Delta is changing the way travelers will earn points in its SkyMiles program next year. The news came out yesterday and, not surprisingly, there was a combination of outrage, confusion and misinformation. Both ABC and NBC carried the story on their 6pm broadcasts and CNNi did a segment with it as well. Some “experts” have decried it as anti-consumer while others have suggested that it is groundbreaking.
It is neither.
Delta is, at best, the sixth airline to implement a program where the points earnt for flights are based on dollars spent rather than distance flown. Nothing about this policy is groundbreaking at all. They are the largest airline to choose this approach, but definitely not the first. And Southwest isn’t all that much smaller; in some metrics they are actually larger.
So Delta isn’t actually doing anything especially new here. But it is different from what they were doing. Is that necessarily bad? Unfortunately we don’t have enough details to say for certain. For many customers and for many flights the earnings will be lower under the new program. In other cases the earnings will be higher. Delta is very clearly tying the reward value they give customers to the value those customers present to the airline. They (along with pretty much every other US carrier) have been moving in this direction for several years now and the fact that they’re more or less there now is surprising only in that they finally wrote up the plan and built the systems to process it, not that they wanted to be there.
Some passengers – particularly in the low-cost, leisure segment – will earn fewer miles as a result of these changes. Some business travelers will be affected as well. But given the relative weakness of the SkyMiles program over the past few years it seems unlikely that this change will drive customers away in the broader travel world. Yes, the mileage runners are losing out here but this is not the first time Delta has done things to discourage those customers and it probably won’t be the last. And those customers are still playing the SkyMiles game.
Another (likely larger) aspect at play is the credit card factor. Delta and American Express have a nice, cozy relationship and AmEx provides a lot of revenue to Delta. And they still will continue to do so. With CC-based points earning being such a large component of the “game” these days it seems quite unlikely that much of anything is changing for the most aggressive arbitrage players. They likely weren’t earning the bulk of their points via flying anyways so the game stays very close to the same as it was before.
The big unknown today is what the award charts will look like. Delta has promised five tiers (up from the current three), one-way awards, cash+points redemption and “more Award Seats available at the lowest redemption levels.” We’ll see what comes to pass with each of these promises but without that half of the data it is impossible to know for certain what the impact of these changes are. It is entirely possible that premium cabin long-haul awards will be priced out of the market, making them inaccessible to most customers. That would suck. But it is also not a guaranteed outcome from these changes. We simply don’t know yet.
I believe Delta made a significant mistake in the way they rolled out this change, particularly by only sharing part of the data rather than having the full story ready to go. That uncertainty and confusion is causing far more trouble than the changes alone would have.
As it stands today the highest revenue customers appear to mostly benefit from the earnings changes. Credit card-focused earners appear to potentially benefit from the changes (via one-way awards and theoretically more low-level space, pending details showing up). And the people buying the lower fare options are likely doing so because the other factors, namely price and schedule, are best for their needs. They were likely to fly Delta anyways given those circumstances.
So, yes, this is a big change. But is is one where we still don’t have all the data so jumping to conclusions seems a bad choice. The game will continue to be played and those who want to be involved will remain so, finding the arbitrage opportunities and exploiting them where possible.
Or, as a good friend commented to me yesterday, “This is like a nuke on an already bombed city.” Once the overall structure has changed so much even a “massive” change such as this one doesn’t really have all that much impact.
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