What Does Delta’s 15% Off Amex Award Discount Mean For The Future Of SkyMiles?

Delta and American Express have a new benefit called “TakeOff 15” where cardmembers of their consumer and small business Gold, Platinum, and Reserve cards receive 15% off the SkyMiles cost of award travel. I discussed this on Thursday, in conjunction with new Delta American Express card bonuses, but it’s worth pulling out separately.

Delta can, of course, increase the cost of awards to compensate for this. There’s not enough data yet to say this, but anecdotally several readers have found that specific award flights they were looking at recently went up by… 15%. (To be sure, Delta Amex customers should check the current price on any existing redemptions.)

Put a different way though remember that Delta has been consistently raising the cost of award travel so in a sense they already did this whether they’re doing it in conjunction with this change or not.

What TakeOff15 says is you only get the best value out of your miles if you’re a co-brand cardmember. And that dovetails with recent moves the airline has made to push customers to card. Already they suggest they’re converting 1 in 8 members to the products.

For instance if you want access to Sky Clubs you can only buy a membership if you’re an elite frequent flyer, the cost of memberships has gone up, and club members are excluded from access on Basic Economy fares. All of those conditions do not apply to customers accessing clubs via card.

Under Delta’s current deal with American Express, which is driving multi-billion dollar increases in revenue, you’re clearly a valuable customer to the airline if you have a card and not so much if you don’t. (Delta Reserve cardmembership is also an upgrade tie-breaker.)

It doesn’t make sense to fly Delta without joining the program, because SkyMiles members get inflight wifi for free. And now the new TakeOff 15 benefit is a clear message to customers that if they’re going to engage with SkyMiles, they need to do it with a card.

Does this take things too far? It certainly leaves out those who can’t or won’t get a co-brand American Express card including most of their international members. But the message is clear that a member’s value to them comes from co-brand cardmembership.

On the other hand international members actually get the best value out of the program since partner airline awards that don’t travel to or from the U.S. generally price for a fraction of what U.S. travel prices at. You can book Delta partner awards for not much more than United or American would charge for the same thing!

This Takeoff15 change also says, by the way, that Delta doesn’t believe they need a frequent flyer program to put butts in seats on their planes. Historically they’ve clearly taken this approach, albeit less explicitly. Delta’s revenue premium has been driven by,

Delta’s on-time performance is still better than rivals but its reliability has eroded. So has its premium inflight offering. Delta also has a uniquely strong position in Atlanta, Salt Lake City, and some of its other hubs that make flying other carriers inferior. This has all been enough to fill planes at good yields in the past, even with a less rewarding SkyMiles program.

This move takes it a step further. They’re giving even less value to the median member of the SkyMiles program, who doesn’t have the card. And they don’t seem to be concerned that this will erode brand loyalty.

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 InsideFlyer.com, 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. If anyone at Delta or Amex is reading the feedback. 15% off is not enough, they are still not a good value for international travel. I have a delta card and have not used it in three years, there much better values that exist.

  2. As someone who has drunk the kool-aid I am fine with it. Given deal-breaker bad experiences on United and American I won’t fly those airlines. Not much they can do short of comping me flights would I fly them. I fly Southwest otherwise (not because I enjoy it, but it’s easier than driving in many cases) and that will cover my domestic travel needs. I have the requisite AMEX card and status that Delta is actually a pleasant experience. Not perfect but better than the alternative.

  3. Delta’s loyalty proposition for consumers has been consistent for over a decade. For those who love flying Delta, there is a misconception that premium class is worth paying exorbitantly more than for the experience in economy. For domestic flights, the economy cabin experience is pretty good. The Amex Platinum card for lounge access (and many other perks) can pay for itself. So can the Amex Delta Gold Card with $10k USD annual spend.

  4. Delta devaluations don’t matter because their redemptions aren’t worthless anyway. The program is based on loyalty perks, not redemption value (which is why I don’t use them, but frequent who pay cash are Delta loyalists). For Delta, questions about loyalty benefits are relevant (to loyalists). Questions about the value of Delta Skymiles are moot because Skymiles have so little value to begin with.

  5. How is this different than United?

    United has many awards that are *only* available to card members. They aren’t even visible without the card.

    I know this because I transfer Chase miles to United for TATL flights and had to get the United card since I’m based in MSP. Without the United card I only see 20-40 hour flights. (Due to weird routes or 10+ hour layovers)

    I only get under 12 hour flights if I log into United (since I own the card)

  6. Since my comment to a prior article, I’ve run several notional award bookings for the remainder of the year. There has indeed been a devaluation of SkyMiles. The 15 percent discount for cardholders simply brings the redemption rate back up to about its pre-devaluation level. The net result is that it will cost a person $95 per year to maintain the pre-devaluation redemption rate. The break-even point is redeeming roughly 48k points per year.

  7. This is the logical extension of the big 3’s recognition of how much money credit card agreements add to revenue.
    Delta is expecting that Amex will hit the $7 billion/year revenue contribution to Delta in the next year – by far the largest that any airline in the world including AA and UA get from their credit card partners.

    DL and Amex are businesses. If their strategies aren’t working, they will change them.

    The fact that Gary noted offers for Amex cards are still ongoing even as Delta purges SkyClub access to a number of lower value customers says they are still in the hunt for credit card signups from the highest value customers.

    And as noted above, United and other airlines have had targeted mileage offers for credit card customers for quite some time.

    Given that Delta’s only real network weakness relative to AA, WN and UA is its relatively small presence in Texas, Delta’s latest announcement is significant in light of its Skymiles efforts.
    They just announced they are adding Dallas Love Field to NYC LGA and LAX and upgrading its ATL flights to A319s, the result of gaining their own gate at Love Field after years of trying.

    Delta will be the only airline that serves 3 of the largest major markets from both Dallas area airports, not unlike what it does in Chicago from both airports.

    And Delta is also adding a half dozen or so flights from Austin to nearly every hub. They don’t have to try to fly to 2 dozen destinations from AUS as AA and WN are doing when they have more frequency than every one else in the markets they do serve.

    They are also re-adding SAT to JFK

    Regrowing its network and pushing its Amex relationship go hand in hand.

  8. @Tim Dunn “And Delta is also adding a half dozen or so flights from Austin to nearly every hub.”

    They’re adding 10 flights, increasing service to all but one of their hubs!

  9. I personally did not notice in my bookings an increase in SkyMiles after the program was announced. Delta SkyMiles present an ok value for domestic and even better now but horrid for international travel

  10. I didn’t count but their gate utilization is undoubtedly going up – along w/ the occupancy in the Sky Club.

    While you always love to see AUS growth, the most significant is the growth at Love Field which Delta has been trying to do for years and has finally overcome immeasurable obstacles.

    Delta’s strategy in Dallas now looks more like its strategy in Chicago – another multi-airline hub city. In contrast to MDW, Delta chose the two biggest markets from Dallas to serve from Love Field and now serves both NYC and LAX as well as ATL from both airports – plus its additional hubs from DFW.

    Texas will be a bright spot for growth – along w/ Florida for years to come so there is plenty to go around for everyone

  11. @Tim Dunn – “the most significant is the growth at Love Field which Delta has been trying to do for years and has finally overcome immeasurable obstacles.”

    Delta has been using half a gate now they’ll operate 9 flights, fully utilizing (more or less) a single gate *AND GETTING THE CITY OF DALLAS TO KICK IN ON THE LEASE COST*

    The airline lacked a gate lease. They got the FAA to say they couldn’t be kicked out anyway. There’s a lack of gates at Love Field, since a deal the airlines cut with Congress eliminated 12 gates at the airport. They colluded to give Southwest a near-monopoly at the airport, while limiting the airport’s growth.

    After a 7 year battle, Delta won the right last summer not just to stay but to get full use of one of the Alaska gates (which Alaska got by buying Virgin America, and Virgin America got as part of the DOJ settlement which allowed American and US Airways to merge). Alaska doesn’t want to use it anyway…

  12. Delta proved years ago that a reliable, user-friendly airline won’t be hurt by a garbage loyalty program. SkyMiles plays no role in my decisions to book or not book Delta. This move further narrows the utility / appeal of an already limited-value program.

  13. Gary is correct about the history at Love Field. Backing up even further, Delta added 50 seat RJ service at Love Field to Atlanta and upgraded to larger aircraft when they could – even using the 717s which WN got rid of as part of the AirTran merger. The complete irony is that Delta is now removing those 717s – which still have the AirTran registrations – from Love Field as Delta grows at its own gate.
    All of the efforts by United and American to push Delta as a tenant and WN’s efforts to call Delta a squatter have failed because federal law requires that airport operators accommodate airlines that already serve an airport if the airport operator reworks the leases – which happened with WN’s massively expensive gate acquisition from UA.
    The city of Dallas failed at what it was supposed to do and it ultimately had to do what it was required to do – which is part of why they are paying part of the costs for Delta to get its own gate.

    As for tom’s statement, Delta has long had a revenue premium to the industry because of its greater ability to attract high value business traffic. AA and UA are improving their operational reliability because they know what drives Delta’s revenue premium. Delta, in turn, is growing its network in key competitive markets. They have said that the growth of their coastal hubs – which are much more competitive with AA and UA – are driving the growth of premium passengers across their network. and the Amex relationship – for whatever reason – still generates far more revenue for Delta than AA or UA get – and that has been and will continue to be one of the the key profit benefits for DL.
    They simply do not need to build their network around infrequent business or leisure passengers.

  14. 15% off the worst redemption rates in air travel. Great. Mystifies me anyone would put spend on a Delta card.

  15. @JRMW — it’s different because United shows expanded availability even for their free cards. You can open one and never touch it again.

    With that said, I agree that the hysteria here is overblown; it’s easy enough to think about this as a 15% miles discount for those willing to shell out $95 for a card. You still don’t have to use the card.

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