Delta’s Plan For SkyMiles Is Already Backfiring, But They Won’t Admit It

Delta Air Lines has angered its best customers in a way I haven’t seen from an airline in many years. They’re taking away lounge benefits from customers who spend $550 a year on their premium credit card, and they’re demanding substantially more ticket and credit card spend for status – looking only at qualifying spend (and no longer miles flown or flights taken) in determining elite level, and increasing the amount of spend required significantly.

We’re seeing a backlash and cardmembers saying they’re walking away from the airline, though those who are hub captive will likely continue to fly – Atlanta and Salt Lake City passengers won’t defect to another carrier. People are cancelling cards. But even if the changes were a huge mistake, Delta won’t admit it, and they aren’t likely to reverse course – just make tweaks at the margin.

Airlines Reveal Surprisingly Little About Frequent Flyer Program Financials

Airlines disclose surprisingly little about the details of the frequent flyer program portion of their business, considering how material these programs are to an airline’s bottom line. Prior to the pandemic it was common at American Airlines for the carrier to lose money in a given quarter flying planes, and all of their profit to be the result of selling miles to banks. Delta last year earned $2.9 billion, roughly $2.2 billion of which was from SkyMiles.

Delta says that they’re on track to generate almost $7 billion this year from American Express, and that nearly 1% of GDP is spent on its co-brand credit cards. These are very rough figures. While there are outside estimates of the margin that Delta earns on SkyMiles (~ 40%) they don’t break down a lot of detail around the business.

That means they won’t need to admit they’ve made a mistake.

People Are Cancelling SkyMiles Cards And Shifting Spend

Left and right Delta SkyMiles members are reporting on social media that they’re cancelling their co-brand credit cards, and that if they’re even keeping their cards they’ll do so for the benefits but no longer spend on the product.

We don’t know what the order of magnitude effect is here, but we know that:

  • Delta’s bet is that its changes will increase card spend.
  • That means cardmembers who don’t cancel or shift spend away will need to grow their spend enough to (1) make up for the losses, and (2) grow spend.
  • The benefits to status that are supposed to drive spend come only with their most expensive cards, not their mass consumer cards. That means either a huge number of cardmembers need to upgrade, or it’s a smaller portion of their cardmember base that needs to drive the increase and offset losses from the bigger pool of cards.
  • It’s only elite customers with premium co-brands that these changes are designed to push more spend from, that’s a subset of a subset.

Delta is demanding more from customers without giving them any more in return, and rewarding them with a currency that it worth less than what customers can earn elsewhere. And their bet is that a small subset of cardmembers will increase their spend so much as to offset those who cancel and the bulk of cardmembers for whom the changes aren’t designed to incent spend.

We Won’t See The Full Negative Effects Of These Changes For Over A Year

While the way Delta elite status is earned goes into effect for 2024, many people have already earned and will use status next year even if they don’t re-earn it next year for 2025.

And changes to the lounge benefit for the expensive co-brand won’t go into effect until 2025. So while some people are proactively making changes now, others may not do so for a year or more.

Meanwhile there’s a growth path for SkyMiles already, signing up new customers just to gain access to free on board wifi, and Delta has said they convert around one in eight program members to their co-brand card. Naturally increases in the portfolio will offset losses, and help disguise damage done to their portfolio from these changes as well.

It won’t be clear in the numbers right away, or even for awhile, what exactly these changes are doing to the airline’s business. And people forget how much recent growth in card spend is simply due to inflation.

Delta Will Declare Victory And Run Promos

There’s no reason Delta will need to admit error, and they’re unlikely to do so even if if it becomes clear to them that they’ve made an error. Delta is going to say that the changes are having their desired effect. Even if card spend were to drop which is unlikely they’ll attribute that to outside forces.

We’ll know, though, that they know they’ve made a mistake once we see promotions or program changes that increase the pool of elite members – it means they’ve cleared out too many – or that encourage card spend.

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. Your logic makes no sense. I have a Reserve card solely for the free ticket and ability to outrank those w/o it. I have the Platinum DL solely for the free ticket. I don’t put a dime on either card b/c a SkyPeso is worth at most 1.4c and you can get 2% w/o even trying. I will not be putting more spend on the card w/ this change. I plan to downshift to Gold but only for the 15% off when I burn SkyPeso.

  2. So we have no plans on reversing course rather there are couple directors who have asked us to keep an eye on the the delta cancellation and social media. They are hoping most of the folks who are throwing a fit as they see it will down grade to a lower card as most have too much points to our right cancel. We are authorize to make changes per CEO order on the number of sky lounge entrance if more media get involved until then we’re in the control the narrative mode meaning announcing other stuff like other routes and our plans to go carbon neutral to drown out bad news.

  3. I’ve had Diamond status for the past couple of years from spending on my Delta Reserve Business AMEX. I was in Delta’s new MSP Sky Club on the G concourse for the first time on 9/22. While most of their lounges are mediocre at best. This new lounge is a truly upscale airport experience.

    I think one thing people haven’t considered is that Delta has been slowly upgrading the status experience with significant upgrades to their lounges, including celebrity chef curated menus, higher end beverages, far more comfortable seating, and just wait for the new Dreamliners to arrive. The status you earn this year will carry you through 2024, which will give Delta a little over a year to complete even more lounge and seating upgrades. I think Delta is giving you a heads up that these significant upgrades cost a lot of money and you are not going to get access to them for your current spending level.

    Now the part that most of you aren’t going to like to hear… I will reach Diamond status under the new MQD program by using my card for most business expenses. Standing in line for the lounge after spending $350,000+ on my AMEX because Delta lets everyone who has $250 a year for the Platinum AMEX is beyond irksome. Then when you finally get into the lounge there is nowhere to sit, food messes everywhere, all of the electrical outlets are being used, lines for the bathrooms… In other words, it’s not an elite experience. It’s a $250/yr card membership fee experience. Frankly, I’d rather sit in the food court near the gates.

    I am glad that Delta is upgrading the experience and has plans to charge the appropriate amount for it.

  4. Or, you know, they could have made their thresholds where they are with the intent of running promotions instead of diving head first with structural deficiencies. That’s called Marketing, Gary. While we’re on the subject of entities never admitting their wrong, though: remember that time you modified an article where you claimed a video to be a real video in a DL cabin when it was clearly a training exercise, then everyone called you out and you changed the article to make it look like you knew it all along? And then you blocked messages calling you out? Remember? You sure about that? You sure about that that’s why?

  5. Delta brought this negative brand sentiment on themselves. Stop giving them money. It’s time to book away from Delta.

  6. Airlines have stopped publishing financial data on frequent flyer programs because it was fraudulent. They used to claim that they were highly profitable, but after the Aeroplan divestitures from Air Canada the truth was revealed that they are not profitable at all.

    Since it would be securities fraud to continue to publish fictitious numbers showing profitability of frequent flyer programs and they don’t want to show the truth that they’re breakeven (at best), they are no longer including these data in the annual reports.

    Simple, really.

  7. I feel like some of the actions taken are illogical. It’s just as irrational to take emotional actions against a company as it is to chase status when the math says it’s not the logical path. The changes don’t come into effect until 2025 based on actions taken in 2024.
    If it was logical to keep the cards before the changes it’s mostly logical to keep them now.
    I say mostly because with the end of rollover miles it would be logical for someone who has already won whatever status he’ll get in 2024 to not renew any cards except the Reserve card if it’s worth it for the lounge. If the Reserve was worth it for the lounge before changes it’s still worth it until the changes go into effect January 2025 (unless you’re flying Basic Economy) .
    I haven’t given Delta much of my money for years, I think there were 2 times in the last 4 years when Delta was best for me, and I took Delta then. And I will continue to take Delta when it’s best for me. It was even longer ago that I had a Delta credit card, and even longer since I put any spending on it.
    If that’s what Delta wants for the rest of the traveling public, then it’s well on it’s way to getting there.

  8. @Jamie: I don’t know where you got the idea that the Amex Platinum card costs $250/yr. Try $695/yr.

  9. We will be cancelling all 4 of our Delta Reserve Amex cards. Skymiles are useless, extremely devalued, and difficult to use. Customer service has been horrific in the last few years. Once we burn our Skymiles we will switch to another airline.
    Breaking up with Delta has been the most liberating experience. As Diamond and Platinum Elites for the past decade, we have had it with keeping up with the constant changes and goal post moving. Honestly looking forward to discovering new products. Looking forward to tying new airlines and new routes.

  10. If they want to lower attendance in their clubs, why don’t they just up the charge, versus take it away all together. They already ruined the Mileage portion of their program, so they might as well ruin the club portion as well. I no longer go out of my way to fly them any longer, as they are usually priced higher than the competition. I’m also a Travel Agent, and will also no longer give them preference when booking clients. I won’t penalize clients along the way, but won’t prefer Delta any longer.

  11. The inability to gift up to 60000 MQM to my daughter from my Reserve Card with the destruction of the MQM pathway will move my spend and Flying to AA starting this fall. Too bad from this 2million miler and permanent Gold Medallion. Loyalty is a 2 way street and as Delta has abandoned me, so to will I abandon Delta

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