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.