In an 8-K filing with the SEC in advance of the Delta Air Lines fourth quarter earnings call, the carrier revealed three data points about SkyMiles and the importance of their partnership with American Express. More people are getting the card than ever and American Express is the largest single contributor to their profits.
- Delta added 8.5 million SkyMiles members in 2022. They report this as a record, but not how much beyond a normal year this represents. It seems like they’re doing a good job signing up members, and bear in mind with disproportionate leisure travel there have been more new travelers to market to.
- They added 1.2 million co-brand American Express cardmembers, also reported as a record. They’ve been more aggressive with initial bonus offers, needing to refill the customer funnel since early in the pandemic people were cancelling cards (at least at usual pace) without adding replacement customers.
- Delta generated $5.5 billion from Amex in 2022. They signed a new 10 year deal in 2019, paying them more than ever. And it’s embedded across each others’ businesses. Complain that Delta lounges are too crowded with Amex Platinum customers? Amex pays Delta more than you do. Amex gives customers credit with CLEAR? Delta owns a stake in CLEAR.
Fourth quarter Amex revenue was $1.5 billion, up a whopping 40% over same quarter 2019, with co-brand spend up 45%. No one ever talks about inflation as a contributor, especially when we’re talking about comparisons to three years ago. I’d also note that Delta is getting paid for all of those miles from new card acquisitions, albeit likely at a lower price than miles from ongoing spend.
With total operating income for the quarter of $1.5 billion, we can assume SkyMiles represents about half of Delta’s profits, despite being just 11% of revenue.
It’s crazy that anyone not trying to use card spend towards earning status would spend money on a Delta American Express card. Delta now even prices saver-level partner awards at over 300,000 miles each way. The head of the program even says they don’t try to make the program competitive on redemption value.
Even if you wanted SkyMiles you’d be better off with other American Express cards that earn points faster (through better accelerator categories) and then you’d have the option to transfer to Delta or to other programs.
However Delta has been uniquely positioned to earn ever more money off of SkyMiles even as they provide ever less value. That’s not something other airlines have been able to replicate to the same extent. (When airlines like United and American have devalued that’s impacted co-brand card charge volume).
Delta’s hubs in Atlanta, Minneapolis, Detroit and Salt Lake City are less competitive. Travelers there see themselves as Delta customers. And they have offered by far the best service options in New York for anyone that sees Newark as ‘not New York’. (That’s why Delta hates the American Airlines-JetBlue alliance so much, and why they lobbied so hard for the Biden administration to try to kill it.)
And Delta’s success derives from its brand. They’ve been a more premium carrier, and a more reliable one, although both of those pillars have taken significant hits over the past few years. Whether their card success is sustainable, as they continue to gut the SkyMiles program, is an open question.
A few things:
1) It appears that Delta’s loyalty program revenue is up 39%. That’s remarkable.
2) I would not be surprised if the number of active Delta Reserve AmEx cardholders is at least 250,000.
3) For me, the only reason to have a Delta-branded Reserve AmEx is status. It’s a tie-breaker for upgrades, which is a big deal these days when at least 80% of domestic first-class seats are sold.
The recent major partner award devaluation to match their own metals astronomical prices means I won’t even consider them as an Amex transfer partner. And I avoid Delta flying as well
I have Amex platinum only for acces to delta sky club. The FF program is such a joke that all my Amex points get transferred to Aeroplan or ANA.
“They added 1.2 million co-brand American Express cardmembers”, but how many did they lose?
A lot of DL loyalist live in the hub cities and yes we do (did in my case) pay more for similar service on AA (can’t say UA since I dont’ fly them). Moving away from a DL hub I find that the “allure” of DL isn’t all that it’s cracked up to be. Also the employees are tiring of their management. My last DL flight was miserable and left a very bad taste in my mouth / haven’t been back since.
Even living in an AA hub (although not a fortress one) I have options but prefer AA service, lounges and pricing. I wouldn’t have said service 4 or 5 years ago but during the pandemic, things shifted and seeing new faces and attitudes at AA. DL will be able to live off thier former reputation in their main 4 hubs but the rest of the country isn’t so “charmed”.
I spend on my Delta Platinum card until I hit the MQD waiver for Platinum status and then switch to other cards.
I agree that Delta redemption values are mostly bad, but I have found some good deals on domestic main cabin and some North American first class routes.
In other news, Amex and AA ended their Business Extra card deal (quietly). Someone at AA “familiar with the matter” said a new partnership is in the works but did not relate with whom.
Bear in mind that inflation is up 16% (so everyone should be up) and Delta got an increase per transaction from Amex since 2019 as well. We’d see big nominal growth even without growth in members.
I downgraded my DL AMEX card from Reserve to Gold last week. After doing the cost-benefit analysis I realized that I was wasting a ton of money on a card that offered me little value.
Strike 1: Shifting the DM spend waiver to $250K. I’ll never hit that.
Strike 2: Award redemption prices reaching the point of absurdity compared to other airline .
Strike 3: Either DL has slid or UA/AA have been catching up, but there’s very little difference between the three in terms of service.
Strike 4: Even as a DM who tends to buy refundable tix, UGs have dwindled. Even getting a window or aisle seat if you are buying a ticket less than 7 days out is almost impossible.
Strike 5: The SC situation has become untenable. Overcrowded, dirty and there is no way I am standing in a line just for a small plate of food and lousy brands of complimentary liquor.
ALL credit card purchases have been shifted to an AA-branded card where every dollar charged counts toward elite status so I actually get something more than just club access for my annual fee.
In the end, I’ve finally accepted that I’m not DL’s target customer any more and that’s okay. As a business traveler I’m not sure I’m any airline’s target customer any more…which totally confuses me since I’m traveling weekly again and am easy money.
Bottom Line?
1) Delta does NOT care about their FF program or their customers.
2) Delta only cares about $$$
From my perspective, the Delta Sky-Peso system is just a dumpster fire.
I avoid Delta like the plague. I have 18 flights booked through November; none of them are on Delta.
I gave up on Delta . I have enough SkyPesos to take advantage of the occasional good redemption on Delta. Planes are full. The won’t miss me. They know this, too.
For the complainers about Delta, the rest are no different, so quite worrying about it. Do what is best for you on any (key word) flight, hotel or car. I’ve been at this a very long time. Loyalty means very little in the US, maybe still with hotels international. And remember Delta is a for-profit company period. IF the CEO/CFO do not keep the shareholders one number, then another company will. Profit is a bad word made that way by the media supported by chasing votes by inside the beltway crowd. Company money comes from basically three sources: profits, investors or banks. You think Delta would be wise to go American’s route via the last financed takeover – banks? Interest is probably American’s number one expense outside of course operations.
Please get more suckers onto DL, and let them waste their resources on DL redemptions. This way, we don’t have to compete with them on other airline award redemptions.
I am about to get my wife a Delta Amex card even if no bonus due to lifetime language just so when she travels without me she and my son can get free bags. The no change fee on trips has been a game changer for Delta from our perspective.
I just received a Delta AMEX Platinum card. Since our son and his family moved to Atlanta, Delta is the only airline with a nonstop flight from our hometown. The Platinum card offers a free companion pass each year upon renewal. For us, that more than covers the cost of the card. And it has a large bonus right now. Delta also has the only nonstop flight to Tokyo, where our other son lives. I think we will be Delta customers for quite some time. Each person can use whichever airline works best for them. For us, flying nonstop is a good reason to stick with Delta. And we will do our research before cashing in our SkyMiles.
@Susan Maas – it makes sense for you to HAVE the card, but not to put ongoing spend on the card. And it makes sense to FLY Delta, but not to accumulate SkyMiles as a primary currency. It’s important to distinguish the airline from the loyalty program. You’re clearly the exact customer I describe in the piece who sticks with Delta, and why they can get away with a low value frequency program.
I’m a longtime member of the frequent fliers program, who back when working had a fair bit to with DL management. Now we are not so frequent users but paying biz class international pax. Just before Christmas to make an international vacation work we had made our separate last two legs on DL. When we got to check in we found the first flight SFO to ATL was well ldelayed and that a second later flight was canceled. (Merged conveniently to improve $$?) Anyway, nice guy at check in laid out plans for making second leg work whatever emerged and he directed us to DL’s lounge. We were summararily turned away becuase no DL Amex card. Very rude and in front of a line of others, embarrassing to say the least. We are now booking away from DL deliberately for the first time in 40 years flying around the world.
I like flying DL when it makes sense, but credit all my miles to Flying Blue where I can actually use them. But if DL drops SkyClub access for Amex Plat, that would be a big negative.
I don’t know the backstory of how Delta ended up with a relationship with Amex but it has paid off in spades. Amex is simply viewed differently than Visa and MC and that has translated into much larger payoffs for Delta which AA and UA cannot match.
As you note, Gary, DL is getting about HALF of its profits from Skymiles – so it is making money on its operations. By next summer, they will be flying alot more and their profit on flying will grow even more because inefficiencies have depressed operating profits.
Combine the highest operating profits of any US airline and credit card revenue and it is not hard to see why Delta is on track to becoming even more profitable relative to the industry post covid than it was pre-covid
And the refinery is contributing over $1 billion per year in revenue. The margin is not as high as other sources of revenue but it reduces Delta’s fuel costs and is something else nobody else has.
Delta is the most reliable US airline – DOT and DAL’s own data show that – which explains why so many corporate travelers prefer them.
They have developed a very strong following in the LA and NYC markets – and are supposedly on the verge of announcing LA to Seoul and Auckland, Salt Lake City to Seoul and JFK to Buenos Aires service so they continue to push ahead even in competitive coastal markets.
So, yes, the Delta-Amex partnership is incredibly profitable for both Amex and Delta and there may come a time when enough people say the value is not worth enough to keep or use their cards but that time hasn’t come yet. Delta and Amex are both well-run companies and undoubtedly are tracking to see when there are indications of having gone “too far” and adjust accordingly.
@ JL100 — AA, UA, AS, WN and more do not charge change fees either. How is that a game charger for Dela?
Dropped the Reserve because, as pointed out by others, tiebreaker doesn’t work if you’re #1 for 0 seats. Downgraded to Amex Delta Platinum and will MS at Albertsons at 2x to get the waiver and boost then put in the sock drawer. Still travel Delta and will try to keep Platinum medallion just for the comfort+ on booking, since I travel on taxpayer dimes, no first for me. Plan is to burn skypesos for mqm/mqd runs and positioning flights for awesome award redemptions.
Last half of 2022 the delta redemptions were priced so high that it is no longer worth it to me to collect any Delta miles at all, let alone pay for the card’s annual fee. Mine expires in 6 months and it’s a big fat cancel. A flight that I like to substitute for a 3.5 drive to MSP was selling for 120,000 delta miles a couple months ago. No thanks.
Delta is the only carrier at the airport nearest to me. Which means the airport nearest to me has basically become unusable for me. Bummer.
Everyone’s down on Southwest right now, but starting tomorrow they’re offering 5x miles on:
–gas
–groceries
–internet
–cable
–phone.
Thru March 31, 2023.
Good enough for me. I just switched my recurring phone bill to pay with Southwest visa instead of Delta. I love having the Southwest miles in my pocket for when their stellar flight deals are offered.
They’re not even SkyPesos any more, they’re SkyZimbabweanDollars. I live in New York City and I’m Executive Plat with AA, of all airlines. My 3 most frequent destinations are STL, PHX, SFO. AA may have the weakest network in general, but they have direct service to all three from a combination of LGA and JFK, plus pretty good transatlantic connectivity via London.
I actually made use of the recent Systemwide-Upgrades-work-on-BA-connections feature for a trip to Milan in August. No upgrade space on the direct JFK-MXP, but it’ll also give us the chance to stop and shower / eat breakfast in LHR Galleries First, not a bad way to spend the morning when we’d probably not be able to check-in to our hotel after coming straight from Malpensa at like 9:00am anyway.
Not surprisingly, “[w]hen airlines like United and American have devalued that’s impacted co-brand card charge volume.” I now have only one airline credit card, a Citi MileUp card, no annual fee, and useful (and used by me) only for earning a few AA miles once in a while to keep my AA miles alive.
Generally, my credit card reward priority is now: first, cash rebates; second, Chase UR points; miles, who cares?
Delta is the same rewards as others
In economy. Very frequent flyers get some upgrades. Delta loyalists love Delta more than other airline loyalists.