作者：对冲基金 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
On most airlines, one mile is earned for every mile flown. But what is a mile worth? Airlines sell them to credit-card firms at a rate of between one and two cents a mile. Yet if you make the best use of your miles, such as flying business class across the Atlantic, the market value can be up to 10 cents per mile. In 2004, over 20m free tickets were issued, and on a typical flight 7-8% of passengers were travelling on such tickets. You can also use miles for hotel rooms, car rental, holidays, restaurants, CDs and magazines, but these account for a small fraction of miles spent.
As with any form of “money”, frequent-flyer miles have bred crime, corruption and crafty scams. A Singapore Airlines employee in Australia was recently jailed for fraudulently awarding himself 17.6m miles. In 2002, two German politicians were forced to resign when it was discovered that they had broken the rules by using miles earned on official trips for personal tickets. In America, by contrast, miles earned by federal employees can now be used for personal trips. But sadly one of the best scams to earn lots of miles ended in 2003, when the American Treasury stopped accepting credit cards for online bond purchases.
Frequent-flyer programmes are no longer just a marketing gimmick； they have become a lucrative earner for airlines, through their sale of miles to partners, such as credit-card companies. When United Airlines filed for bankruptcy in 2002, it said that its frequent-flyer programme was the only part of its business that was making money. The economics is certainly attractive. Charging partners for each mile earned on a credit card, say, by a member of a frequent-flyer programme, brings in estimated annual revenue of more than $10 billion for the industry worldwide. Better still, the airlines get this revenue upfront, while the miles are not redeemed until well into the future—if ever.
Miles make money
Moreover, although a ticket may be worth several hundred dollars to a passenger, the marginal cost to the airline of giving away empty seats is estimated at around $25 for a roundtrip on an American domestic flight, to cover the cost of fuel, ticketing and food. If the airline had previously sold all 25,000 miles redeemed for that ticket to a credit-card firm, it could have earned up to $400. Even allowing for some revenue loss from passengers who might otherwise have paid, the industry's total costs for giving away free seats are probably not much more than $1 billion—a fraction of the $10 billion revenue. No wonder sceptics argue that frequent-flyer miles now reward airlines more than passengers.
Airlines have to include a contingent liability in their accounts, to cover the future cost of unredeemed miles, but they try to make this as small as possible. American airlines ignore all miles in individual accounts until they reach blocks of 25,000 miles (the minimum required for a domestic ticket). Then, for each 25,000-mile block of unredeemed miles, they enter a liability of only $20-25. They also assume, on average, that one third of miles will never be redeemed. Taking all this into account, in 2004 the 14 biggest American airlines posted a total liability of only $3.9 billion to allow for future frequent-flyer mileage redemptions, according to IdeaWorks, a consulting firm.
Whatever the correct figure, the future financial liability of unredeemed miles cannot cause an airline to go bust, because the fine print of frequent-flyer rule books allows airlines to increase the number of miles required for a free flight, or to restrict seat availability. Both are a form of devaluation. With no independent central bank to protect the “currency”, the value of frequent-flyer miles has already diminished: over the past decade most airlines have increased the number of miles needed for a free flight.
Just as passengers are addicted to earning miles, so airlines have become habituated to the profits from selling miles to partner firms. As a result, the stock of miles has soared. The snag is that the stock of seats available for awards is limited: the number of miles redeemed has barely changed over the past five years (see chart). Indeed, in relation to capacity, seat availability has fallen. In 1999, free tickets accounted for around 9% of total revenue passenger miles on both American Airlines and United. In 2004 the figure was only 7.5%.
With too many miles chasing too few seats, there are growing complaints from consumers who cannot book the flight they want, or have been forced to redeem twice as many miles to get a seat. Most American airlines have a two-tier system: a limited number of seats are on offer at the basic rate of 25,000 miles for a domestic ticket； but if you pay up to double this, you can buy any available seat. Once again, this is a form of devaluation.
According to a survey on Webflyer.com, the average success rate in getting a free ticket varies from 71% on US Airways to 54% at British Airways and only 37% on Northwest. Members of US Airways' frequent-flyer programme succeeded in getting upgrades 76% of the time, on British Airways only 23% (see chart). British Airways' scheme is generally stingier than those of its American counterparts. Not only are upgrades much harder to get, but discounted tickets earn only 25% of the miles flown (compared with 100% on most American carriers) and do not count towards earning elite status. On the other hand, a British Airways gold card is a much-coveted prize of the frequent traveller, allowing free access into luxurious first-class lounges around the world. British Airways likes to see its Executive Club as a true loyalty programme rather than just an upmarket trading-stamp scheme.
It is one thing for frequent-flyer miles to be devalued, but what is the risk they might become worthless? Never before have so many airlines been in such trouble. American airlines have lost around $40 billion over the past five years, and three of country's four biggest carriers (United, Delta and Northwest) are currently operating under Chapter 11 bankruptcy protection. In the past, when a big airline went out of business, parts of it were acquired by rival airlines, which honoured its frequent-flyer miles. When TWA went bust in 2001 its loyalty programme was absorbed by American. But smaller airlines have fared less well. In the cases of Midway, Braniff, Ansett Australia and National, members lost all their miles when the airlines folded. If one of the big American airlines went under today, none of the other giants is currently strong enough to take it over.
What to do? AwardGuard, a company that insured frequent-flyer miles, stopped accepting new customers in 2003, because of the increased risk of claims. But American Express has just launched an insurance policy for miles in the United States.
Both history and recent financial troubles suggest that frequent-flyer miles will not improve with age. If you can't use all your miles on flights now, you could try to sell them. The fine print of every programme prohibits the sale or barter of miles, but there is a black market of brokers, such as Award Traveller, which will buy your miles at a discount (by paying you to redeem them for a ticket for one of their customers). However, if the buyer is caught with your award ticket, it will be confiscated and your frequent-flyer account permanently frozen. Some members who have sold their miles on eBay have also had their miles revoked.
Another option is to transfer miles to a sounder airline. Points.com brokers miles among various programmes, but its rates of exchange involve losses of up to 90% of the value of miles. The Diners Club Rewards programme can also be used to swap some airlines' miles (again with a sizeable loss). For instance, 10,000 United miles can be switched into 5,000 BA miles.
If current losses persist, might some airlines try to raise money by selling off their frequent-flyer programmes? In 2005, Air Canada sold 12.5% of its loyalty scheme, Aeroplan, into a separate income trust. This raised C$250m, putting a total valuation of C$2 billion ($1.6 billion) on the scheme. United's Mileage Plus has eight times as many members as Aeroplan. On the other hand, United's estimated revenue from sales of miles to partner companies is perhaps only three to four times larger. This suggests a valuation of United's mileage scheme of $5 billion-10 billion.
That would come in handy, but in the long run, airlines that flogged off their loyalty programmes would risk killing the goose that lays the golden (or perhaps platinum?) eggs.
Chief Wu's name tops the list of donors to the temple displayed in the entrance. He is the wealthiest Wu they know in Yongqiang, a satellite town of Wenzhou, a city 365km (227 miles) south of Shanghai famed for its embrace of raw capitalism. And Chief Wu's risqué line of products? No concern about that. He has done well, and in Wenzhou that is what counts. In the clan register they proudly point not only to Chief Wu's name, but also to those of his three sons who help him control much of China's burgeoning production, domestic sales and exports of “items for adult use”. Theirs is a very traditional Chinese family-run business.
Private businesses have proliferated in China since the early 1990s, thanks to the Communist Party's gradual abandonment of efforts to keep them in check. A few have now grown to significant size. This has raised questions in China about whether the kind of dynastic business empires run by ethnic Chinese that have been a prominent feature of many Asian economies will emerge in China itself. The Communist Party grudgingly opened its doors to private entrepreneurs only three years ago. But it remains uneasy about the age-old practice of keeping businesses under patriarchal control and handing them down through the male line.
And it is just as uneasy about sex, although the visitor to the Wu showroom in Wenzhou, run by the 36-year-old eldest son, Wu Wei, might not believe it. Mr Wu pauses only briefly in the first section, adorned with reproductions of antique Chinese paintings of copulating couples. He points to one showing women in classical attire buying dildos from a street merchant. “Look, they used them in those days”, he says, as if to justify with historical precedent what comes next.
Mr Wu ushers the visitor into the main exhibition: row upon row of sex toys in a rainbow array of rubber, plastic, leather and—he proudly asks your correspondent to squeeze this one—a sponge-like material designed to simulate the texture of female flesh. Hung on one wall is a macabre line of near life-size inflatable dolls, their rouged mouths agape as if in horror at the implements before them: the Vertical Double Dong, the Occidental Vagina, the Waterproof Warhead Vibe (“Bathtime was never this fun”) and a variety of black leather and metal goods for fans of sadism and masochism (for overseas markets, that is； the Wus see S&；M potential in China too, but party cadres do not).
The production lines themselves are off-limits to most visitors. Many of the workers are young peasant women, perhaps not eager to be seen putting the finishing touches to a Christmas Lover vibrator. Elder Brother Wu says that despite higher than average wages at the factory, about a third of job seekers withdraw their applications when they find out what they would be doing. But ironically it is China's sexual conservatism that has enabled the Wus to corner a market and prosper.
China's new private businesses have often done best where state-owned enterprises, until a few years ago the economy's mainstay, have been too sluggish (or prudish) to respond to rapidly evolving markets. The Wu family spotted their chance after China's first sex-toy shop opened in Beijing in 1992. Chief Wu, who owned an electrical machinery business, took his family to have a look. They noticed that the products were mostly imported and very expensive. Thanks to his good connections with local officials (a prerequisite of success for the Chinese entrepreneur) and effective lobbying in Beijing, he was able to get permission to produce them in Wenzhou.
With no other local government daring enough to follow suit, the Wus monopolized production and expanded rapidly thanks to strong demand from overseas companies for made-to-order sex toys. Unlike most Chinese family-run businesses, which resist diluting ownership, Wenzhou Lover Health Products saw the benefit of forming a joint-venture. They chose as their minority partner a Japanese sex-toy maker to take advantage of its knowledge of the relevant technology and contacts in foreign markets.
Imaginechina
At home, sex-toy shops spread rapidly—few of them officially licensed but all eager for the low-priced goods that the Wu business had to offer. Such is the power of Chinese consumerism that, for all the party's disdain, sex shops became more commonplace in urban China than they are in most western cities. The Wus defend their products to sometimes sceptical officials by arguing that they help promote marital harmony, deter men from seeking prostitutes and keep the population in check by allowing people to relieve their frustrations without engaging in real sex.
Some of Asia's biggest Chinese family-run businesses have prospered in the last century by gaining monopolistic or oligopolistic control of markets thanks to good official connections. If any company in China enjoys privileges in a market, it is almost invariably state-owned. The Wus' monopoly eventually eroded as other local governments, sensing tax opportunities, began to lose their inhibitions.
The virtues of self-reliance
Several privately run competitors to the Wu family business have sprung up along the coast from the industrial rustbelt of Liaoning in the north-east to Guangdong in the south, turning China into the world's biggest producer of masturbatory aids. Last year Shanghai began hosting an annual sex-toy trade fair. Elder Brother Wu says his company still has about 60% of the domestic market, but prices and profit margins are ｄｒｏｐping.
Family-run businesses in China must survive more by their wits than by official patronage or the cheap credit that state-owned firms enjoy. State-owned banks often turn up their noses at private businesses, and most of the companies approved for listing on China's stock exchanges are state-controlled.
The Wu family empire is trying to adjust to the rapid evolution of China's sex-toy industry. Brother number two, 35-year-old Wu Hui, is spearheading the effort. His company (the three brothers' businesses are separate but interdependent) has exclusive control of the distribution of the Wus' products in China. He believes that profits can be sustained only if more value is added to the company's brands: Loves, LustyCity and Daily Planet.
The way to do this, Wu Hui says, is to set up chain-stores across the country to give the products a more upmarket image. Unlike the grubby little stores around China offering “health protection items”, the franchised outlets would have trained staff. Storefronts would be clearly branded in red and yellow with a sun and moon logo. Wu Hui and the youngest brother, Wu Xiao (who runs the retail business in Shanghai), already own 20 or so. The plan is to have 1,000 of them across the country, beginning with at least two in each provincial capital. A training centre for franchisees (who will pay some $74,000 for a license and keep any profits) will be set up in Shanghai, as well as a new factory.
But making it big and staying big as a family-run business in China is fraught with difficulty. (Despite its growth, the factory in Wenzhou would count only as a small- to medium-size enterprise.) The odds of making it to the top will long remain stacked in favour of state-owned firms. Only 15% of China's biggest 500 companies are privately owned. Their combined capital amounts to less than 3% of the list's total, even though private enterprises now contribute some 60% of China's GDP. None is in the top 50. The biggest family-run business, an agricultural conglomerate controlled by four brothers, the Hope Group, ranks a mere 105.
Several of China's most prominent private businesspeople have ended up in prison in recent years. In a world where rules quickly change, few trust or respect the law, and big profits can be made in grey areas of ill-regulated markets, the legitimacy of almost any businessman's wealth is open to question. The rich therefore become easy targets if they fail to keep on the right side of officialdom. Many prefer to avoid media attention and find ways of keeping their gains in havens abroad.
Another obstacle to dynastic businesses is demographic. Mr Wu the elder, who is 59, had his three sons before China imposed its one-child policy in the late 1970s. Each of the three sons, however, has only one son. This leaves little room for manoeuvre should any of them lack business acumen, or the imperviousness to embarrassment that is required to sell synthetic genitalia. The likelihood, however, is that growing numbers of China's nouveaux riches will ignore family-planning policies and have as many children as they can afford to pay the fines for.
Chief Wu would be considered blessed in having three sons to choose from. In Chinese tradition, daughters are considered to have left the family when they marry and hence are unlikely to inherit a father's business. Chief Wu's 20-year-old daughter's name is not even recorded in the clan records. She spent a few weeks working in the Wenzhou factory, but decided to pursue studies in America rather than go into the family business.
Successful private enterprises in China were founded only within the past few years, making the problem of succession from the first to second generation (Chief Wu to his sons) a new one. The trickier transition from second to third generation is still several years away. A report this year by the China Enterprise Confederation in Beijing said that a “sizeable proportion” of family-run businesses lacked capable successors yet remained very unwilling to groom outsiders. And with no promise of a significant stake in a business, professional managers are hard to recruit.
As perhaps befits his junior ranking in the family, the youngest son, Wu Xiao, says he does not share his father's enthusiasm for clan activities (“it's just for old people”). And he is all for rewarding talented employees with shares in the business. “The family style of ownership prevents the progress of an enterprise,” he says. But Wu the younger is as enthusiastic as his brothers when it comes to the promise of the trade itself. If only the party would ease up on pornography, he says, that would be a tremendous boost to the industry. But, he laments, that is unlikely to happen at least until his baby son grows up.
作者：对冲基金 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
