Incoming Delta President Glen Hauenstein, the key architect of the airline’s revenue-based this-and-that over the past decade (hint: Jeff Robertson was always a great cheerleader for the efforts, but not their driver), has declared the end of award tickets as the end goal of miles at Delta.
He told Bloomberg‘s Justin Bachman,
“We want people to be able to use those miles not to fly for free but to control your experience,” says Glen Hauenstein, Delta’s incoming president and architect of the airline’s revenue plans.
This isn’t the first time we’ve heard this from him. But it’s the first time I’ve seen the stark ‘not to fly for free’ claim and the first time I’ve seen it since succession plans at the airline were announced a month ago giving his already weighty words that much more significance.
A key takeaway for me from Delta’s investor day was that they expect to sell buy ups for 70% of their first class cabins, for all intents and purposes eliminating elite upgrades. Whether the policy changes, or the supply or unmonetized first class seats simply approaches zero, if they’re successful that will transform US airline elite programs.
But there was a lot more in the presentation — like Delta’s plan to expand basic economy fares to long haul markets, a continuation of a strategy they’ve been working on for the past year. More markets with stripped down fares offering few services, and more opportunity for upselling.
Reavealingly, when Delta talks about customer experience they don’t even mention the SkyMiles program.
In fact, the entire 56 slide investor day presentation mentions SkyMiles only twice — both times in explanatory footnotes related to revenue (e.g. “SkyMiles used pursuant to advance purchase under AMEX agreement and other” under “Non-GAAP Reconciliations”).
Hauenstein said that day that he wants you to stop thinking about award tickets and start using your miles as (very low value) currency.
“We want our customers to have a lot of miles and use them like currency. Right now, they save them for the one big trip in retirement.” He referenced being able to celebrate (using SkyMiles) by buying a bottle of Dom Pérignon in a SkyClub, or a business traveler who has had a rough week and wanted to upgrade (presumably using SkyMiles).
Delta has indeed started selling premium alcohol in their lounges, and you can pay with points instead of cash. Your miles are worth a penny apiece.
Leaving aside that I hardly consider Stella Artois to be a premium beverage, who in their right mind would put a dollar of unbonused spend on their co-brand credit card?
If you’re an infrequent Delta traveler with a few miles in your account but happen to have a Platinum Card by American Express that gets you into the lounge or an overpriced SkyClub pass it may be booze or magazines. But since SkyMiles don’t expire, save them up for a future free trip — and just hope that Hauenstein still lets you do that.
The thing is, they view awarding so many more miles to high spending customers as a result of revenue-based earning to be the reason to offer these redemptions — never mind that premium award prices have gone up, up, and up with the new revenue-based earn. Cheap premium beer at a penny per SkyMile is something they think they’re doing to service their best customers it seems.
The loyalty program changes give big spenders many more miles than they used to earn—as many as 75,000 per ticket at Delta—while those flying on less-expensive tickets earn fewer miles. That means top-spending customers are likely to see their mileage balances grow faster than they had in the past.
The roots of this plan lie in the airline industry’s goal of greater segmentation of their traveler base: rewarding “high-value customers” with greater perks and amenities while offering less to those who just want the cheapest tickets.
And never mind that they do not want these miles to be like a currency, or at least any reputable one. SkyMiles aren’t currency, this is rhetorical sleight of hand.
- I can use cash to buy anything I want, including tickets on United or American.
- Cash can earn a rate of return when it sits in my account. Granted my portfolio hasn’t done exceptionally well, but it’s done better than SkyMiles. Delta SkyMiles become worth less and less, and they do not compensate by adding zeros onto your balance.
- I can transparently compare the value of a real currency to other currencies. I can even convert currencies, for a small fee.
Delta has a $2 billion credit card deal and they certainly wouldn’t want to jeopardize that. So they must believe that their customers either won’t know or won’t care that they’re getting a 1% rebate on their spending that can only be used with Delta when they could get a 2% cash back card or more value out of the miles from another airline.
SkyMiles planned to peg your miles to be worth around a penny in fixed value redemptions when they moved to a revenue-based program in the first place. They got scared out of it because too many high value members wanted the chance to earn better value from their miles. So their executives at least worried that this was a bad idea.