New this week is that Delta Air Lines is eliminating qualifying miles and segments next year and will award status based on qualifying dollars only – but qualifying dollars can be earned through credit card spend, as well as booking hotels, cars and vacation packages through Delta.
It’s going to take $35,000 qualifying dollars to hit Diamond. You only earn 1 qualifying dollar per $10 spent on their Reserve credit card or 1 per $20 on their Platinum co-brand card. And they’re limiting lounge access via credit card, too.
At the Morgan Stanley 11th Annual Laguna Conference, Delta was asked about changes to the airline’s loyalty program. His answers were telling.
- They wanted to make elite qualification simpler. He didn’t understand qualifying miles and segments.
- Where they “are going as a company in terms of brand” is to “expand ways to earn miles.” It was a mistake not to reward customers for activity like buying rental cars, hotels, and vacations through their portal.
- They want these changes to mean different members are able to earn different status, “making sure we had the right people in the right categories,” there were “too many in certain categories” (top status levels) and that made them “unable to fulfill the commitments you make in terms of the upscale brand.” This also played in customers waiting in line to get into Delta’s Sky Clubs, he said.
Bastian said that “the last big thing we did was transition from mileage to dollars spent.” He called that “transformative” and said that this “is another step in that direction.” But it is not the last.
According to the Delta, “over the next several years we’ll announce additional changes to qualification and to how a mile is awarded.” In other words, even if you can get comfortable with Delta’s latest changes don’t get comfortable. The goal posts will be moving again. He added, “I think there are additional steps in the next years to make sure our best customers are receiving truly premium experiences.”
So what is Delta actually after here? More of your money.
- The changes are “designed to do get a higher share of wallet from the people we know can spend. Our hypothesis is that people will find their way to get to the levels they want to.”
- He thinks pushing up the requirements for elite status, and giving them a path with a lot of credit card spend, will be “hopefully stimulative.”
- They are expecting just under $7 billion in revenue from American Express this year. This was all done “in conjunction with our partners at Amex.” We are “very comfortable this should be accretive.”
Once customers do earn the highest status under this new program, don’t expect the benefits of the past. Delta noted during the event they had a “74% paid premium load factor” domestically last month. A decade ago it was less than 50%, and twenty years ago it was just over 10%. Which begs the question, why go for tougher SkyMiles requirements when there aren’t seats to upgrade into? After all, the 74% includes routes where there’s no premium demand at all, where customers want to go things are far tougher than that number suggests.
Interestingly, they noted “real strength in Boston and New York” where “of course we have the leading position in both of those markets.” Unspoken was a nod to the Biden administration for killing off the American Airlines-JetBlue partnership which would have given them competition.
With strength in some of the most premium markets, and already selling their premium products well, Bastian previewed that they plan “to segment premium products” in much the same “way they have segmented coach” – noting things like basic economy, and of course they’ve done Comfort+ as well. He adds, “that’s a hint towards what’s coming.”
Delta may be drawing the wrong lesson from their ability to sell premium seats. They’re thrilled by how many they’re selling and how few are left over for frequent flyers when they should be asking themselves maybe they do not have enough premium seats? Because when someone spends $350,000 on a $550 annual fee credit card in hopes of the occasional upgrade, you want it to be possible enough that they keep spending $350,000 on that $550 annual fee credit card, not to mention giving you all their ticket purchases.