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.