Cathay’s loyalty boss talks alliance-wide upgrades, lifetime status and more with Point Hacks

Cathay Pacific’s loyalty program has long been a great option for spending Asia Miles on flight bookings. But the program is growing and evolving. For one thing, mileage upgrades across the oneworld Alliance are on the horizon. Yet there’s more to Cathay’s loyalty arm than simply earning and redeeming miles.

The status tiers in Cathay unlock some serious perks – unlimited Cathay Pacific lounge access from Silver, for example. But why is it so hard to reach Gold and Diamond above that? And why does Cathay no longer offer new lifetime memberships to its regular flyers?

To learn more, I catch up with Paul Smitton in Hong Kong. An Aussie expat, he’s now Cathay’s Director of Customer Lifestyle. Smitton has also served as Managing Director and CEO of Asia Miles since 2018. Let’s get to it!

Recognising Cathay loyalty every year, and for a lifetime

Right off the bat, one piece of feedback we often hear about Cathay’s loyalty program is the challenge of earning elite status. Every time a member moves up to a new tier, their ‘membership year’ resets – and along with it, their balance of Status Points.

In effect, when a member moves from Cathay Green to Cathay Silver, they start from zero again to earn Cathay Gold. That disadvantages newcomers to the program, as you can’t simply climb from Green to Gold or even Diamond based on a standard 12 months of flying. You have to stop at every tier along the way and start from scratch. Granted, once you’ve reached your desired level, keeping it is an easier prospect.

Smitton recognises that ‘given a lot of other airlines do it a different way, it does (require) a bit of education. So I’d say it’s probably something that in time we may well evaluate.’

‘We’ve got a 25-year-old legacy IT system, to be honest. And so that system creates some limitations in terms of how things are done, because there’s business rules behind these things. Sometimes you have to operate within the constraints of your operating system. And so yeah, look, if it was a blank sheet of paper…’

Speaking of the current system, ‘because you’re in that level, you’ve got through that hurdle now and then you go to the next level. It is something that I (still) think works.’

What about lifetime loyalty recognition with Cathay?

Cathay Pacific used to have a lifetime membership program, recognising the loyalty those who fly more than most. But back in 1999 – around the time that Cathay and partners founded the oneworld Alliance – the ability to reach lifetime status was revoked. Existing members had their benefits grandfathered, but nobody new could attain it. In fact, for the trivia buffs, that’s how Cathay’s secretive Diamond Invitation tier came about, which was created for those members.

But in recent years, many of Cathay’s oneworld partners have increased their focus in the lifetime space. Finnair Plus now has lifetime Gold (Sapphire) and Platinum (Emerald) levels. Qantas launched Lifetime Platinum – albeit at a level that almost nobody could realistically achieve. Other carriers, like American Airlines and British Airways, also offer lifetime benefits achievable to new members.

So why doesn’t Cathay still dangle the carrot of lifetime status to win the loyalty of even more frequent flyers?

‘It’s another great question,’ (thanks Paul!). ‘It’s something that we do think about from time to time. Honestly, I’ve been in loyalty for all my career. There’s a whole thing around having a sort of carrot and stick type thing, right? If you have no incentive to maintain your loyalty, often people start spending less with you and you see share shift, move to other airlines.’

‘So the positives are, it’s great for the customer’s perspective. From a loyalty perspective, (it’s a bit more difficult). We are a great believer in making sure that we have a very high standard of customer service. So if you look at our lounges – they’re some of the world’s best lounges. If you see other airlines that have allowed too (many people into the) lounges, the standards drop.’

‘You go to some of the US carriers where they have huge levels of membership in their (programs). I’m not trying to knock my competitors, but those lounges are nowhere near the same quality as our lounges. So it’s very important for us to maintain the customer experience, limiting the people who get into those levels. It does maintain the standards, the customer service and I guess it’s a balance. It’s tricky.’

Earning, spending and expiring Cathay miles

Even though Cathay’s policies on earning yearly and lifetime status may not suit everybody, the airline has made some other recent changes in the loyalty space. Miles no longer have a hard expiry. Instead, as long as a member continues to earn or spend miles, their entire balance never expires.

‘We moved to activity-based miles … at the start of the pandemic. The decision we made before the pandemic actually,’ Smitton shares. ‘So what that meant was you can park your miles with us and as long as you maintain activity once every 18 months, they never expire. It’s pretty easy to maintain activity with credit card miles. So if you’re not flying, you can still keep your account active really easily.’

But speaking of those challenging years, did Cathay see a decline in miles earned on the ground? ‘We didn’t really see a massive drop-off during the pandemic,’ Smitton advises. But ‘there was absolutely a drop for sure. All the airlines saw a drop because you can’t use the miles for flights: the main reason for the program has kind of gone away. But we saw a bit of dip. Absolutely. We’re back at the levels where we were in 2019 now, already, so that’s exciting.’

Keeping more Cathay miles flowing in

Notably, Cathay’s major international competitors have made negative changes in recent years. Emirates now imposes significant carrier charges on reward bookings, decreasing the underlying value of reward flight bookings. In Australia at least, points conversions to Singapore Airlines KrisFlyer have also become less rewarding, with many banks recently downgrading conversion rates to KrisFlyer.

Cathay, on the other hand, doesn’t levy overly excessive carrier fees. And conversion rates from Australian credit card programs tend to be reasonably competitive – still 2:1 from Amex Membership Rewards, for instance. So is Cathay seeing an uptick of people switching loyalty programs?

‘Oh look, it’s something we look at all the time,’ Smitton acknowledges. ‘We are looking at the value of our mile versus our competitors. It’s very important for us to make sure we are in the right level that’s competitive. So we are, I think, one of the more competitive options. So yeah, we do try and get it right.’

‘We get a lot of miles coming in from American Express. So even though we have a co-brand relationship (with Standard Chartered in Hong Kong), we also have a lot of conversion partners too. So miles keep coming in. I have a team that looks after … customer value optimisation. So we look at miles that have been issued, the miles that are used. And making sure, you know, while some of the miles will expire, (that) it’s not too many.’

‘We’d rather that most of (our miles) get used. Because when customers are earning and using, they value the program. So we try to keep (expiring miles to a) very limited level.’

Speaking of expiring Cathay miles…

It must be said, when a mile expires, that mile costs an airline nothing. More likely, it’s pure profit, as they’ve likely ‘sold’ that mile to a partner behind the scenes. So why did Cathay take the customer-positive but costlier step of making it harder for miles to expire?

‘Some airlines, I think, are a bit hooked on their expiry. I’d say it’s bad profit, because it’s customers who are not getting the benefit. So we try to make sure customers can use them.’

‘Just for example, last year when the pandemic ended, we actually put in place for the full year, the same number of (reward) seats we did in 2019, on our full network. So our (flight) network is about half (the capacity) of the 2019 level. (But) we had the same number of reward seats as in 2019, so it’s essentially double the percentage’ of available reward seats on each flight.

‘So that was great, because what we wanted to do was tell our customers, hey, you’ve been saving through the pandemic. Thank you. We’ve got a lot of demand for commercial tickets, but we want to make sure you can also use your miles. That’s a long-term loyalty play. It’s not about profit today, it’s about profit tomorrow.’

And then, there are alliance-wide upgrades…

There’s been a lot of talk in recent years about a new initiative from oneworld. That is, the ability to use points or miles from one oneworld frequent flyer program to upgrade a flight operated by another oneworld carrier. And it sounds simple in theory, but the execution behind the scenes is extraordinarily complex.

For it to work, every oneworld frequent flyer program needs to set up the technology for this to take place with every other oneworld carrier. With oneworld currently counting 13 members among its ranks, that means there’d need to be up to 156 separate integrations on the IT side for things to run smoothly across the globe.

‘If it’s not digital, that’s not good,’ Smitton recognises, noting that Cathay wouldn’t want members having to make phone calls to process loyalty upgrades on partners. ‘Our customers don’t want that either. It’s not what you want. You want to have a clean, friction-free digital experience.’

Speaking of broader cross-partner upgrades though, ‘you do try and have these alliance-wide benefits because that’s one of the strong reasons for being there. So we are actually looking to try and add that benefit. The complexity of doing it is quite challenging. We want to make sure it’s easy for customers to understand, easy for them to use, right?’

‘One of the things – the challenges – is it’s not very digital at the moment. We’re looking to try (and change) that. I’m focused on making sure we have a desirable digital product that meets customer needs, and then take away friction from that experience.’ From the sounds of things, watch this space.

Also read: American Airlines launches Oneworld upgrade trial with Qantas

Imagery courtesy of Cathay Pacific. Chris Chamberlin travelled to Hong Kong as a guest of Cathay Pacific.

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