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.
@1990: I’ll concede that Los Angeles and New York are competitive markets. Especially for international travel. But domestically, Delta is not competing against Southwest, JetBlue or Spirit for business travelers. Delta’s only serious competition is United and American on premium transcontinental routes and then Alaska in and out of Seattle.
@James Ingram
Why are you even mentioning loyalty. You must have slept through your last flight. Loyalty is gone. Your U.S. airlines mileage is worthless. You want better, pay for it. Just like I did before the term frequent flyer was a thing.
So, unless your company will splurge for you (not likely), you pay for what you get. Deal with it.
I would love to see a foreign airline like Lufthansa buy the maximum 25% they’re allowed to buy in Spirit, push through a Spirit-JetBlue merger under a friendly Trump administration and then transform the new airline into a full-service airline with good operations, a solid domestic first-class product and extensive route network that can give Delta a run for the money. Alaska could potentially do it, but they would need a major hub east of the Mississippi.
I find all the righteous indignation in the comments rather amusing. In 48 hours 90 percent of the pearl clutchers will forget everything they just read. How funny so many people have their panties in a wad because an airline is opting for the status quo.
@FNT Delta
” would love to see a foreign airline like Lufthansa buy the maximum 25% they’re allowed to buy in Spirit, push through a Spirit-JetBlue merger under a friendly Trump administration and then transform the new airline into a full-service airline with good operations, a solid domestic first-class product and extensive route network that can give Delta a run for the money. ”
I don’t think anyone has ever associated Lufthansa with a solid domestic first-class product or a good full service airline. Their business class rollouts take longer than Delta’s somehow which is impressive since Delta had no plans to be consistent in their business class whatsoever.
Lufthansa is not much of a premium airline, from what I read. Kinda like British Airways, they’ve gone downhill pretty far.
I have to wonder if the real reason for AI is to maximize the buy-ups that they can get from a customer. There is plenty of competitors to keep fares in check, but they can use AI to set the best strike price to get you to pay for the extras.
@MaxPower and @Win Whitmire: Check out what the Lufthansa CEO had to say about expanding into the USA and their focus on upgrading their premium products. https://x.com/questCNN/status/1858963987884282049
Selling my Delta stock and already got Friday Delta rarely post pandemic. They had the worst service of any of the big airlines during the pandemic (literally was told that hold time to speak to someone was 36 hours with no call back option). Now that the CEOs strategy appears to be not improving the product to get more customers but rather have customers pay more for less, I say no to investing in this type of company.
@ 1990 — If one is willing to connect, superhubs like ATL, DFW, etc are VERY competitive and one can get very good pricing.
DL’s overreach has made it attractive for me to fly NK. 5 flights on NK in the last 2 months in “Go Big” or “Go Comfy”. Each one with good service, no middle seat person, on time departure and arrival, pleasant and smiling staff. About half the cost of DL main cabin. Guess where I’m booking.
If you want loyalty, Ed Bastian, get yourself a dog.
@ Retired Lawyer — Bingo!
Dear United,
How about a status match? Delta doesn’t want my business anymore. Do you?
If they want more revenue for upgraded seats, they need to give discounts to Skymiles loyalists. Amazing that nobody at Delta has thought of this, especially after ransacking the Skymiles program. I am a long-time Platinum who will be at best Gold in 2026 and beyond. While first class upgrades are nice, I am satisfied just getting into Comfort+ seats. If a Gold or Silver has to pay the same for Comfort+ as a non-Skymiles member, why should I bother trying to attain Gold or Silver? As it is, Gold/Silver has close to zero for me, and I suspect many others. Give me discounts on Comfort+ (and Premium and Business) and I am likely to stick with Delta and BUY the upgrade to Comfort+ (or Premium) at the time of booking.
Great article and great comments. About the only thing that I didn’t see mentioned was Lounge Access and how this plays into individual strategy. The relatively recent rules changes by all of the Big 3 to forbid Lounge Access to members who were not flying the airline that day was huge: As “Status” per se reduces in importance, Lounge Access will increasingly be dominant. After all, the United/Delta/American PAX who’s paying $600 to $700 per year for that access will not easily give that up, they’ll continue to book on the carrier that they bought the Lounge Access for. It may also bolster the already strong rise of the many non-carrier lounges for precisely this reason. It will be interesting to see how all of this plays out.
I’m not going to say that I don’t prefer Delta. I do very much. But if this arrogance persists it will lower its own bar to were it will become the equal of UA and AA. I don’t prefer those, but they get me in a single flight to many destinations and I like that more than Delta. So Delta: keep it up so when I choose AA I won’t miss you.
A finance person running a service company is the worst combination. Eventually they take their eye off the customer.
In the case of the airline business, it is and always will be a bad bet. The IRR on assets has always been a problem. I remember Bob Crandall warning his employees not to invest in American Airlines stock.
Delta is out pricing themselves on international flights. Our last two trips across the pond we chose AA with better schedules and much lower costs. I’ve been Delta Diamond for years but now look for the best deal. Delta is over estimating ‘loyalty’. Return your focus to ‘quality’ and the market will follow.
DELTA IS OVERRATED PERIOD!
OLD,OUTDATED AIRCRAFT.
IF ADDING SHAKE SHACK HAMBURGERS IS THE PLAN, THINK AGAIN!
Just another reason to avoid Delta. I used to fly them a lot but I can’t remember the last time I did. I think it was when they let empty seats take off and left me standing at the gate instead of letting me go stand by. I’m now a million mile around United.
I am not sure this model is the right way to go.
The issue is and always has been, that economy fares are simply too cheap and they dont seem to want to change that.
I think Ecomony fares need to come up by at least 10% at all levels. If they want to continue to sell fares in “buckets’ like they’ve done for years, fine, but a lot of these fares haven’t moved in years (on average) at nearly the same percentages as business/first fares have. I think that if all airlines did this, they might even be able to bring down the ridiculous amount of money they want for business and first. Many times, even booking more than 2 weeks out, a domestic first class flight is nearly 1-2k dollars and that just seems ridiculous –esp. when the most “basic economy” fare can be as low as like 200 bucks. They need to be increasing revenue across the board and not just trying to milk as much profit out of the elites/up-front flyers all the time.
Along with this, some of the ridiculous limitations that we as consumers still have to deal with (that were removed during the pando but then came right back) need to go away. This includes ending the practice of making nearly every fare non-refundable. They need to let people who buy fares make changes that dont always just favor the airline—these are benefits that most airlines reserve for their elites but even those come with too many “gotchas” that are irritating. If i can’t fly somewhere and need to change the person who is going ..for example, that should be possible. If I need to change the dates, that should be possible (esp. if the “fare bucket” is available). The reason I want to see these changes is b/c if they continue to devalue any reason for our loyalty, then they shouldn’t get to “hold all the cards” so to speak on when we fly with them.
DL higher ticket price for Business (J) just isn’t worth it. I’m cancelling my American Express Delta card and will be seeking best Business Class fares on Google Flights. Buh-by Delta.
My daughter called me a few months ago complaining that America. Used her browsing to overcharge her for a flight from Houston to Charlotte. She cleared her cookies and browser history from her computer and voila – a much lower airfare price. This article is a Confirmation of how airlines gouge you based on your browsing and what they know about you. “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.”
I’ve already gotten used to tapdancing around fare goofiness at times. The thing that’s likely to kill “personalized” fare offerings is the 24-hour risk-free cancellations the airlines have to have. For example, I’m waiting to see two different prices on my phone vs my computer (I already run into insanity like this over on AA, where inventory availability varies between the two).
One thing I wish we’d see is the DOT come out and say “If you let AI handle fares like this, don’t come whining to us trying to get out of mistake fares.”
Vaguely related to all of the above – I’m going to be running the numbers this year, but I may be ditching my Delta Reserve if the fee goes up again. The /only/ thing saving that card in my wallet right now is the mix of a high limit and the fact that I can get most of the fee back in the various credits (e.g. I can easily get well over half of the Resy credits and the rideshare credits, and the Delta Stays is a gimme that can be timed to get free MQDs).
Delta is working hard to compete against Spirit as the worst airline in America. They are completely destroying the brand equity they built over many years. I try to avoid Delta whenever possible.
I cant wait until the AI decides to increase my fare $800 because my cookies show I searched the word Gucci in the last week or my IP shows im in a high income area. AI isnt ready for anything and all this business leaders saying it is makes me question their competence. .
delta has decommoditised?!
interesting theory
just not true
The only reason I fly with Delta is because of the program and benefits. Other airlines offer the same type of services and sometimes even better. Loyalty work both ways. If they do not appreciate my business then I will give my business to another airlines… Who care