Delta’s Investor Day was held this morning, and a key theme of airline President Glen Hauenstein’s presentation was getting passengers to pay more for their seats.
There were three ways he outlined that Delta is and plans to drive more revenue from passengers out of each seat that they fly – reducing upgrades, stripping down their Comfort+ and business class products to get customers to pay extra for the services than they’re used to, and using AI to figure out the most each passenger is willing to pay at the time they search for fares.
Many will see a lack of details in the presentation as disappointing but there’s actually a lot that’s radical here, especially when considered together as a package.
- Delta despises upgrades Delta has been able to nearly eliminate complimentary first class upgrades. Before 2010, only 10% of domestic first class seats were paid. But even less than that was people buying domestic first class since many of those seats were connecting to international business class. Now there are only “12 points going to upgrades.”
He described the front cabin before 2010 as the “biggest loss leader” of the airline because they were available as upgrades:
We didn’t sell them, we gave them away. And we gave them away based on a frequent flyer that was based on [flying] and not spend.
Most miles earned even then (as now) were earned from Delta’s credit card, not from flying. To Hauenstein, selling miles to American Express is profitable, but redeeming those miles for value is unprofitable.
He later calls the loyalty program “a manifestation of our brand” and you should understand that as distinguished from something that provides value. People stick with SkyMiles because they think Delta is better, not because SkyMiles is better. (Narrator: for earning and redemption, it is far worse.)
- Greater product ‘segmentation’ is coming. They already have basic economy, but want to bundle more services that they sell coach flyers. They don’t have a ‘basic’ premium economy or business class today, that aims to get more money from customers for the product that exists at a single price today (and that is structured to give less to those willing only to pay the same).
He says that they are “experimenting with this, not announcing anything today” but his idea is that “people with different needs, good product, better product, best product, could we invent subcategories of each product..?”
In 2025, try additional segmenting of main cabin, we really already have it with basic and main but do we have a best in that category? Comfort+ there’s no good, better, best there… over the next couple of years you’ll see us attempting and testing what consumers want in their bundles.
He wants customers to think, “I know if I pay more I get more.” Speaking about business class, he wants those paying more to feel like they’re getting more, rather than giving ‘leftover inventory’ to late buyers who spend more. This amounts to continuing the journey to ‘make it more value-based’ as we move forward.
- Charge each passenger the most they will pay. He sees AI as changing the way that pricing works. Today, Israeli company Fetcherr is currently pricing 1% of Delta inventory as a test.
Currently, “pricing sets price points, revenue management controls access to inventory of those price points.” However he sees this changing (emphasis mine):
Over time we think that is going to get melded together and it’s really just offer management. We will have a price available on that airplane at that time that’s available to you the individual…what we have today with AI is a super analyst, an analyst working 24/7 a day, trying to simulate..real-time what should the price points be? ..We’re letting the machine go ahead and price in a very controlled environment. It’s going to be a multi-year, multi-step process.
Hauenstein also asks, “Is there a better card than [Amex] Reserve?” Unstated is, now that Delta is devaluing lounge access through their premium card, they’ve created space to offer something even more expensive that gives back what their Reserve cardmembers used to have. We only thought that lounge access limits were about reducing lounge crowding, rather than about driving a price increase from customers spending the most and most loyal to the airline.
Delta has been talking about basic business class and further unbundling like what they’ve done with basic economy (that has no seat assignments included in the fare, board last and get forced to gate check, no miles), since this past summer. They promised more details to come at Investor Day but didn’t offer the promised specifics.
Personalized pricing for tickets has been a white whale for airlines for many years. Ultimately it’s hard not just in terms of technology (knowing what to charge) but because customers can just ‘log out’ and use incognito mode or a VPN to prevent airlines from knowing much about them, and because they also have to compete on most itineraries with other airlines and that caps how much they can charge. But Delta thinks they’ve de-commoditized enough that people will consider only them, which makes it easier to accomplish.
Hear me out: If you don’t like a service or a policy or a product, don’t buy it. In most cases, air travel is a luxury, not a necessity, and there usually are alternatives, competitors, etc. So, good luck to Delta, let it do its thing, and the ‘free market’ will sort this out. If you want ‘First’ then buy it. Loyalty is dead.
Ahhh even more reason to stop chasing status. Delta has now won the game. Conditioned many of their most loyal customers to pay for the benefit (upgrades) they used to get for free. Only a fool would remain loyal now.
It is interesting. The brand image carries a halo that they think will get loyal members to pay more through their channels. They won’t be able to do personalized pricing through OTAs in the same way, at least not for a long time. So, they have to think that they have a loyal consumer that will not price check with an OTA and will not start their search with Google flights. I’m sure the research is going to be interesting, but that seems like a massive hurdle. The risk is: once the consumer becomes aware that they have been taken for a rube by Delta, will the consumer have a knee-jerk negative reaction? Will the NYT think pieces that emerge from this practice tarnish the brand image? Seems like a very, very risky strategy. I bet it doesn’t go anywhere. But for an investor presentation, this makes sense. You have to convince shareholders that a runway for growth exists. There are not many more levers for Delta to pull.
If Delta moves forward with these plans, United and American could follow suit.
This is a great summary.
Unfortunately it continues the trend towards status being irrelevant. This year I definitely moved flights to Delta at marginal incremental cost and spent way too much on the Reserve card (to earn basically nothing compared to what I could have earned on other cards) just to secure Gold which, I fully realize, is maybe 1% more useful than Silver. I had originally hoped to make it back to Platinum (the first status that matters in terms of support and RUCs) but that’s not in the cards.
I think going forward I will focus on WFBF (Want First, Buy First for those not on Flyertalk 😉 ) BUT without any regard to if it’s Delta or anyone else.
Their penny pinching moves make it impossible to be loyal. You won’t get any upgrades and you’ll have to justify paying for the ability to choose seats on a Basic Business fare. You get all status benefits when buying First in combination with just holding the DL Reserve card (you needn’t spend a dime on it), so there goes quite a bit of both my airline spend AND my card spend.
Oh, and now I need to think about if they are trying to completely screw me over using AI pricing?!
They definitely have smart leadership, however I think they think they are smarter than they are.
Explain to me how “Personalized Pricing” is even permitted today? It’s telling me that I they identify you to paying higher premium fares in the past that the fares will rise in your case when searching for a flight compared to, say, Mabel in Iowa looking to visit the grandkids.
Ok making people pay to sit up front, I totally get. I don’t expect a business to give out free stuff. But at least for me the purpose of either buying first out right or paying for a cash upgrade (this is on AA) versus playing the upgrade lottery is a confirmed chosen seat, a meal if within the meal window, a dedicated check in area (which admittedly I rarely use). Not being subject to Spirit Airlines.
Unfortunately I could see AA and UA following suit because this is a monkey see/monkey do management mentality.
So much for DL being the “premium airline.”
I’m waiting for a Black working-class female to sue because the White working-class male sitting next to her paid less. Delta **could** argue, well they bought different tickets at different times, except now they’re on record stating they’re going to charge some people more simply because they think they’ll pay more.
I hate this crap.
Looks like Frlta no longer has “Customers”, just “Marks”
Hate Typos qnd auto correct.
“Frita” started out as Delta in my earlier post.
If Durbin’s bill passes Congress and goes into law, won’t this negatively impact the lucrative credit card business the carriers currently enjoy? It would almost make it worthwhile to see one of the largest revenue streams dry up.
Diamond with Delta Reserve Amex, based in NYC, where we actually have decent competition (unlike, say, Atlanta, where Delta is the only game in town). Selected the $700 statement credit, GUCs, RUCs, and 35K points, for Benefits. Will use my new ‘enhanced’ Companion Certificate for the ‘BOGO’ on a roundtrip fare in North America in First. Will visit any SkyClubs or DeltaOne lounges, if applicable. However, I am no longer expecting ‘complimentary’ Medallion upgrades; if I want ‘First’ or ‘Premium Select’ or ‘Delta One,’ I plan to buy it or redeem SkyMiles. The way I see it: lowered expectations, less disappointment.
Looking ahead, I am not going to do ‘mileage runs’ or any other fanatical stuff (honestly, glad they got rid of the ‘spend $25,000/year for the MQD waiver! $30,000 for extra MQMs!’) just to get a ‘bag tag’ and a slightly faster ‘call-back’ time with customer service. So, if status happens, great; if not, that’s alright, too. It was fun while it lasted. Again, I’ll use what I have, but I am not going out of my way for any company anymore. I’ll take a nonstop with a competitor over a connection in Detroit, Atlanta, Boston, or Minneapolis, please. Nice to be a ‘free agent’ again.
@ Gary — Delta will finally overreach. Their product, which is to get you from A to B on time, is no better than Spirit Airlines. They will see soon enough. The guy from AA was right all along, just ahead of his time.
Delta is selling-out its cabins because on many planes there aren’t enough seats. Delta is adding seats to Delta One and domestic first. Right now, there are often zero alternative flight options when someone goes wrong because first or business is sold-out.
There has to be a happy medium between encouraging and recognizing spend and recognizing and rewarding loyalty.
The idea that a customer who flies 150,000 miles or 125 segments a year all within the USA and always, because of corporate policy, books an economy ticket is somehow less valuable than the guy who four times internationally on $5,500 Delta One tickets is absurd.
Delta seems incredibly detached from the vast majority of Americans who don’t fly Los Angeles or San Francisco to New York. There are a lot more people flying vanilla routes; like Detroit to Dallas.
It’s interesting to watch an industry commoditze itself. Delta is moving forward with the assumption their customers lack agency or other choices. Additionally, pricing technology can be used on both sides of the transaction. Considering the horrible redemption costs at Delta I’ve been attaching my LATAM program to all my Delta travel. United must be licking their chops.
Delta was garbage in the past and continues the trend. Thankfully I no longer travel for business. When I do travel it’s overseas. There are far better airlines than the American domestics ..
No thanks delta I already gave at the office.
@FNT Delta Diamond
I am one of those ‘absurd’ guys who fly ‘four times internationally on $5,500 Delta One tickets’ and also fly ‘Los Angeles or San Francisco to New York,’ but you would never find me on Detroit to Dallas, so I think someone else may be taking ‘your’ upgrades. Vanilla indeed.
First, it is a slick slide deck. Well done, McKinsey or Bain.
What Delta is saying is you should always search and book anonymously for the best possible fare (regardless of class) and then add your SkyPesos number after the booking process is complete via a 3rd party web site.
Hauenstein is bragging that your status gives you zero chance of a complimentary upgrade (~10%) while AI will make sure you pay more for your seat every time (well more than a first time Delta flyer).
The credit card(s) are merely an extension of the overvalued brand, meaning $1M in CC spend earns AMEX/Delta about $50K and you earn 100K SkyPesos, not even sufficient for a fraction of one way trip in Delta One (JFK-GRU) which costs 400K each way using SkyPesos or $7K in cash (round trip) for January 2025 travel.
In other words, Delta wins and you lose, big time. Every time.
I have zero interest in flying an airline with these policies.
The other airlines may follow suit or they may take this opportunity to steal market share from Delta. Time will tell.
I have been Loyal to Delta for close to 30 years. Off and on I have switched to other airlines for a bit but this right here I had seen nothing about what is best and great for the customer to keep them loyal and bring them back. Just reading this Delta has lost my Loyalty due to much of what I have read lines up with what I have been experiencing seek flights the past few months. It appears this is already happening to a point. Time to fly the best fare no matter who it is. If Delta is not willing to be loyal and true to me then I need not be with them. And I Fly Loads.
Darn… Delta is banking on the idea that their customers will follow them even if they turn into a cult. Soon, you’ll only be allowed SkyClub access if you “donate” all of your possessions to Delta. Diamond Medallion only if you induct your first born into the Delta pilot school right after birth!
What a great example of taking the customer for granted. “Our product is so superior that we can do whatever we want without losing customers”. Delta is the Apple of airlines.
Just flew a leisure trip on Delta and paid plenty extra in economy to fly them versus AA because as a Diamond with Amex Platinum I would get both lounge access and a likely upgrade (I did). Take away the two perks or even one, the lounge, is the Delta experience so incredible that I will still be willing to pay extra? Interested to see if the lounge access limitations for card holders prompt people to look elsewhere, for me the much more accessible Amex Lounge in CLT versus ATL, makes American and lower fares far more attractive than Delta.
Devil’s Advocate:
Should AA & UA mimic the Widget (ie: alienating their high paying PAX), then an opportunity exists for B6 & AS to skim from the Big Three. Loyalty only goes so far when checking fares on-line!!
– B6 is developing lounges while AS has several….Cross Access via fare plans
– B6 has a footprint in Europe which AS dreams of
– B6 could install 1st Class without infringing on Mint while AS PAX would like a taste of Mint
– Each could use the other (code share) to fill in the hollow spots of their North American coverage
– Unlikely the incoming Administration would object like what happen with NK or NEA
Delta home to elite status illusion for fools
We got you suckers
Delta is the reason there are now 500,000 mile one way award tickets that previously were
50 to 80 k
Yes a whole industry of monkey see monkey do management style
My wife and I checked the fares on our DL Xmas week flight to ORD., where we fly 10-12 times a year. I’m a Delta gold and usually do the booking
So last night, my wife, who is on a laptop and usin a VPN sees $50l lower RT fare than I did on my phone, using the Delta app.
Left a bad taste in my mouth
I’m with 1990. If you don’t like or agree with a service, policy or product, don’t buy it. The free market will sort this all out.
In the meantime, thank goodness I’m a 100K Oneworld Emerald in Alaska’s Mileage Plan, where although the award redemption for Premium Class seats has been devalued, the service, perks and overall recognition remain top flight.
Delta you are taking for granted that the CC point chase with correlating status reward WAS because of the opportunity for advancement. (better seating). Your customers, that you think will follow you blindly, are very smart people. They will use the same tools on you. People understand the value of upgrades and perks but if you try to blur things, the travel web sites will re-write there algorithms to show the real value. People will pay more for better service, within reason, but diminished upgrade potential will lose you loyalty, especially with smart people and who can afford the upfront seats? Yep, smart people!
The 2 largest unknowna that could reshape this whole strategy are
1. The breadth of the next recession
2. Durbin et al continued push on the interchange fees. Eventually something will happen there which will redefine the revenue landscape of these airlines that are so dependent on credit cards.
Good for Delta and I hope other airlines do the same. Businesses should maximize revenue. If is like people whining about Disney park prices yet they are still packed. As long as people buy the tickets businesses should raise prices and otherwise maximize revenue. If people don’t pay prices will drop.
Simple economics – businesses don’t “owe” any of you anything so get over yourselves and accept reality
@ Jared — Thanks for the info. I guess we should all be more careful when booking Delta going forward. I’m a little confused about how Delta thinks they can charge a smart shopper more than the fare that ITA/Google flights displays. I guess they are counting on those that just go straight to Delta and buy a ticket with no research. As long as one doesn’t have any loyalty to any one airline, they should be immune from the latest Delta thievery.
@ELTON PARKS: The free market will sort this out? America does NOT have a free market, not least with respect to the airlines. But regardless, there is no true national choice. We are down to just three major national airlines and then several boutique or niche airlines.
Well Delta you almost have made your SkyMiles useless for loyal customers. Delta is a great airline made great by loyal customers who appreciated the rewards as a result of loyalty. Delta is now headed in the wrong direction. It started last year and is now moving forward. Give me a good reason to keep my card. I have American and United cards and they appear to want me as a customer. I think your idea they will follow Delta is hopeful thinking. Good luck Delta
brent wrote what i was going to write
this is the same level of IT delusion that aa suffered when they convinced themselves they could wishcast selling 80% direct
the board level in this country is completely disconnected from the actual business reality only 2 layers below them but you don’t keep your job or move up if you tell the c-level what the street doesn’t want to hear
@ FNT Delta Diamond — For my domestic travel, I use five airlines (NK, AS, AA, UA, DL) on a regualr basis. For interntaional travel, I’ve used 10 airlines (AF, KL, SQ, QR, JL, AA, BA, LH, DL, UA) this year alone. That seems like plenty of choice to me.
I submit DL thinks the new equilibrium will be one with less bang for loyalty, less valuable FF miles, fewer upgrades, more pay for extras, etc. I suspect they believe that this means less DL loyalists. But, so long as AA and UA follow suit, why would they care? Everybody has fewer loyals. The people have to fly anyway. If you believe you’re competitive among those who have no loyalty, you’re better off. Except, this can’t devolve to a zero-loyalty-rewards world, given the benefit of selling miles. We’ve seen a world with zero loyalty rewards evolve to one with large rewards. I simply think we’re evolving to a less rewarding world.
@ELTON PARKS Thanks for the vote of confidence, good sir.
@FNT Delta Diamond We’re heading towards less regulation, not more *gestures broadly at everything* Profits win the day, not loyalty. On ‘choice’ geography really matters. Superhubs, like DFW (+80% American), ATL (+75% Delta), etc. are not very competitive. But cities like NYC (if you include EWR), LA, and Chicago actually have vibrant domestic and international competition. Even some mid-size airports, like FLL, have a decent mix of domestic competition (United, Southwest, Delta, American, jetBlue, and Spirit). So, like most things, it depends.
@John Durbin and the pro-regulation Democrats are out. Unless someone wealthy and powerful convinces Trump to change rules on credit cards, nothing is happening anytime soon on that. They’d have to practically give Trump personally a cut of the profits for him to agree to anything.
Joe Customer: How much for that basic economy seat?
Delta Soprano: How much you got?
The MBA douchenozzles are leading Delta in a race to the bottom.
Might as well fly Spirit.
And other douchebozzles on this board laying prostrate in front of the MBA douchenozzles at Delta, thinkinf they sound smart by throwing around words like “free market”, “choice”, “maximize revenue”.and such…LOL
These esshats are as detached from reality as the said MBA doomasses in ATL.
I recently switched my car insurance because it went up 50%. I have no accidents or tickets and an excellent FICO score. Whatever! I was told the cost of health insurance product drove up the premiums. Huh? What’s driving up Delta’s pricing? At least the insurance company can say there is a cost for them to do business. Delta is just about greed then they will beat their chest about how great they are.
I’ve flown United recently and I can say the service and hard product was not bad at all. Be careful, Delta. Beating your chest too often means you must stop to maintain your balance. Meanwhile, as you stop beat your chest, your competition is gaining on you!
@FNT Delta Diamond–I agree completely. We do not have a free market for air travel in the USA. Their has been a great deal of consolidation in the industry such that there isn’t enough competition for a truly free market. Add to that the fact that airlines only teach each other their bad habits by copying things bad for consumers, especially loyalists, and you have our current situation. This copying of farea, fees, etc., falls outside antitrust laws as long as there is no actual collusion but functions the same as if there were.
Whether DL succeeds financially with this endeavor will depend upon a few factors, mostly what the competition does in response. It will also depend somewhat on the specific airport markets involved. I will be particularly interested in how AS responds.
As many of you have pointed out, loyalty is a 2-way street. I was a Diamond for a number of consecutive years, starting from that program’s very first year. I got great value from the program until the spend requirement forced me out. I was also a Reserve card holder for many years but no more. These days, I still fly Delta a lot because they have a reasonable product, a lot if nonstops from my home airport, and farea are often competitive. However, domestically, I often fly AS because they have nonstops to many more destinations. Internationally, DL has a number of nonstops but compete against a number of very good foreign carriers. I fly with whom I get the best value. As someone said earlier, loyalty, in the traditional sense, is dead.
One other point–VPN won’t mask your identity if a website or app won’t let you use it. If the AI scheme is put into place, don’t count on being able to use VPN if dealing directly with Delta. I often find it doesn’t work now.
Nobody despises engaged loyal customers more than Delta, except maybe Marriott. I don’t begrudge Delta a profit but alienating your customers by squeezing every possible cent from them while offering little to nothing in return is very shortsighted, which is why I dropped Delta years ago.
I just hit 10mm miles on AA and was “rewarded” with a computer generated mail with 4 basically useless SWUs AND a new luggage tag which I am sending back to them
Bottom line the only benefit of status is the preferred phone # and lounge access for alliance partners
I tried to move over to DL but their international service is very inconsistent -old 767s are miserable so I am now flying the airline with the best service
Delta has had a very good run but thus is a cyclical business and this will eventually reverse itself. When it does they will need the support of their loyalists who they have taken for granted and they won’t be there
I find the unbundling to be maddeningly confusing and time-wasting. There are a number of times I’ve found a flight at a time I preferred only to be faced with so many stupid options that I gave up and booked elsewhere. They’re banking on customer confusion generating more revenue, but the opposite is also likely. I just want to find a fare and book it, not play 20 Questions with the airline.
I do not fly enough for most of this to affect me. I chose delta becuase of their tech ops and i know, for the most part i am going to get where i want to go pretty close to on time. I only make one purchase every 6 months on the delta platinum card (just enough to keep it active). They have taken every benefit from the platinum excpet companion pass. They will eventually take that and when they take that away i will get rid of that card.
I will chose delta over everyone else cause i am a tall guy and i fit just fine in delta main cabin aft of the wing.
I feel so fleeced, er, “empowered”! Yeah, that’s it!
Do I now hire my own AI Bot to fight the Delta AI Bot?
Delta’s stupid dynamic pricing has actually cost them about $3000 of my business this year.
I’ve been trying to coordinate a trip with friends but from the time we start planning to the time we are ready to commit, every time, the price has shot up 2-3x
Since we aren’t in a cult like delta thinks, we just cancelled the trip.
Ate a few hundred bucks on deposits and tickets to things in Europe, because I’m not rewarding delta for gouging me on a late night trans Atlantic flight with 60% vacancy.
Five years ago, it wouldn’t have been wrong to say good things about Delta.
Now, the best I can muster is that they are very egalitarian. It doesn’t matter wherever you fly basic economy or D1, where this is your only flight this year with DL or you take a hundred of them, DL will give you the same treatment. As a cost to be minimized, a liability to be contained, and a resource to be exploited to the hilt.
The only thing that I found positive in this is the idea that AI can help in determine ideal revenue extraction. That’s not how AI works.