Delta Ends Expiration of Miles — And That’s NOT Such a Good Thing!

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! 🙂

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. Agreed. I don’t see a problem with expiring miles of customers who aren’t the least bit loyal. It’s a loyalty program, after all.

  2. Pure PR but great PR. I suspect the accounting rules that used to penalize loads of miles on books have changed and DL took advantage to get a little favorable news for SkyPesos.

  3. With SkyPesos, they are worthless and don’t hold their weight in diamonds/platinum/gold/silver on the balance sheet, albeit a liability.

  4. I’d wager that this change is actually going to improve availability of award seats for most of your readers. It’s a counterintuitive result of eliminating miles expiration so I’ll use an oversimplified example to illustrate. Suppose that Delta’s Skymiles program only has 3 members and only 1 award seat available systemwide for all of 2011. The 3 members are each a different type:
    Larry is an avid Viewfromthewing reader and would have found a way to generate miles activity to keep his miles from expiring anyway. The non-expiration of miles doesn’t affect him. Larry redeems his miles for seats regularly and will continue to do so under the new Skymiles expiration policy. Larry wants that 1 available seat in 2011.
    Moe is the type of guy mentioned in Gary’s post who doesn’t pay attention to the Skymiles program. He doesn’t track expiration dates and might not even know his mileage balance. His miles would have expired in due time under the old program but he is “saved” in the new one. However, Moe is exactly the type that will also never redeem his miles for a flight anyway because he is oblivious to the redemption rules, or he cannot be bothered to fly a slightly different award itinerary than the one he wants. After all, if Moe is the type who doesn’t even know his mileage balance, he’s probably not going to realize he can use it. The Skymiles policy change to No Expiration will have little to no influence on Moe’s propensity to claim that 1 available seat on Delta in 2011.
    Curly is the type that is between Larry and Moe. Curly knows his mileage balance and how to redeem it, but he’s not a road warrior, and he doesn’t know all the FlyerTalk tricks for keeping his balance from expiring. It probably takes years for Curly to accumulate enough miles to reach award thresholds. Under the old Skymiles expiration policy, when Curly realizes his miles are about to expire, he thinks it’s a use-it-or-lose-it situation. So, he will go online and he will likely try to book that 1 award seat available on Delta in 2011, even if he’d rather wait and save it for later. Under the new No Expiration policy, Curly has no pressure to use his miles in 2011 because he knows he can keep his miles and try to redeem it when he really wants to fly. Maybe that will be in 2012 or later.
    In reality, Curly will probably defer redemption year after year because every time he goes to check award availability, it’s not the ideal itinerary he wants to travel. He grumbles a bit but in the end doesn’t mind because he thinks he’ll just use the miles on a future trip because they never expire. He is Delta’s ideal Skymiles member: someone who will never redeem his miles (or who will do it so many years into the future that the present value of that award will be very low cost). Curly is the most common type of Skymiles member. On Continental, I personally am a Curly. I don’t actively try to accumulate Continental miles but I have had enough miles for an award flight through normal travel for 10 years, but I have just let my miles sit unredeemed for a decade, always waiting for next time or until I have enough to get to the next class of award.
    The net effect here is that Larry is the only guy left that is going to try to get that 1 award seat on Delta in 2011. Larry and Viewfromthewing readers like him will probably see improved success securing the available award seats. To them, award availability will improve. Under the old system, Larry and Viewfromthewing readers would have had to compete with all the Curly’s out there.
    Incidentally, this change is incrementally cash flow positive for Delta, too. Yes, Delta recognizes less near-term deferred revenue because miles won’t be expiring but that recognition of deferred revenue is a non-cash event, no more than an accounting entry. From an economic point of view, the No Expiration change will lead to more cash-generating paid seats, especially in the near-term, as the Curlys elect to pay cash instead of redeeming their miles to get where they need to go. I’d bet that Delta has done an analysis of this and they probably think they can lengthen the duration of their mileage float and increase the proportion of seats sold for cash. I don’t think Delta is purely motivated by generosity here; they probably think it improves cash flow.

  5. Now I can breathe a sigh of relief that my Pan Am and Republic miles will remain alive (for the time being).

    This is one less thing for me to worry about. However, as we all know the 40k is the new 25k with Delta. In a few years this will likely be 50k.


  7. With one exception, I always have enough activity to avoid expiration. But I’m very happy for this change because my young kids have miles and it’s not as easy to keep them active. They’ll take a few flights/year on DL, CO or AA typically and quite conceivably, won’t fly one of them for a couple of years. They don’t have credit cards, of course, so that doesn’t work to keep regular activity. Now they can slowly accumulate until they have enough and I don’t have to look for other ways to get them miles.

    As for the comment about the good will without potentially much cost, I agree. I’ve been elite on CO, AA and DL domestically but stopped flying US significantly enough to be elite several years ago. But I had a balance that, due to oversight, I let expire (my one exception). I’ll avoid flying them now as a result.

  8. @ STAN ATH – seems like you have some serious hostility with Delta. I use the Platinum Delta AMEX credit card to get 1) access to Skyclubs for $25; 2) Better rates on Skymiles marketplace (buying AMEX gift cards at 1.1cent per mile and other retail gift cards at 1cent per mile); 3)a yearly domestic companion ticket (which I have used successfully for 2 years). I have medallion status so no need for free checked bags benefit (for me personally). The Delta AMEX cards give you many side perks that SPG card just doesn’t give.

  9. Expiration of miles policy is once again changed by DL — something like the 3rd or 4th policy DL has had in 10 years and cycled through so as to fleece its “loyalty” program customers.

    While this change seems like welcome news on its face, guess what DL has done? Secretly hiked up the award travel prices on charts that it pulled and then hid from customers, while now claiming to (re-)introduce the international award chart for non-US/Canada travel at some point later this year. With higher prices to be expected.

    Delta SkyMiles management is of the same customer-unfriendly character as it has been for many years now.

  10. Lufthansa keeps kids miles active till age 18 without any activity. Makes sense as when they are ready to spend their own money, it helps get them started and keeps them loyal.
    As a loyal flyer, I would have thought that they would have kept an incentive to fly more with DL for the loyalists.
    e.g. no expiration for 3-6 years after your last earned or gifted status, say 3 yrs for FO, 4 GM, 5 PM and 6 DM and 2 years for the rare flyer.
    This is like social security or medicare and will likely go under the knife later with the next financial trouble.

  11. This was nothing more than an attempt to create a PR smokescreen prior to announcing that award levels for intraAsia travel (and now apparently some others) have been jacked up dramatically with no advanced notice. As others have said, you really have to ask if SM can be considered a “loyalty” program.

  12. If not already addressed…Delta & American both are utilizing their FF Programs as Collateral for multimillion Dollar Loans…
    Does this utilization of our miles, allow those of us affected to be Considered sub Rosa contributors with possible legal ramifications ?

  13. @Aafreq- American will be doing so (for a government subsidized loan) and United is doing so, Delta at this point is not. And they’re multi-billion dollar loans. Please explain your legal theory?

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