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Dueling Opinions on Delta’s Rewards Program Shake-Up

We are on our way. Even though I did not have a window seat, I could see outside quite well. A Delta Air Lines Boeing 747-400 at Narita can be seen.

Delta Boeing 747-400 tail seen from a Dreamliner – Photo: David Parker Brown

THE DETAILS

This week, Delta Air Lines announced a major change to their Skymiles frequent flier program, while many in the industry speculated was coming. The changes to the Skymiles program will see an end to their current (and, some would say, traditional) points earning process, to now be a revenue-based model.

Similar to airlines like Jetblue, Southwest, or Virgin America, it no longer comes down to how far you fly, but rather how much you spend.

As of January 2015, Delta will move from a “1 mile flown = 1 point earned” model, to a new revenue-based system where for every dollar you spend on your airfare you will receive 5 points (though they are still using the term “mile” for some reason). As with the current program, the higher your elite status, the more miles you get as a reward. By using a co-branded Delta credit card, you can earn yourself a few extra points as well.

But we wanted to share our opinions from both the perspective of a miles and points junkie (Mal) and someone who doesn’t really care about miles (David).

The new Delta Skymiles "Mileage Earning" table showing how many "Miles" you will earn for every dollar you spend - Image: Delta

The new Delta Skymiles “Mileage Earning” table showing how many “Miles” you will earn for every dollar you spend – Image: Delta

Without delving to deep going into analytical data of the changes (for that, we suggest you check out some of the blogs as they are better qualified to make those assessments), we want look at it from two opinions, that of the mileage junkie (Mal) and someone who could generally care less about miles (David).

APATHETIC MILEAGE EARNER: DAVID PARKER BROWN

I like the idea of airline miles, but I do not go crazy over them, nor do I have many. I enjoy earning miles, but I just don’t go out of my way to do so. Many people are surprised to find that even with all my flying, I have no status with any airline. Yes, I get to fly around the world, but it is almost all non-rev, which means I cannot earn miles. I am okay with it, but it means miles have a lesser priority in my life.

I have rewards cards, but they give me cash back (which I then spend on travel). I know I probably should care more about miles, but I have just been lazy about it. Always on the to-do list. In the back of my head I have always thought that all the mileage games were a bit like cheating. The people who actually fly should be rewarded more than those who play the system. Now, I am not judging here, just I decided not to take part in the games.

It seems that airlines are starting to agree with my thoughts. Delta’s move is big. Sure, other airlines have already taken similar steps, but not the world’s second-largest airline. I see this move by Delta to likely represent the new industry standard.

With it being so easy for anyone with some time and motivation to earn miles, does that not then de-value those miles and the status. I hear so many passengers complain that they never are able to get upgrades because there is a list a mile long.

I think this is an effort for airlines to increase revenue (they are for-profit businesses, remember) and reward those passengers who they actually make money on. Why should an airline reward people who have found loopholes, such as taking advantage to discounted mileage runs? It’s logical to reward those who help your bottom line. To me this just makes sense and I am surprised it hasn’t happened sooner.

The First Class seat may make mileage running a little bit more comfortable - Photo: Mal Muir | AirlineReporter.com

Will it be more difficult, or easier, to get upgrades with Delta’s new plan?

MILE MASTER & LOVER: MAL MUIR

The new Delta revenue-based program is not a good thing for the mileage junkie. Gone are the days where you could pick up a dirt cheap fare, extract as many miles out of it as possible, and use it to get some pretty decent points out of it. Although Delta has copped some flack in recent times over just how tough their program can be to redeem points (some mileage junkies call them “Sky Pesos”), they have had a number of sweet spots where they are the leader in being able to earn points.

Delta was the first of the legacy airlines to add a spending requirement to their elite status requirements, and that made sense. Delta wanted to make sure that they were not only rewarding those who flew a lot, but also those who were spending a lot. No longer could you use those cheap/mistake fares to make elite status. Some people think they are going from airline loyalty to airline disloyalty. I am not so sure about that.

Earning five points per dollar spent kind of makes it easier for you to know exactly how much you are going to get from the start. What isn’t quite evident is if the value is still going to be there for passengers. In the past you knew, no matter how much you spent, that if your award was 25,000 points, you needed to earn 25,000 miles (be it from spend or from flying itself).

Now if your award is 25,000 points, you need to spend in the worst case scenario $5000. This is definitely a devaluation, but that depends on the type of flyer you are. If you fly regularly on full fare tickets, purchased by your company, this probably won’t affect you all too much, but for the individual flyer this is a huge change.

Although in the same announcement Delta said they would be adding one-way awards (they currently don’t offer them, though you can book them and you end up paying the same round-trip price). But will that be enough of an incentive to keep flyers in the program?

For a flyer like me, at the moment, I can credit Delta flying to other programs, like Alaska (though who knows how long that will last), Virgin Australia, or other Skyteam partners (Korean, KLM/Air France) but in the short term things don’t change. As of January, though, this might all be a different story. 

Since the new program comes into affect with other changes (like new tiers for redemption, though they haven’t yet been released) it is still a long way off to see if this is going to be an overall downside or just a new way forward. If the system works for other airlines, I can’t see it not working for Delta.

People are going to scream loudly over this, and they will walk to other airlines, but it won’t change where I put my miles… yet.  Plus, it can’t be long until other airlines follow suit.

NOW YOU

In the comments, we would love for you to share your thoughts. Is this the right move? Will others follow? Would this make you look at changing your alliance?

9 comments to Dueling Opinions on Delta’s Rewards Program Shake-Up

  • Carl

    I think Delta’s change is a bad move for the vast majority of travelers.

    It has nothing to do with being a mileage junkie or finding loopholes. The majority of travelers, whether leisure or business, select the lowest logical fare. They are neither gaming the system nor flying on full fare tickets. They will be earning less than half as many miles as before on average. Only if they fly on very short trips or very high fares do they have a chance of earning the same amount.

    I’ve done the analysis and on a transcontinental trip, you’ll need to purchase $1000 round trip fares to break even. The vast majority of travelers don’t purchase such fares, and they will be earning far fewer miles. And if business travelers purchase more expensive tickets as a result, they are stealing from their employers. Most won’t do that. And the airlines don’t need to give extra rebates to high passengers – those passengers are not buying those fares for the miles, they are buying them because the flight is sold out (or close) or the airline has a monopoly or duopoly on that route.

    This change a bad development for virtually every traveler. The few rewarded don’t need the extra reward, any who change their behavior are stealing, and everyone else gets less than before.

    Oh, and showing the credit card miles in the chart is totally duplicitous – since those are earned today in addition to the miles. So anyone who thinks that the 2 credit card miles should be used in comparing the two systems is overlooking the fact that they can already earn 2 miles/dollar with the credit card, and get full miles-based miles on top of that.

    • Jon

      Based on your statements, I fail to see how this is a bad move.

      You state that everyone buys tickets based solely on fair, lowest price wins. Honestly, I do not believe that is remotely true statement. There are companies that only book a certain airline regardless of price. I’ve worked for one.

      But let’s assume you’re correct. Then rewards are irrelevant. And they will book their flight on the cheapest, with no loyalty. So why reward fliers for loyalty if they were only responding to a price?

      Now, for those who continually spend money with one particular airline, being its core patron, then yes, they should be rewarded. Unfortunately, these rewards have been handed out to every flier who bothered to sign up for anything. And now, they’re watered down. The perks, which were intended to be a reward, became an attempt to attract business and handed out like escort ads in Vegas. You end up with half the plane of fliers, loyal or not, eligible for the same perks as someone who spends a lot of money with the same airline.
      This includes boarding priority, which Delta boards its medallion members first, and half the plane gets in line when called. Now, sure, maybe boarding by rewards points seems like a bad idea, but it’s only bad if you’ve handed out those vip passes to everyone in line for the bathroom.

      All said and done, those who fly long distances on a cheap fair are not necessarily those who keep the business going, nor do they deserve the rewards. It’s those who spend the money, even if it was the cheaper fair.

  • Len

    “dualing?” Come on guys! You know better! It’s DUELING.

  • Amol (@PointsToPointB)

    A couple things responding to DPB:

    “The people who actually fly should be rewarded more than those who play the system. Now, I am not judging here, just I decided not to take part in the games.”

    The revenue system HURTS people who fly (fewer miles earned for most travelers) and keeps the status quo for the gamers (credit cards still earn the same amount.

    “With it being so easy for anyone with some time and motivation to earn miles, does that not then de-value those miles and the status. I hear so many passengers complain that they never are able to get upgrades because there is a list a mile long.”

    The announced changes don’t affect elite status. You still need to fly the miles to earn the status. Which is what makes this change so confusing for many.

    Lastly, airlines DO make money on cheaper fares. Most of the time, it’s those passengers in economy that push a particular flight out of the black and into a slight profit.

  • I’d say this hurts the traveller, but we won’t know until we know whether airlines will change the required number of miles to earn an award flight or, like Mal said, whether one-way award flights will be available. I know enough to know there are many arrangements airlines can dream up, more than I can think of. After a cursory look, it seems the long-range flights will almost definitely have a lesser benefit: I follow the Buy 3 Get 1 Free plan with flights to China from the USA on United or its partners. It’s typically 65,000 miles roundtrip at about 20,000 miles per trip + ticket fares paid with the United credit card at about $1,500 apiece. With the revenue program, it seems to be Buy 6 Get 1 Free if I buy the ticket with the Delta credit card. So, they’d have to dramatically decrease miles required. For shorter flights and high-traffic, low-cost, long flights (JFK-LA, JFK-London, etc), it might make little difference for the demographic that makes plans based on eventually having enough miles for a free flight.

    This seems to also reduce losses to the competition when you buy a United flight with a Delta card and pay all your bills with a Delta card, continuing to pay United and get your free flights on Delta. Now, you can probably still do that with the Delta card, and it might become easier if they decrease the required miles for long flights because it’s so much harder to get a free flight so that passengers with just enough patience before won’t have enough now and will instead go elsewhere, but when other airlines follow suit, they’ll most certainly reduce award requirements for the competitive edge. Delta will be seen the beast that started the battle, and other airlines will look like the heroes that fixed the mess they made.

    Isn’t that Delta’s history anyway? They were one of the first, if not the first, to make the big merger. Now, the other airlines are doing it to make things even. So, they’re first in trying to control pricing through route competition, and now they’re first in trying to control award travel, which is another way is to raise the average price.

    Those who make big changes are very much noticed, but history shows first-movers don’t usually last, while those who differentiate after the fact as the second or third mover usually stick around for a while. Delta will either win big or lose big, but the ones who fall in the middle will probably benefit the most.

  • spike

    I buy the lowest fare becouse that is how the company wants it. Flown almost 2 million miles with Delta alone. Been a pretty good customer. Now will shop around.

  • Delta Platinum Medallion

    I wanted to address the comment about people who “game the system” by taking mileage runs. The fact of the matter is that even those people are good for the airline and Delta will be alienating them. An empty seat on a flight earns the airline $0. So other than the marginal cost of the extra fuel to carry the weight of a passenger, any additional revenue is preferable to an empty seat.

    I fly frequently for business and pleasure and have been a loyal Delta flier for 20 years. I typically pay a premium of up to 15% more (my Fortune 500 company’s limit) to fly Delta or a Delta codeshare. However this drastic change has me searching for a new place devote my loyalty (American Airlines maybe?).

    While this plan could help very frequent/ high cost travelers, this is a significant downgrade for about 80% of the ELITE level fliers. And And I really doubt that cost savings from the award reduction is going to offset the loss of loyalty from the majority of the Medallion level fliers.

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