Your SkyMiles are Now Worth 1 Cent Apiece for Booze in the Club. How Long Until That Low Valuation Spreads?

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 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”).

In fact, at investor day Delta Chief Revenue Officer Glen Hauenstein made clear in his remarks 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).

Indeed, Delta has started letting members redeem miles for premium alcohol in their clubs.

The program started this week at Delta’s new San Francisco International Sky Club, which opened a few months ago in Terminal 1, and the carrier plans to expand it to all 34 Sky Clubs that accept payment for drinks by the end of March.

The payment rate for premium drinks is 100 miles per dollar, so premium beers like Stella Artois or Blue Moon can be had for 300 miles, while top-shelf wines, spirits and cocktails will cost 600 to 800 miles.

…“Customers who opt to pay with miles will be prompted by the bartender to scan their SkyMiles membership card or boarding pass and enter their SkyMiles account password at checkout on a payment device,” a Delta spokesman said.

Leaving aside that I hardly consider Stella Artois to be a premium beverage, they’re valuing SkyMiles at a penny apiece. Why would you ever want to earn 1 mile per dollar with the Delta co-brand American Express card?

Delta SkyClub San Francisco

More redemption options are good, and 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 the program doesn’t peg your miles as worth only a penny (until some future devaluation) going forward… which is roughly what they had been planning when they moved to a revenue-based program in the first place.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Why would anyone want to make this their airline of choice? They are basically saying F-you to anyone who can’t drop $500+ (at a minimum) per flight. No one is seeing anything above coach on DL unless they drop $1,000+.

    Just when I am feeling silly for sticking with AA post devaluation, this reassures me. I don’t care how good others might say their product is, they’re a joke and so is their loyalty program. Bottles of Stella with my points? How can some of you support an airline who shows outward contempt for it’s FF program?

  2. Why didn’t my last post make it through moderation? I didn’t swear or insult anyone, I was just critical of Delta. I read posts from folks on here who flat out insult you, and they make it through, but I talk bad about DL and you delete my post? Really? C’mon Gary

  3. I used to worry about 1 cent/mile until I realized that Delta probably thinks that is too generous and leaves money on the table. I wonder the value of all those one-way awards over the years that paid roundtrip fare at Delta’s absurd-o-pricing.

  4. When Delta advertises a 30,000 mile sign up bonus for the Gold Delta Skymiles credit card from American Express, they can now advertise the new benefit of 100 complimentary bottles of Blue Moon beer.

  5. Honestly I don’t mind.

    I think as airlines directly devalue their programs and indirectly remove themselves as a source of distressed inventoryb for card issuing banks, these cards issuing banks with step in with benefits of their own to counter balance.

    American Express for example in response to decreasing lounge access created their own lounges. In response to decreasing award availability and point devaluations experimented with buying tickets at award pricing and scheduling.

    I think card issuers would in general continue this trend to hold customers, justifying it by the cost savings of paying the airlines less.

  6. Well said I used to fly only delta, now not anymore their ff program is getting bad, my wife can longer join me in the club they want me to oy for her. I carry the platinum cc spend a lot but it is better to use a card with cash back or even Marriott cards. You get free room stay or in case of cash back you can purchase tickets that will save you you money. They only cater to the rich now, the miles you get are based on how much you spend not how far you fly

  7. This is so hard for me as I still want my $.025 a point value and only in the front cabin. We plan in advance and can normally make it so (Using Virgin Upper Class and Air France this summer). This pattern isn’t gonna help that…..

  8. @ Gary — 1 cpm is looking good these days. Delta wants 125,000 one way for many F flights SFO-ATL. They have lost their freakin minds….pay with miles is actually a better deal.

  9. Wow, this is really bad, but par for Delta. I always made fun of the CapitalOne “miles” (their terminology, not mine). But at least they have a better payout rate than this program.

    If airlines think that they can succeed by following Delta’s suit, they’ll find that large number of people will be bailing on their co-branded credit cards. There are better cash-back programs out there.

  10. PWM always valued it at 1 cpm. So this is nothing new.

    In general, look at all card offers.
    Hit the sign ups, (even that has a cost in lost cash back).
    Use cash back cards for everything, until the interchange fees are lowered.

  11. @Gary

    Airline co branded cards, who pays for the free checked bag?

    For instance, I sock drawer the AAviator, and Delta Gold for the bag benefit. With 12+ flights per year where I bring 1 checked bag that is a pretty hefty savings. I’d like to think I’m denying the airlines their bag fee and from collecting any swipe fees – I have other card with these banks I spend on. Is that actually the case of are the banks having to pay the airlines for the bag benefit?

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