During the Delta Air Lines third quarter earnings call on Thursday, the Wall Street Journal‘s Dawn Gilbertson asked executives to speak to the customer reaction to announced changes to the SkyMiles program, and when to expect details on how they will roll back some of those changes in the face of customer backlash.
CEO Ed Bastian reported that they are “getting good feedback” from customers and that they “had too many changes rolled out at the same time” and that’s why they needed to go back and “reassess” the planned rollout for new elite qualification levels.
He contends that the vitriol from SkyMiles members simply shows their “intense loyalty to Delta” (narrator: that they used to have) and that “most everyone agrees” Delta needed to make changes because they have more premium customers than they have premium assets to offer.
The airline didn’t offer specifics of changes, or when they would make an announcement, beyond that they have “received a lot of ideas” and that we will be “hearing in coming days” what they’re going to do. However Delta emphasized that they’re purely reacting to customer feedback and that they are “not seeing any change in trajectory in acquisitions or spend levels” on their American Express cards. Bastian says that “some of” the feedback they’ve gotten he agrees with.
There are two key takeaways:
- Delta is still committed to the changes they announced. The only issue is whether they did too much, too fast, and should have made more incremental changes this year followed by more changes in future years. Customers that might be lured back as Delta announces a partial rollback should be aware that it is only a temporary reprieve.
- Delta offers a false narrative. They say they don’t have enough premium capacity to meet premium demand, but that takes two forms.
- Sky Club space. They’re adding space and adding business class lounges which will relieve capacity, but fundamentally what’s different about Delta’s lounge problems versus other airlines is that they allow everyone with an Amex Platinum card flying the airline into their lounges.
- First class upgrades Delta has spoken to 75% of first class seats being paid for (including cheap buy ups). Fifteen years ago it was about 10%. During the earnings call airline President Glen Hauenstein said that “Domestic paid first class load factors are reaching new highs each month.” But that paints to not enough first class seats, not to too many loyal customers.
Delta’s goal, which they’ve explained to investors, is to drive customers to spend more on their American Express cards – and that is why card-based unlimited lounge access was announced to require $75,000 in annual spend, and why card spend was announced to become a new way to earn status ($350,000 to $700,000 in annual spend for Diamond, without other activity).
The airline says they generate nearly $7 billion in revenue from Amex today, and that they have $10 billion as a goal. These changes are primarily about driving Amex revenue. That’s why Amex customers who aren’t regular Delta customers would continue to have lounge access, and why the way in which they plan to redistribute a declining number of upgrades is increasingly based on American Express spending.
United is adding premium seats. Delta isn’t. I’m pretty certain that the A350 has fewer Delta One seats than the 747 or 777 it replaced. Delta should be adding at least two rows of first-class on A321s, 757s, and 737s domestically. On some routes maybe more. I would imagine that Delta is up-selling first on West Coast to Hawaii flights and New York and Boston to the Caribbean, the latter of which has sufficient demand for Jet Blue to offer Mint service on most or all Caribbean routes from New York and Boston.
The dude is tone deaf, but he’s more or less saying this is where DL is going and wants to go, and so it’s coming either way whether the customers want the bad stuff in one hit or not. Unfortunately, the US market concentration is so bad for consumers that the chief DL dude can afford to do this.
It’s all BS! Period.
“getting good feedback” from customers
…
they generate nearly $7 billion in revenue from Amex today, and that they have $10 billion as a goal. These changes are primarily about driving Amex revenue.
Amex is the only customer they actually care about.
Here’s what they’re going to do:
– Status levels at $5k, $10k, $15k, $30k
– $10 spend for MQD on DL Plat Amex
– Less punitive rollover MQM conversion. Double the original ratios would be fair, with a cap to prevent anyone from getting Diamond with MQDs converted from rollover
– DL Amex Reserve unlocks additional SkyClub visits at $25k, $50k spend
If they’re smart they’ll add some kind of $10 per MQD earning to DL Gold Amex, and add redeemable miles boosts to DL Amex Plat for every $10k spend, say 2000 SkyMiles
Hmmm…maybe they are not seeing a change in spend levels? Well, I may only be one person…but there’s been a whole lotta change in my spend levels. I removed the Reserve from every auto-pay account and it hasn’t seen the outside of my wallet since the changes were announced last month.
The key here is – as Gary noted – no other airline lets customers with a non co-branded card to access their lounges. By limiting the number of visits on the Reserve card (and removing the MQM spend bonus) they have essentially reduced the value prop of that card to a companion ticket per year. Not enough to make me keep it once I shed through my accumualted Sky Miles next year.
Anything there for non US Diamonds?
Of course they haven’t seen much changing yet in card member retention. That will happen next year if they bump the waiver thresholds and club access.
The law of diminishing returns is in play. Delta is betting people won’t care.
They may be surprised.
Lol good job narrator. People still spending on their American Express cobrand cards are delusional.
despite the incessant need by some to prove that Delta made a mistake in rejecting them or their ideas, Delta execs JUST SAID and filed documents with the SEC showing that they do not see any
negative impact to their financials because of their changes.
In fact, DAL AFFIRMED Its guidance that they are on track to meet the HIGH END of their guidance for Skymiles/Amex compensation for this year and expect to reach their $10 billion/year goal.
If Delta was seeing negative impact that would affect their financials, they are required to report it.
Some people can’t accept that Delta and Amex worked together on these changes, have received positive feedback from some parties, and are moving forward based on their expected outcome which clearly included some people bailing out while other new customers come into the program and spend more – which is exactly what they say is happening
This is one formerly loyal Delta Diamond Medallion (9 years) and exclusive Delta flyer (over 15 years). I am going free agent. I just compared the JetBlue Mint and Delta D1 prices to London. I can save $3000 per ticket by flying JetBlue. My wife and I will be heading to London in January and it won’t be Delta.
If my Platinum Card will not give me access . I can live with 6 a year .Good bye Amex plat.
I never understood why the $25000 spend on Delta AmEx was the same for silver, gold and platinum levels. It would have and may still make better sense at $25000 silver, $50000 gold and $75000 platinum. This is from a longtime platinum medallion.
Tim Dunn you have zero credibility when it comes to Delta. Take your ball and go home.
Too little too late. I’m done! I’ve moved on. AA has matched my Diamond Medallion and I’ve now taken 8 flights with them all in First Class domestic and I have to say that even though they do NOT have TV monitors their offerings in transcontinental is significantly better than Delta. Their WIFI is much better. Their lounges at JFK and LAX are superior to Delta’s and their staff onboard has been excellent and all of my flights have been on-time! They have lost a loyal customer of 9 years.
Sorry the whole thing is flawed.
Take lounge for example.
Delta indeed drove more premium from Amex because they handed out lounge access like candy. Sure .
Now they say they don’t have enough capacity and cutting back. What they were hoping that people will keep spending and they are realizing that if enough folks are serious about their threats, they have a problem.
Well , you can’t have your apple and eat it too.
Delta WILL see lower revenue from Amex, and not more.
And Tim, the most execs are only focused on one Quarter at a time for guidance. What had Ed and his team shaking is what will happen after next year. Make no mistake about it.
You don’t think UA could offer free UA club access to all Chase SR customers and increase revenue significantly?
@Tim Dunn – there is no plausible way that this week’s earnings call would have any legitimate feedback on the effect of these changes. This time next year would have the first real feedback on the effects.
The real effect to look for next year will be if there is a drop off in corp travelers as non Amex medallions refocus their flying to another carrier that better rewards butt in seat spend more than credit card spending. Delta will be fine in ATL, DTW, MSP, and SLC, but look for corp travelers to drop in TATL and from the coastal Hubs (BOS, JFK, LGA, LAX, and SEA) where there are real alternatives to Delta. Why fight the boss to use Delta out of Boston / NYC when JetBlue is flying the same route for less??
There’s too much focus on Amex spenders vs real customers, that is the feedback and that is what Delta will need to address. Delta Amex spenders are leisure customers, not business flyers, and who wants to fight AA for the bottom of the market??
Next year will also feature the rolloff of the remaining covid carryover mediallions, so there should be a reduction in Diamond and Platimun flyers simply through attrition..
@Tim Dunn – “filed documents with the SEC showing that they do not see any”
I don’t think you read the 8-K because they said no such thing.
“If Delta was seeing negative impact that would affect their financials, they are required to report it.”
They would report material changes in the aggregate, not changes to projections of American Express revenue
It is in fact unlikely that there have been material changes to actual spend volumes across their portfolio that rise to the level of disclosure on their own! But their SEC filing does not say what you say it says.
I terminated my platinum card I had for the past 7 years due to their games.
Being penalized for being a parent of Delta employee! We purchase most our tickets & go standby occasionally, with Platinum American Express Card & seat request you’re denying access!!!!
That was Ed assuring the stockholders that “there is nothing to see here.” The real impact will be felt in 2025 when the changes are realized. Ed is hoping that by then the stockholders will forget that they went from a loyalty (and I do use the word loyalty loosely considering all the gutting that has continued over the years to the Sky Miles program) program to a spend program. In speaking with both Delta and Sky Club employees nobody on their side is happy with the changes either. The Sky Club employees especially as it will mean much fewer tips for them.
I’m gonna give it one more year. After that, I’m a free agent myself.
They definitely lost my personal and corporate Delta cards. So at least two cards gone.
Es unicamente…
!LO MEJOR EN SU CLASE!
And DL flyers… why are you complaining now? After all Jeff R told you this directly in 2010-11-12 etc. I’d say more than ten years of advance notice is ample. Not only did he tell you but you could all see it with your own eyes… beginning with that legendary SM redemption on DL.CO in June 2010…
635k…
And not all in J…
PHL!
FCO!
You know…
But, please convince yourselves that you believe Ed’s “rollback” propaganda, stay on DL and don’t being your high $$ spend to all other airlines where I lurk… UA AA AS etc.
A bunch of people canceling cards that tbey only had for lounge access is exactly what Delta wants to happen. Every one of you Reserve holders who never charged to the card because Skymiles have no value and are now canceling your reserve cards are doing Delta a favor! They are not sad to see you go!
Gary,
Delta said on the earnings call that they are not seeing negative impact. You do realize that earnings calls are public investor disclosures?
You and others desperately want to believe that DL shot itself in its foot. Same thing for Amex.
They know what they were doing, worked together, will make minor adjustments but both will be financially stronger after these changes even w/ the “modifications”
It doesn’t matter how much you incentivize anyone to post what they did with their DL- Amex accounts.
The sour grapes in comment section is quite a read.
Yeah. Im still gone.
As a 3MM multi year DM and 30 year Delta loyal customer will be moving to AA next year when it suits me.
I have DM for next year and will use Delta next yeat at my convenience, mostly award travel to use up my pesos.
Delta basically sold more perks than they can supply. If they expect to earn an additional $3 billion from these changes, they should be prepared to spend some of that on new lounges and more 1st class seats on their fleet.
If you are reading this blog, you are not Delta’s target customer.
I will be cancelling my Delta card. I liked to use points for upgrades could care less about the lounge. Already reviewing United and American routes. My absence will be one more seat Delta can have for their Million Milers!
As someone whose work requires them to book all Travel through our corporate-designated booking agency, it’s near impossible to adopt the changes that Delta is making with booking all content through Delta.com affiliates. I can’t afford to book $8,000 worth of my own vacations each year, so it will make no sense for me to stay with DAL once my status is up.
Ed Bastian, why don’t you change Delta Airline to 2nd Class Amex, since very few will Delta anyway? This is similar to auto companies becoming financial management companies and then bankrupt.
Elite status and lounge capacity are two completely separate problems. What % of lounge attendees got in with amex plat? I’m guessing over 50%. Too many elites has nothing to do with it. So you just pissed off your most loyal customers to not address the root of the problem. Nice job, Ed.
All you had to do was nerf the amex plat benefit. That’s all. Make it 2 or 4/year, or make it unlimited but add a $20/visit surcharge. The lounge lines would disappear. You could probably get away with keeping lounge access for DL reserve too. Or god forbid add capacity. Nahhh, that’s crazy, let’s just piss off our customers instead.
@Gary, please regularly monitor and follow-up on this over the next 2 years. It will be fascinating (and informative for the points and miles crowd) if there ARE or ARE NOT any negative impacts for Delta or AMEX as a result of these changes.
I could put $75K on an AMEX each year, but it’s just not worth it for Sky Pesos and access to a single airline lounge.
Long-Time Free Agent with over 4 million miles here.
I find the hand-wringing over the “Delta Skypesos Changes” most hilarious– only because something has been obvious to those of us happy to book UAL or AA or DL or even AS/SWA for the best price, best connections on the best day. (Was simultaneously Exec/Platihum, 1K and Diamond for a couple of years. Wife is still UAL Global Services, while liking the DL First product her company puts her into.)
That obvious gorilla in the cockpit has been the CLEAR priority at DL for “Their AMEX income streams” over “the passengers they fly the planes for”.
For years, FIRST on DL has been full of people who clearly didn’t fly much– but had the right credit card. The DL lounges are always chock-a-block full of entitled AMEX card holders. Who boards first? Not the guy flying 250K miles a year– but instead the mystery “SKY” and “AMEX” people.
So, now? Yeah, DL’s CEO makes it clear that they are doubling down on the addiction they have to the AMEX cash flow– despite AMEX being a loser (consumer) company and the “wrong” clientele it attracts to the brand. DL operates to their priority– and that priority is the people over-paying for credit card services. I’m sure if DL could bring in that 100% margin revenue without flying planes? They’d be the first to sell the fleet.
There’s a lot of reason to dislike AA or UAL on a given day. But, at least, they still seem to value the folks that fly their metal. YMMV
We in Atlanta are screwed. Not a lot of good alternatives and AA and United are as high as Delta on many routes (and no direct flights) because they can.
We used to spend $12k per month on DL Amex Reserve, now it’s $0! We use the Cap1 Venture X.. so DL is full of it.. if we are stopping spending, so are others..
What I’ve had happen to me is, after getting stuck on a plane for 3 hours sitting by the jetway, instead of pulling back to the building, they pulled out on the tarmac, so we couldn’t get out and sat for another hour and a half. Then a lady threw up in the first class bathroom, the place creaked of vomit and the two dogs across the isle starting crying and wining, because they decided they needed to get out of the plane. If all of that wasn’t enough the stupid stupid stupid lead stewardess cancelled all of our reservations, saying she new we were going to have to rebook at our destination for the remainder of our travel. The problem with that is I had a first class ticket and was left with no negotiating power, when I got to the next airport. They get you behind security and essentially rob you blind. Their CEO Ed is responsible and should be sent to Gaza. None of this would happen if it wasn’t sanctioned. Let him fly back by the toilets, when they decide not to empty them, before a 5 hour flight, with a plane full of people.
@ Gary — I don’t even care anynore. I’ve already decided to move along and whatever Delta announces won’t change that. Delta clearly hates its customers, and in return, they hate them. Pretty simple, no?
Timmy is a D-Bag. And a FalseProphet #DeltaGeddgon
It’s so disingenuous for Delta to say it’s about lounge space.That is code for: this about money, as everything is in this world. It costs money for unlimited free food and alcohol at the lounges. Full stop.
I’ve been a skymiles member most of my adult life. A loyal one that would always chose Delta even if it costs a little more. Now that I’m retired and in a fixed income I doubt I will be able to enjoy rewards and upgrades. Even if my family buys me a ticket…I have to pay for it to count towards my medallion status. I’m truly disappointed
Alaska status match, card and AA miles, here I come . . .