On Friday, former United Airlines CEO Oscar Munoz appeared on CNBC’s Squawk Box. Andrew Ross Sorkin asked him about Delta SkyMiles changes that generated such an uproar: “there’s only so much space on these lounges…there’s only so much space up front on these planes.” And Munoz acknowledges that the reasons behind Delta changes were capacity restrictions.
Delta says they’ll modify plans to make elite status much harder to earn, looking only at spend amounts, and limit access of premium cardmembers to their lounges.
Munoz offered that with the tradeoff between monetizing short term and investing in long-term customer relationships, “Brand reputation and customer satisfaction and appreciation are really critical long-term values that you need to create and maintain.”
Sorkin pushes back, though, that Delta’s “best customers were standing in line and couldn’t get into the lounge, for example.” Munoz bought into the framing, and suggested – like Delta did – that the changes were essentially a marketing problem. He says that can’t go from everyone being welcome to “what feels like” no one being welcome.
This buys into Delta’s framing, that they had little choice to do something and just didn’t sell it to customers correctly and that is frankly all wrong.
.@AndrewSorkin @SquawkCNBC asking former @united CEO Oscar Munoz about recent @Delta frequent flier changes: "Brand reputation and customer satisfaction and appreciation are really critical long-term values that you need to create and maintain." pic.twitter.com/Lddn2E2QDH
— Ross Feinstein (@RossFeinstein) September 29, 2023
Delta wants us to believe that they are just trying to solve a problem – that there are too many elites for the benefits available like upgrades and club access. They have no choice! Victims of their own success!
However lounge crowding is a function of:
- Amex Platinum card access. Everyone with a Platinum card flying Delta can use their lounges, which is something other airlines don’t do. In fact, Chase’s premium travel card doesn’t get lounge access with its main U.S. airline partner United. More people with access means more crowding.
- Declining Delta reliability, compared to pre-pandemic. More passengers spend more time in lounges during delays.
- Lack of dedicated business class lounges. The eventual introduction of Delta One lounges will help – United and American already have business class lounges that relieve the pressure on United Clubs and Admirals Clubs but delta was behind the curve on this. Their business class passengers all use Sky Clubs.
And crowding remains an issue:
So much for the second JFK club meaning no more lines at New York Delta SkyClub. pic.twitter.com/rgcXnc8TVm
— Clint Henderson (@ClintPHenderson) October 1, 2023
Delta has been selling its first class seats, for less than they used to. With about three quarters of first class seats monetized there are few seats left for upgrades. It’s actually worse than that, considering that there are low yielding routes where first class seats aren’t frequently sold at high levels. Getting upgrades on popular routes like cross country flights from New York and Atlanta are nearly impossible.
Yet Delta plans to further monetize the cabin. Their President Glen Hauenstein describes ‘what’s next’ as doing for first class what they did for economy with Basic Economy and Comfort+. That’ll make upgrades harder even with the SkyMiles changes they’ve planned, rather than easier.
What Delta should be doing is adding first class seats to the extend that demand has grown six or seven-fold, with plans to monetize those seats further. They shouldn’t treat premium cabins as a fixed pie.
The truth is that planned Delta changes weren’t about scarcity of benefits or too many Diamonds (CEO Ed Bastian was mistaken about the number of Diamonds, claiming that the pool had doubled – he was using outdated information).
It was all about squeezing customers for more American Express spend because Delta is trying to move from $7 billion in revenue from American Express to $10 billion. But they went too far. Delta says they will roll back announced changes but they will just dribble out the changes rather than doing it all at once… slow boil customers hoping they don’t know any better.
Delta was never offering more for customers who gave more and plans to push even harder with more changes in the future. They have a road map and they’re just slowing down the march, not changing course.
The airline is taking payment from American Express now for infrequent customers to access lounges via Platinum cards, and pushing their most loyal members to spend more than they make on the airline’s credit cards merely for access to a limited pool of benefits.
They’re cutting back on Platinum lounge access, but the infrequent Delta customer is fine with 6 Sky Club entries per year. They’re still choosing those customers over Delta Diamond members reaching $35,000 qualifying dollars spending less than $75,000 per year on a premium co-brand card.
It’s Delta’s short-term greed for Platinum cardmember lounge access from Amex, and pushing for Amex spend to redistribute a limited pool of upgrade seats, when the lesson of the premium cabin demand they’ve experienced may be that they should be expanding the pool of premium seats.