Just as fuel surcharges are really marketing-speak for price increases (and see also this discussion), coupled with an end-run around corporate contracts and paying commissions (er, “overrides”), they are a price increase on award travel. Delta is saying that miles no longer pay for free travel. Delta now only offers “cash + points” awards for tickets.
You can no longer hold awards when booking by phone, plus Delta charges a telephone booking fee. They charge a partner award redemption fee. They charge a close-in ticketing fee. And non-elites flying domestic coach pay for checking baggage.
With all of these fixed fees, it makes less and less sense to redeem miles for coach travel. A frequent flyer can spend over $100 redeeming miles for a coach ticket that might cost only $300 – $400. But they’ll spend that same $100 redeeming for Air France business class from Los Angeles to Paris and beyond. Think of the cash cost of redemption as akin to transportation cost in the Alchian-Allen theorem.
[W]hen the prices of two substitute goods, such as high and low grades of the same product, are both increased by a fixed per-unit amount such as a transportation cost or a lump-sum tax, consumption will shift toward the higher-grade product. This is true because the added per-unit amount decreases the relative price of the higher-grade product.
I love it when economics reinforces my award redemption priors!
Oh, sure, there will be the occasional itinerary that’s especially expensive, where nothing is available upfront, where you have to travel with little flexibility and where a reasonably priced award ticket can be found. But on Delta that’s almost an impossibility, with their three-tiered award redemption structure designed to allow regular mileage redemption pricing only on flights that are otherwise-inexpensive. But glitches can happen, and I never say never with respect to redeeming Delta mileage for coach.
But my advice for those still collecting Skymiles: as long as Delta retains their partnership with Singapore Airlines, and until they raise the cost of such awards, the best use of Delta miles is premium class travel on Singapore.