Back in January Delta announced changes to how frequent flyers would qualify for beginning in 2014. Instead of just basing status on miles flown, there’s a second component at least for US residents — a requirement to spend a minimum amount on Delta tickets, or to spend a minimum amount on Delta co-branded American Express cards.
I then declared that Delta isn’t done making changes to their program and in fact there are more big changes to come.
Delta’s shift towards becoming a revenue-based frequent flyer program isn’t just about elite status, it will be able earning and burning as well. They just haven’t revealed the details yet, but I don’t expect it to be pretty.
When I sat down to put together nominations for the Freddie Awards, I struggled to find a promotion that I could include for the Delta Skymiles program. That was strange because it’s a category they’ve actually won in the past. Delta has historically been among e more active frequent flyer programs in the promotion space, bonusing partner activy, bonusing mileage purchases and transfers. Delta miles may be in general tougher to use than other major US currencies, but they’ve also been pretty easy to earn.
What I found was a few rental car promotions, a few hotel programs at a low level especially with Hilton, and a big bonus for high-fare London travel which basically just matched what everyone else was offering on the same route.
In the past there were frequently big bonuses for transferring American Express Membership Rewards points to Delta, as big as 67% and including elite status for big enough transfers (there was once an 80% bonus by stacking two different bonuses based on how the rules for each were unintentionally written, but that wasn’t purposeful). In 2012? Nothing.
And my understanding is that inactivity in the promotion space has been because they’ve been so focused on revamping the program itself. In the coming months I believe we can expect to see a dynamic award chart that bases mileage cost of award tickets on the price of purchased tickets.
There have been a lot of changes brewing across frequent flyer programs recently, and in how airlines are monetizing what they once gave to elite (and other) customers for free. Some of it is really smart. Monetizing upgrades more than ever before (granted there are good and bad ways to do it — offering cheap upgrades to non-elite members that you won’t offer to your own elites, the way United has done intentionally or not, is bad business) airlines have been letting the revenue potential of their premium cabins sit mostly dormant until now but that’s changing. Domestically they’ve given those seats for free to elites, and internationally for free to employees. When customers will may more than a de minimus amount it makes sense to take that money.
But some of it I do believe they’re getting wrong, undermining what is a profitable model already. The programs themselves are billion dollar enterprises, entirely apart from the airlines they’re associated with. Selling miles especially to banks (about 60% of miles printed) is bis business. It seems less sustainable at the moment than it has in the past because with really full flights redemptions become more difficult. A little bit of airline expansion, an economic downturn, and things don’t look as bad. There is this overhang of miles that makes programs worry about whether they can sustain long-term and are increasingly willing to do creative destruction.
Randy Petersen thinks that US Airways was on the verge of going revenue-based and that when they merge with American Airlines, the combined program will launch in such a way. I’ve been skeptical, thinking the merger puts off such a decision as the folks from Tempe take time to understand what they’ve bought and as they strive not to alienate customers during the merger process.
Nonetheless, there have been tons of predications that the future of US frequent flyer programs is a revenue-based one. American had been the program I tagged as least likely to go there, with Delta and Alaska and potentially US Airways at the forefront (all programs that had adopted three-tiered award charts for their own flights already) plus United which had been on the verge of implementing revenue-based requirements for elite status a year ago but didn’t pull the trigger when they merged programs with Continental.
Still I don’t worry so much because of international programs and worldwide competition, I can bail for AviancaTaca in the Star Alliance (plus potentially Aeroplan, Singapore, All Nippon), for British Airways or LAN in oneworld, for Korean Airlines Skypass in Skyteam. They aren’t in general as good as MileagePlus and AAdvantage, but the point is that there are tons of programs to choose from and they won’t all make the same changes.
But Delta will go first, others will watch how things develop there. Customers probably don’t flee in droves because few will even realize how devalued their Skypesos become until redemption time and even then won’t internalize differences in value across programs. If I had to guess they’ll succeed, and in the monkey see, monkey do world of frequent flyer programs others will follow.