Don and Matthew send along the news that Delta is eliminating expiration of Skymiles.
This is a consumer-friendly move to be sure, and deserves to be lauded.
And I admit it’s a move that surprises me.
Mileage programs hold unredeemed miles on their books as a liability until those miles expire or are redeemed. Expiring miles mean recognizing revenue without associated cost. That’s why programs have shorted expiration periods in recent years, with most programs going from three years to 18 months (Delta’s miles expired after two years).
Mileage expiration is big business. United Mileage Plus booked an extra $64 million of revenue in the first quarter of 2010 just by tweaking their model for mileage expiration.
So real applause here, but at the same time I don’t value the move myself and anyone who pays attention should lament it just a little bit. It’s incredibly easy to keep miles active. Most activity in an account every couple of years is enough, an online shopping purchase or a points transfer from another program or crediting a rental car does the trick. And with an ever-increasing array of mileage management tools out there (I use AwardWallet myself) that track not just frequent flyer balances but miles expiration as well, it’s hard to miss expiration deadlines.
This spends a great deal of program dollars on folks who aren’t paying attention to the program. On the other hand, I’d much prefer the dollars spent on additional award seat availability for those who are paying attention. If there’s one part of the program where Delta is uncompetitive relative to their competitors, it’s the availability of award seats. That’s where I’d be investing.
It seems they’ve chosen to invest in the unengaged, once every few years flyer so that those members keep on the treadmill and keep earning points. And that’s instead of investing in making the points themselves more useful.
Funny thing is, they can always expire the miles later if they want. Should we even believe them when they promise that we can earn miles and they won’t expire them alter? After all, we’ve been down this road before with Delta.
Miles in the original Delta Frequent Flyer program didn’t expire. They even ran a Super Bowl ad with no fine print promising their miles wouldn’t ever expire. When they ended the Delta Frequent Flyer program and launched Skymiles, with expiring miles, they promised that miles earned under the old program would never expire. But then they decided that old miles would be merged into Skymiles, and those old miles would therefore.. expire. (Delta had also committed that any elite member who continued to maintain their status could always redeem their old Frequent Flyer miles under the original program’s award chart, that promise went poof as well.) Delta’s explanation? The terms and conditions of the program said they could change the rules.
Memories are long, different people were in charge of the program back then, but I take such unequivocal statements as made with this announcement — “no asterisk, no fine print, no ifs, ands or buts” — with a grain of salt. We’ll see. But I’d say keep those Delta marketing emails, in case they ever decide to change their mind!
In the meantime, I do have to acknowledge that this move represents an improvement for the program over what it offered previously. I just lament that it’s not nearly as big an improvement as the hype around it wlll suggest, and that it’s frankly just not the main area where the program needs to improve.
Update: I’ve continued to mull this change, it really is quite a big deal. I wish I had more information, I’m wondering whether they’ve adopted a change in their revenue recognition policies to accompany it. I’ve never looked up Delta’s 10Q but imagine that if they have it would be disclosed in their next filing. Meanwhile, it’s worth pointing out that there’s a real difference between accounting rules on revenue recognition (the financial statements show that miles Delta has sold are a liability) and real business decision-making, even if public companies often behave as though GAAP rules are the more important. It doesn’t really cost Delta anything to leave miles on their books unredeemed unless those miles eventually turn into award bookings, and customers who bootstrap towards their awards will likely be more negaged in the program in the future. So it could be a good business decision not to expire the miles, even if accounting rules encourage an airline to pretend they’ve made a bunch of money at the point the miles expire even though they took in the revenue much earlier and they generate customer resentment by doing so. As a result, it’s conceivable that Delta is either changing the accounting rules or ignoring them in favor of good business here, and my thinking about choosing to spend their dollars on the areas of the program in least need of improvement are misplaced. This boils down to how they think of revenue recognition, accounting rules, versus real decision-making. And I’d be really surprised if my more generous view were true. But it is possible! 🙂