a broader shift in the airline industry toward basing awards on customer spending rather than the traditional marker of the distance flown.
Carriers including American Airlines Group Inc <AAL.O>, Germany’s Lufthansa Group <LHAG.DE> and Australia’s Qantas Airways <QAN.AX> have already rejigged their loyalty programmes in this manner.
CEO Stephen Wong of Asia Miles, Cathay’s loyalty programme, said the new award chart was a hybrid involving the airfare type, travel class and distance rather than being solely dependent on revenue and was based on customer feedback and studying other airline, hotel and retail loyalty programmes.
“This is a balanced approach,” he told Reuters in a phone interview, adding that 80 percent of tickets would earn more miles, with the remainder to destinations including Manila and San Francisco earning fewer.
Asia Miles has 10 million members, with most based in Hong Kong, mainland China, North America and Taiwan, a figure that has doubled over the last five years and is expected to continue to grow, Wong said.
Cathay’s 2017 annual report said Asia Miles achieved an increase in profit compared with 2016 due to an increase in business volume, but it did not disclose the actual result.
Loyalty programme earnings are typically less volatile than profits from flying jets, with airlines receiving payments from partners like credit card providers and retailers that purchase frequent flyer points as customer rewards.
In the first three months of 2018, Asia Miles members redeemed 20 percent more points on flights and other items than the prior year, Wong said.
As part of the programme changes, Asia Miles said it planned to increase the number of award seats by 20 percent or more.
Cathay had typically offered fewer award seats to Asia Miles members than peers, according to U.S.-based consultancy IdeaWorksCompany’s CarTrawler Reward Seat Availability Survey released last week.
Only 17 percent of seats on Cathay’s long-haul routes were available as reward seats in August, compared with 92 percent on Qantas, IdeaWorksCompany President Jay Sorensen said.
(Reporting by Jamie Freed; Editing by Muralikumar Anantharaman)