MJ on Travel writes that Delta is highlighting its strong operational performance in its corporate sales agreements. You fly Delta because they’re a reliable airline, not because they’re honest or generous with their customers.
The actual nuts and bolts of the agreement are almost meaningless in the near-term. They’ll pay a financial penalty to corporate customers if:
- Delta’s controllable performance over a whole year is worse than both United and American (and notably, not Alaska Airlines with whom they’re competing heavily against in Seattle).
- Despite this poor performance, companies still meet at least 95% of their committed travel spend with Delta.
They’ve designed the guarantee to be more a rhetorical tool (we have great performance and we’ll stand behind it) than to be an actual incentive (there’s only a payout risk if Delta becomes a worse performer, for reasons within its control, than both American and United… and if companies stick with Delta anyway).
Nonetheless it’s a notable shift in how they’re selling travel. Delta is a strong operational airline, though Alaska’s numbers are at least as good while also viewing their frequent flyer program as an important competitive advantage.
Delta knows what their comparative advantage is. And in air travel, a reliable on time operation is unquestionably paramount especially for the lucrative business market. No matter how good your marketing program is, your airline needs to run well. And when your airline runs better than your competitors’ products, you can get away with a ‘last in class’ loyalty program.
Did New York Times get any type of feedback or a rebuttal letter from Delta on that article
It’s simply good business. 😉
PR fluff. God knows what sort of disasters would have to occur for them to sink below both UA and (less so) AA. Then this is further qualifed by the requirement for the customer to hit the 95% level. Granted they have a good operation now, but if things ever slipped to that extent, you have to imagine customers would already have abandoned them.
If they ever have to compensate customers in this way, it will be the least of their problems.
Gary didn’t coin the term SkyPesos for nothing.
@Idahost – I do not know
The admin level staff making corporate travel policies are going to eat this crap up.
In my experience, the people making travel decisions in most major companies don’t have any actual, first hand, travel knowledge. They make decisions based on information provided to them by the travel companies themselves or from articles in industry publications like Business Travel News.
The number of times I’ve been asked to stay in ridiculously out of the way hotels, drive rental cars that are 2-3 times pricier than competitors, or fly airline routes that wholly disregard the value of my time has been ridiculous.
Thankfully, I’ve been blessed with bosses that have had my back when I tell the corporate travel team to pound sand, but I know I’m the exception rather than the rule.
A “last in class” loyalty program is indeed easier for a company to get away with providing when the government has granted this airline and its “competitors” so many waivers and favors that we have but an oligopoly that runs the bulk of the show.
Welcome to the fruits of a less competitive domestic market for airline passengers.
UA would be lost without its lucrative corporate contracts. Of course UA could never agree to meet an operational metric because it isn’t capable of doing so as currently managed.
No question has better reliability, but those who value miles (and that includes many corporate execs) will still book away if they can get better rewards elsewhere – which is currently the case.
Alaska’s operational performance is good, yes, but the airline’s limited network renders it irrelevant to those of us outside the Pacific Northwest.
Gary is spot on — corporate management wants its employees where they need to be without regard to frequent flyer programs. Operational dependability trumps everything else. And, my experience is that many corporations take the frequent flyer rewards to reduce travel costs. So, whether employees get anything from a program is a non-issue in corporate life.
Remember, travel departments claim to reduce corporate costs based on factors that are not real world. For instance, Delta may rebate 10% of a year’s spend to a major corporation. The travel department shows this as performance against their target goal, and does not measure the incremental cost of flying Delta against another airline on any given day. Employee time is never factored into the mix. The actual cost of the airfare (without the discount or other incentive) is charged directly against the operational department — not corporate travel. So, there is no accountability at the senior manager/director level. And, C-suite management can’t be bothered with the time necessary to sort it out.
Been there, done that, and have multiple t-shirts (and scars) as souvenirs.