Delta has made several changes to how they display award availability and pricing in recent weeks, that may point towards a whole new way of handling redemption.
It Looks Like They’re Preparing to Move to Revenue-Based Award Redemptions
They told us we were getting revenue-based mileage earning for Delta flying, but that awards would continue to be priced based on a traditional award chart (albeit with more gradations than before).
Nonetheless, several recent moves seem to telegraph another direction:
- Delta eliminated their award charts — just pulled them off the website — without telling anyone. When asked they said that members now get all they need to know from the award calendar. That suggests pricing could change and change rapidly, or at least they’re preparing for it to. Perhaps it’s a move towards real-time pricing based on the cost of a ticket.
- Delta now has 21 day advance purchase requirements for the lowest award prices in many (most) markets. Just like traditionally the lowest cash prices require advance purchase, so too do the lowest prices for award tickets. The is the opposite of how awards have traditionally worked, with seats an airline won’t sell available at the lowest prices — and the best knowledge of what’s going out empty close to departure.
- Delta eliminated extra award availability for elite members and co-brand credit card holders. That makes sense to do if redemption is going to be about fare and not availability (award inventory).
What I Don’t Get is the Timing
Delta gave 10 months’ advance notice of what their award charts would look like for travel within and to/from the US, starting January 2015.
Three months ago they released more award charts.
Why in the world would they do this? For 10 months they told us to expect what redemption would look like. They continued to tell us even as 2015 drew near. They started the year with this new mechanism in place.
And then six weeks into the year they look as though they’re on the verge of blowing it up.
I’d have expected them either to introduce new award pricing with the 2015 program, or wait a year. Introducing a new system and then changing right away… something is missing.
Could it be that they knew the IT wouldn’t be ready, but they somehow got their technology act together in a way they didn’t think possible? One thing I never trust is the ability of Delta IT to properly price an award ticket.
Why I Expect the Worst
Delta is making changes, but doing so quietly. They didn’t announce the end of award charts. They didn’t announce the end of extra elite availability. These were discovered and Delta called out on it. They haven’t announced new 21-day advance purchase requirements for Delta awards in most markets, they just did it.
If what they were doing was plausibly good for members, they’d be the first to trumpet it.
If they go with revenue-based redemption, then their miles are like money… only with no central bank or currency board, nothing at all that keeps them from changing the value of their currency at will and no history of even giving members advance notice when they make changes.
Nations work exceedingly hard to develop credibility for their currencies, to make credible commitments to fight inflation. Delta doesn’t have a strong track record of trust with its miles, and isn’t sending out any signals at all that would suggest they’re even trying to build one.
If you can earn a currency that works like money, why not just earn money instead? The whole point of miles is that you could get something aspirational at a discount, that they could serve a purpose different than money.
They’ve got a new $2 billion contract with American Express. Are they about to turn their co-brand Amex cards into 1% cash back cards where the ‘cash’ can only be spent at Delta’s whim on travel? In that case you’re far better off with a 2% card that earns.. cash. (I do not actually expect that any revenue-based redemption will wind up with a single fixed value for points. That would be far too transparent.)
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Would suck to have a big stash of Delta miles at this point. I need to get those united award trips booked.
You missed one more important one. No elite Medallion Choice Benefits until 1MARCH15
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http://deltapoints.boardingarea.com/2015/02/09/confirmed-no-delta-elite-medallion-choice-benefits-1march15/
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Delta says due to “technology limitation”
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To me more that it will clash with what you have outlined so well!
I am one of those people with a big stash of DL miles. Well…big in my opinion. (373k) I was saving for 3 biz tickets to Australia. Not sure what to do now. 🙁
Wonder what AmEx thinks about this.
Sounds to me like they’re sticking with the pricing structure they announced for this year but moving to dynamic INVENTORY in which you’ll pay in one of the five price bands but which band you get is aligned with current ticket prices and / or other policies.
This would allow them to still claim that redemptions are “available” at the lowest band while eliminating the possibility that anyone would ever derive spectacular value from the program. If the high-end band is in the penny-a-point range it would also allow them to offer guaranteed last-seat award availability (albeit at an uneconomical-for-the-member price point).
i saw through DL’s trickery since long time ago and now only have <4000 miles inside my SkyMiles account.
last minute 12500 awards allowing real-time transfers from Amex MR was one of the main benefits to even bother looking at DL.
I just searched JFK-LAS for upcoming days and the pricing is ridiculously high :
21 days : variable
i might as well go book last-seat availability at UA for guaranteed 25000 instead of dealing with this mess.
Great, me and SO are holding 2.1 million right now. I better start booking fast…
I still don’t see how the 21-day advance purchase requirement for award travel does not hurt their bottom line. Have all the other airlines been doing this wrong all these years? I don’t think so.
Air New Zealand Airpoints program is revenue based for redemption. Airpoints dollars can only be used to redeem flights and you need enough points to cover the entire air fare.For NZ to LAX it is over 4,000 air points dollar. Takes a lot of flights to earn that much. Very difficult to earn air point dollars except thru flying, not impossible but very difficult.
Wow.
21 day advance purchase is a killer – I’ve kept a small balance of DL miles in my corral because they actually stack up favorably for close in redemptions.
It seems very obvious to me that LarryInNYC is corect. Seems an “innovative” way to pretend to have value.
I’m so glad I left Delta two years ago. UA and (especially) AA flyers need to speak loudly and clearly to their airlines that Skymiles is the main reason they fly UA/AA and not Delta and that copying (further in UA’s case) this disaster will result in the loss of loyal customers.
Gary,
A couple of questions and “requests for speculation”
First, do you think DL might move to a quasi-revenue system where their 5 levels of award levels informally correlate loosely to the cost of the underlying ticket, but otherwise maintaining the ruse of being miles based redemptions?
Second, I note that, generally, (although not entirely) airlines with no premium cabins have gone revenue based, which did not matter to the extent they were generally domestic airlines and had few “aspirational awards” to offer at all (think SW and Jet Blue prior to Mint). Do you think Delta, partially in an effort to get something for otherwise empty premium seats, will be more “revenue generous” for such redemptions?
Third, I note that traditionally, but with exceptions, revenue based programs have no redemption partners – how might DL make revenue redemptions on DL coexist with a traditional chart based system on Skyteam? (I can allow as how they will make those revenue based as well). BUT, with this violate the Skyteam rules or otherwise be too likely to antagonize Skyteam partners?
Fourth, (and I’d love to see the contract with Amex) BUT, will banking partners be our savior, perhaps in future contracts (or maybe in current ones – we are not privy to them) including limitations on how badly the airlines can devalue their miles or otherwise impair their usefulness? (I’d be hopping mad if I were Amex).
I’d appreciate your insights and think they would be helpful.
@Rene: Just take your ball and go home already!
@Brian L.:
Yeah, I’m curious what they think of this now… whatever they thought the value of Delta’s FF program is then, it’s probably lower now.
Man… I haven’t flown DL since the NW merger. The only reason I even have DL miles is because of my legacy NW miles that now never expire.
I’m really not sure why they won’t expire my miles, and instead torture me with constant reminders that I will never burn them on anything except magazines.
DL does this for the same reason why anyone does anything….because they can (HT Jim Rome). I highly doubt they will stop making negative changes. And, I also highly doubt it will materially impact their financial results.
Thanks to consolidation, where are you going to go? UA is always a week/month behind making the same changes.
I do not see these moves as a prelude to Delta going revenue based for redemption. This is better than revenue based redemption for Delta. They can still scream in their ads that a domestic round trip is 25k miles like AA and UA but behind the scenes can manipulate prices without making any announcements.
Gary, I think you’re spot on with regard to a revenue based system destroying the value of the DL Amex. I will not be keeping mine, regardless. Here’s hoping it doesn’t get so bad that my DL debit card becomes worthless!
BTW, in many instances awards are pricing out at way less than 1CPP. E.g, ATL-LAX RT, 5 weeks out, $494/57.5K.
@PeteyNice: I agree, going purely revenue based would be too transparent for Delta. The “Awards Cost What They Cost” method gives them infinite flexibility. Peak or near peak pricing already drives the CPP value to less than 1 in many cases.
@Laura R – Book your trip! If you’re short by one or two one-way tix worth of points, use Virgin Atlantic miles from Citi, Chase or AMEX to get on the same flight. Virgin Australia has gotten rid of surcharges so there is nothing for VS to pass on.
Gary – I’d be interested to know how you think this will affect partner redemptions.
@jfhscott – 1 and 2 are reasonable guesses. Partner awards could either be chart-based (whether published or not) or as I’ve speculated they may have contracts with some partners (an increasing number) that give them access to paid seats at a 20% discount off market price and that they could then effectively price those in the same way as their own seats. Amex and Delta did do a tug-o-war over the initial launch of revenue-based, so I have to assume this all could have been worse..
@mark nailed it. Consolidation = reduced competition = oligopoly = Delta can do whatever it wants. As will United in its footsteps, and American once US has finished digesting it.
An interesting side effect of this that Delta probably likes…the lack of availability at the lowest level less than 21 days in advanced also means that there is a lack of availability for those trying to book through partners, such as Alaska, on Delta metal.
Gary, can you please describe the tug of war with Amex? I have read on the Delta thread of Flyertalk that Amex phone representatives have said that may have started cancelling their Delta cards in recent weeks. Is there any way that you can use your contacts at Amex to express your displeasure?
I am really worried about other airlines following Delta in this direction.
Daniel, why would Delta like that? Partners PAY Delta for those redemptions on DL metal. Better to get paid than to let the seat fly empty.
NSX,
I was thinking because of Delta’s recent aggressive moves with Alaska. This makes switching to Alaska less of an alternative for one who prefers to use points on Delta flights.
DL seems to have decided to try to bundle in all the customer-unfriendly changes it has ever wanted and could into 2015 as fast as possible. If you want to know the tolerance limits of your customers, boiling the frog slowly won’t let you know the temperature points at which the frog would otherwise instinctively jump in or out of the pot.
@Kenny – I wish I could! I have to wait until the seats for June 2016 open up. I hope nothing drastic happens before then!!!
I think what I might do at this point (since I won’t earn enough for RT with DL miles) is book one way on DL/Virgin and one way on AA/Qantas.
@Gary I’m assuming that “back door” is a euphemism 😉 Great coverage btw!
If AmEx & DL had a tug of war over DL going revenue based, then I think it’s safe to assume AmEx is pissed (at least to some degree). The question then becomes, what (if anything) they’re going to do about it. I seriously doubt they’d end the relationship with DL over this, especially since they just renewed the contract, but I’m wondering if there’s anything else they can, or will, do in response.
Brian, these business deals have a lot of inertia. Amex will push Delta only after we vote with our wallets against Amex, not before. Until then the degree of damage is too difficult to assess.
At some point, Amex will negotiate a lower price per mile from Delta. Then Amex will come up with a 1.5x or 2x Delta miles on everything card as if it’s the greatest thing since sliced bread. The world will keep turning, and miles will keep devaluing, with this game moving faster and faster.
Why faster and faster? For the same reason that countries which print currency have to accelerate their inflation: People learn to expect a certain rate of inflation and they build that into their transactions and plans.
You love to rip United (and mostly deserved) but at least UA provides excellent advance notice of significant changes.
I have a big stash of DL miles – not sure if this is good or not as I can never find DL saver awards – so maybe just better to have a massive flight credit I can use – as is the case with Southwest. Of course this will disappoint those who redeem for international C/F on partners…
Good point about the cash back cards, someday we will get you on board with the JCB 3% rebate.
Amex should be really pissed. Two billion dollars Amex paid delta and, hopefully, folks are going to drop their Amex cards. There goes the fees I’ve had to pay for the privilege of carrying their cards and the $85000 worth of charges I made. Maybe Amex can convince delta they screwed up since delta doesnt seem to care about its “loyal” frequent fliers. Discover card will be getting much more of my business and I haven’t paid a dime in fees for it.
DL consistently enforcing married segments rules on award tickets is least publicized but arguably the most negative change. Recently 4 manual reprice desk agents would not manually override when low level space was available segment to segment, citing recent management communication/re-training.. One 15-year manual price desk veteran said she feared she would lose her job if she overrode DL.com pricing, even after acknowledging low level award space was available on that segment AND that the system would permit the manual override.