I’ve had a day to digest Delta’s changes, and crystallize my thoughts as I’ve talked to a variety of television, radio, and print journalists about the revenue-based changes that Delta is making to its frequent flyer program.
I shared the guts of those changes yesterday, but having given them further thought I think I have a bit of a clearer take.
We don’t know yet just how bad they are, because Delta won’t release full details. But they certainly aren’t good for the vast majority of flyers — even business travelers whose tickets cost an average of 20 cents per mile or less. (And even those paying more could still wind up coming out far behind when we see the scope of changes Delta makes to their new five tier award chart to be unveiled later in the year.)
Here are seven thoughts that I have crystallized more clearly since Delta’s announcement.
- We can’t really understand the impact of Delta’s frequent flyer program changes based on the earning details they released yesterday. We still have just a sketch of what redemption changes will look like. A frequent flyer program is half earning, and half redemption, and we only have half the picture. Still, I’m guessing it won’t be good. (Delta is going to be giving out fewer miles from flying, and that should be deflationary, but they’ll still sell miles to American Express and I’m not betting on lower prices.) If there was good news, we’d be hearing about it. Instead, Delta tells us we’ll have to wait until close to the end of the year to find out what they’re going to do. They’re making changes to the award chart, but they’re secret changes. Members will be earning miles throughout this year to redeem next year, and Delta won’t tell them how much those miles will be worth.
- Delta’s most frequent flyers are hurt the most by changes to Delta’s earning structure. This is something I’ve been mulling over quite a bit after Joe Brancatelli pointed it out to me.
Elites have to spend more than general members in order to ‘break-even’ and earn the same number of miles next year that they have earned in the past.
- The changes to mileage-earning are twice as draconian as the changes to elite status qualification. Delta changed their elite status program to require spending of at least 10 cents per mile in addition to requiring specific mileage flown to earn perks and recognition. A silver has to spend at least $2500 in addition to flying 25,000 miles, a Diamond has to spend $12,500 in addition to flying 125,000 miles. In order to break-even on the mileage-earning side, they’re doubling that bar to ~ 20 cents per mile. 10 cents was considered revenue-based for elite status, and most frequent flyers (who aren’t mileage-runners) will probably make it). Break even for points-earning is an astronomical figure.
- Delta’s portrayal of how many points you earn is exaggerated. I gave Delta’s rendition of earning yesterday, with ‘2 extra points per dollar’ for paying with a Delta co-brand credit card. But that’s not really a fair characterization. You earn 2 miles per dollar with a Delta American Express. But you give up the points earned from a different credit card. It’s not really a part of the earning structure for flying. And you’re better off giving up 2 Delta miles per dollar and earning 3 American Express Membership Rewards points per dollar (that transfer to Delta) with the American Express Premier Rewards Gold card, or earning 2 Chase Ultimate Rewards points per dollar with Chase Sapphire Preferred.
- Skymiles is opting to make their program even more complicated than before. Going to five redemption tiers amazes me. I imagine the decision is driven by technology challenges and that they really wanted to do dynamic award pricing based on real-time revenue inventory (price of award varying based on flight of the specific flight booked) but that this just ran into too many hurdles.
- For now, low fare flyers who will do badly under Delta’s revenue-based changes can credit their miles to Alaska Airlines Mileage Plan in order to still earn one point per mile flown. Delta and Alaska are ‘frenemies’ with Delta encroaching on Alaska’s Seattle hub even as they’re partners. And Delta may twist other mileage programs into not awarding miles at all, or at a reduced rate, on cheaper fares. But looking to Delta’s partners to credit Delta flights is likely to be a good strategy for those who come out behind with Delta’s revenue-based revamp.
- Pushback matters, whether or not Delta will rollback any of their changes. United just made big changes to their award chart, they won’t follow Delta quickly. American and US Airways are busy integrating their airlines, my bet is they won’t follow quickly either. Instead, they’ll watch how customers react to the changes Delta has made. So if you don’t want other US programs to follow, you need to patronize programs that reward the time you spend up in the air. We can seek refuge with non-U.S. frequent flyer programs for awhile even if all the US programs went revenue-based, thankfully, but the trend needs to be met with resistance now.
Delta runs a good airline by US standards. But now more than ever, it’s hard to justify a focus on Delta Skymiles as a preferred frequent flyer program unless you live in Atlanta or the Upper Midwest. There, of course, you may find that it’s worth giving up a lucrative frequent flyer program for non-stop flights and frequent service.
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My conundrum here is that I agree that pushback matters. But pushback requires that the customer pool be aware of what is going on. And I think the customer pool is generally casual about miles programs, present company excluded.
But in my capacity as a fairly well informed consumer I equally do not want others to be as informed. Opportunities in this “game” exist to a significant part because 98% of the customer pool does not know how to goose the broader system.
Educating enough people to provide ample pushback may let a genie out of the bottle, and the already educated may find themselves with unwelcome new competitors.
I’m Atlanta based, but given the change, I’m willing to forgo direct flights for the sake of miles. When Delta is the only option or cheapest option by far, I’ll be crediting those to Mileage Plan (For however long that partnership lasts).
That is a helpful synopsis and commentary on the situation. Another interesting variable that is Delta is (more often than not) the more expensive flight option when comparing costs. While that might not concern business flyers, as a someone who flies a lot for personal travel, it will impact my loyalty. Our household contemplated the switch from Delta (platinum status) to US Airway with the initial wave of changes, and now we’re certainly going to jump ship. A big remaining question: What happens to the 300K FF miles that I currently have stockpiled with Delta for a rainy day?!?
“Delta’s portrayal of how many points you earn is exaggerated.” This is incorrect – the portrayal is just as accurate as their current award tables.
Deflation for miles means higher prices to charge a credit card company, not lower. Fewer miles are needed to get you someplace, which means the mile is more valuable.
Also, everyone uses to long haul, low fare flight as an example. Not only do high fares do far better, but people who fly a lot of short haul flights do much better under the new system. Let’s say you fly ATL-MCO or LGA-BOS or LAX-SFO or any of the hundreds of other flights under 500 miles. If your ticket costs more than $100 (which is pretty low fare), you wind up ahead. If it’s $200, you double what you would getting. I bet that from a numbers perspective, the aggregate number people who do a lot of short haul flying and the people who do long haul flying at high fares are more than long haul, low fare fliers. The proportion of bloggers in the latter group is probably significantly higher though.
I don’t think the sky is falling. My only desire is for them to do away with MQM and make it just based on the dollar thresholds because the combination of MQM with MQD makes it more limiting for everyone. Perhaps when they see a large decline in elites, they will do that. By the way, point #3 really mixes apples with oranges in a big way.
Driving Every Loyal Traveler Away is the motif of current DELTA management team. In their handbook, they consider a customer is loyal if he is willing to pay $$$$ for his flight ticket on DELTA. No wonder DAL is a Wall St darling in these days.
Time to burn, burn, burn. The real screwing over will be on the burn side, which I’m sure Delta will eventually apply for award purchases made prior to 1/1/2015. (They are just too damn greedy to resist this temptation.)
This will undoubtedly be a very unpopular perspective in this community, but, as a counterpoint: I am a regular business traveler in an industry where the convention is to buy last minute fully refundable tickets, in coach for short flights and in business class for long ones. I suspect that for almost every ticket I buy, this will increase the amount of mileage I earn, and I suspect my coworkers will be generally happy with this change. Frankly, I think they would be happier if status were based on dollars spent as well.
Presumably Delta knows they’re playing a balancing game between customers like me and customers like most of the rest of the readers here – and I don’t know why or how they made the decision to shift the balance – but I just wanted to add one small voice of counterpoint. This isn’t to say that I’m universally happy with a transformation to revenue-based frequent flier schemes – I’m not – but there are definitely some customers, customers who spend a lot of money individually on Delta flights, who will be more inclined to choose Delta after this change than they were before.
This is just a belated wake up call to all those who earned majority of miles/status via BIS. Those days are gone and the remaining dinosaurs will either adapt or go extinct.
Just about anyone can get Gold without stepping in a plane and get 110K miles for their troubles. And can be done at negative net cost. If you don’t know how to do it, start reading the few blogs that are worth reading…
@mg –
To a great extent Delta is engaging in reallocating a fixed pie. You are likely to get a bigger slice now, and I don’t know that people really begrudge you that larger slice.
The alarm appears to be primarily that for earning miles by flying Delta will be no more gamable than Jet Blue and that unpleasantness on the redemption side may well follow.
@mg – I agree – that’s the one class of travelers that I think really benefit from this – business travelers that often buy tickets closer in on someone else’s dime (especially on relatively shorter flights).
One thought that I had last night is that it actually puts folks like this at direct odds with their employers. The cheaper the ticket (good for employer), the worse it is (fewer points) for the traveler.
Now while I doubt that many people will just soak the company for the highest possible ticket just to earn more miles, there are already tradeoffs that business travelers have to make. Do I take a non-stop flight that costs a little more but gives me less time in an airport? Or do I take a more expensive earlier flight that gets me home to my family a day sooner? Now this just adds even more choices to the mix
I am in the top tier with Delta (Diamond – 2 million miles) and most of my trips are international and in first/business class.
The problem is that my tickets are purchased in bulk (cheaper fares) by the travel agency and Delta refuses to accept the amount spent in these tickets as MQD, which means I will go straight from the top tier to “no-tier” if I keep flying Delta.
As you can see I am being forced to move to a different airline since no options are left at Delta.
Never understood that logic of buying last minute/refundable fares. Last minute may be unavoidable on occasion, but how many industries is it regular? I have my employees buy regular/advance discount tickets and we just eat the occasional change/rebooking fees, even if the change is for personal reasons. This comes out much cheaper than if bought fares all last minute/refundable.
Just wondering why certain industries seem to throw money away like that. BusClass is usually an executive/manager and up perk, so I can understand why some companies allow that.
I’ve been a little frustrated at all of the bloggers who talk about west coast to east coast routes as the example. I would venture to guess that for most people, that’s just not their flying pattern. I’m in Dallas, an AA hub, which means that nearly all of my domestic trips are around 300-350 dollars for approximately 1000-1500 miles one-way. And, think about folks who are in the Midwest or smaller cities or ones with regional airports who may be likely to pay 400, 500, even 600 dollars per RT flight. Yes, these changes are bad, but talking solely about the LAX/SFO to NYC or DC or Boston examples just isn’t reflective of how most people travel.
@joe – that’s why I explained the break-even point at about 20 cents per mile in airfare. A 1500 mile roundtrip means airfare > $600 PLUS TAX (so really more than $650) before you earn as many miles as before. It’s only the ticket cost over that which puts you ahead.
@Jeff short haul expensive does better, but long haul expensive doesn’t necessarily do better… i used an example yesterday of a long haul trip at 2.5x the current prevailing price and showed how folks buying that much more expensive fare would lose too.
But Gary, doesn’t your 1500 mile roundtrip actually need a $300 fare to “break even,” not $600? Or do you mean 1,500 mile one way? (which is closer to transcon than short haul) I just have a hard time seeing even low fare, short haul fliers not doing better, often much better. Hard to find a one-way ticket for under $100 and sometimes it’s several times that even for short jumps.
Yeah, it’s true that this puts people booking tickets sort of at odds with their companies. I don’t think most people want to game the system that way, insofar as they have much more to lose if they’re thought of as irresponsible than they do to gain by getting a few extra frequent flier miles. But it’s a consideration, for sure. And certainly after this change people will think twice before saving the company a little bit of money when choosing between two in policy flights – particularly if the extra hundred bucks is a few hours more convenient or whatever.
I also suspect in the long run that we’ll see fewer of these “fully refundable last minute ticket” policies – it’s not clear to me that if my employer told people to buy refundable tickets early and just burn them if they had to change flights that they wouldn’t still save money for many kinds of flights. And some companies have interesting policies these days – at least one that I know of has set a “budget” for travel between city pairs that are common for its employees. If employees beat the budget they get to “bank” a portion of the savings to use for future flights, so that if they travel cheaply sometimes they can fly upgrade classes other times. I think this company actually sets the budget a third of the way between what they think a coach ticket should cost and what they think a business class ticket should cost, with the idea that on average the employees should fly business ~1/3-1/4 of the time, with thriftier employees doing so slightly more often. These sorts of policies may make Delta’s shift less effective…
@Jeff 1500 miles each way, which is what I thought I was taking from your comment above, but apologies if I misunderstood you.
short-haul will probably come out ahead, but ask yourself : how many short-hauls do you do unless you’re a consultant ?
say MSP-based. chances are, at least a few times a year, you would vacation at SFO, LAX, LAS, JFK, MCO, MIA … – you’d be screwed in most of those cases to make up for that MSP-MKE shuttle you take
bottom line – if DL RASM is 16cents and they ask for 20cents break even on points earning, then the average traveler is being screwed … it’s LESS than a zero sum game
Just looked at my Delta flights for 2nd half of last year. 2 long haul leisure, 3 short haul leisure, 5 short haul business. Fares ranged from $54-336 o/w (leisure) and $216-301 o/w (business). Earned 12,037 miles including all bonuses. Would have earned 14,770 miles under new system. Pretty immaterial in my opinion. If you have a mix of long and short and business and leisure flights, I would not be surprised if your results would also be within 20% better or worse.
You might be surprised to learn that I agree with those points despite my being mostly happy about the announcement…
1. I’m not happy that details of the new chart were not revealed, but I consider that more of a non-event at this point than a negative. In other words, they can always devalue the award chart without notice (and have before). There’s nothing new here about that other than a timeline (i.e. we’ll know in Q4 and it will take effect in 2015)
2. I think its wrong to imply that all of their most frequent flyers are hurt by this, but I agree that many/most are. There are plenty of examples, though, of business flyers who fly shorter routes frequently (or last minute routes) who will come out well ahead.
3. Very interesting point! I hope they don’t read this and decide to double the MQD requirements!
4. Absolutely agree. You can simplify this argument by simply saying that those 2 points per dollar are available now too, so that’s not an enhancement to the earning structure at all.
5. Yeah, but this complexity pales in comparison to the MQD requirement in my opinion. I’m not sure that multiple levels of awards are that complicated. All of the hotel chains do this and they add new levels every other year it seems.
6. Yep
As a hub captive who earns miles primarily in ways other than flying, I’m happy that 1. I can still earn high level elite status through credit card spend; 2. one-way awards will be available; 3. there might be more low level awards available. I agree too that I’m not like most people so whether I like or dislike this stuff is immaterial to most!
@Bob Creek
If you switch your personal spending over to a Delta SkyMiles Credit Card and spend 25k a year you’ll be fine.
From: http://www.delta.com/content/www/en_US/skymiles/about-skymiles/medallion-program/medallion-qualification-dollars.html
MQD Waiver: The new MQDs requirement for the qualification year will be waived if you make at least $25,000 in Eligible Purchases in that year with your Delta SkyMiles Credit Card from American Express.
I look at it this way. They will attract more PM’s and DM’s who will fight over a limited number of 1st class seats. But how many 1st class are on a plane 10%? Who’s going to want reduced perks to ride coach if they can go to AA, UA or AS. That means they’ll have to reduce price on the 90% of the seat if they want to fill them. Or if they fill them with PM’s and GM’s they are going to be very unhappy. Either more kettles at reduced prices or more PM’s and GM’s in coach.
The only part of your summary I might quibble with is the idea that DL’s competitors won’t move quickly to match. I’m not so sure about that. I think EVERYONE in the USA airline industry has wanted to move ff programs to a revenue-based system. Now they have their chance. And, as you know, the industry tends to move in lockstep: matching fares, matching fees, matching ff programs, etc.
BTW, I see a comment from “Paul” above stating that anyone can get gold status without getting on an airplane. Does anyone know how THAT is done? I know lots of ways to accumulate miles without getting on a plane (mostly through credit cards), but STATUS? I’m curious. 🙂
A question? If you fly Delta and credit miles to Alaska due you still generate credit toward status levels with Delta? I think the answer is yes but you never know these days.
Since the airlines have been making all sorts of changes the past few years with baggage charges etc, I do think pushback is important. If this generates a lot of noise and hate it might prevent the same from some of the other airlines. I am sure Doug Parker is watching this closely. While they probably would not do this in 2016, it could be something for the following year.
@iahphx: There are several Delta credit cards which give not just redeemable miles but also MQMs when you hit spending targets each year. I think one gives 10K for each of two different levels, and the other gives 15K for each of two different levels. If you have both, and hit the higher spend level on each card, that 50K MQMs, and gold status.
@robertw – no you would not
@iahphx – you can earn status via credit card spend alone with delta/amex
Thanks, guys, for clarifying that “status” question. It sounds like if I spent a very large amount of money on Delta AMEX cards, I could get gold Skymiles status without doing much actual flying. This does not sound like a very good idea, especially now!
Given how poorly delta executes their award calendar, I don’t trust that my miles will even be credited properly in 2015. I will choose my flights strictly based on convenience and cost going forward.
I have a few things to say
One I am signing up for the 2% cash rebate for all purchases and will use it exclusively if more programs go this way
Hope Delta becomes the next JC Pennys or Sears and suffers badly
Time will tell
I was avoiding Delta for many years now I won’t purchase their seats
in business class or coach unless it’s the last airline standing