Why Delta’s Increased Mileage Prices for Awards are Good for Members of All Programs, Everywhere

Delta’s Untrustworthy and Frequent Changes to Award Pricing

I gave Delta a pretty hard time on Friday for announcing changes to their award chart effective immediately, for travel between February and May.

They had previously announced award chart changes for travel beginning in June. The clear implication at the time was that we could use the current award prices for travel until June. But they didn’t stick to that. And as is Delta’s practice they made the changes immediately, with no notice to their members.

I do not think Delta is honest about what customers can expect and I find absolutely zero credibility in their claim that they are legally precluded from providing their members with advance notice of changes. Other airlines do it. Delta has done it in the past (what’s more their SEC filings do not include self-reporting of legal violations..). And the Department of Transportation doesn’t regulate frequent flyer programs in any case.

But Where’s the “Revenue-Based” Frequent Flyer Program?

So I don’t trust the program one bit. Nonetheless, I think there’s some good news buried here.

In March 2012 a memo was leaked outlining Delta’s plans to fundamentally change their frequent flyer program to a revenue-based system. I understand from several sources that Delta management was up in arms over the leak, suggesting it was accurate. There were also job postings related to making these sorts of changes that were uncovered.

The plan, as I understand it from several sources, was:

  1. To replace points-earning based on miles flown with points based on money spent.
  2. To charge for award seats based on the price of tickets.

Development of the program was slow going. No doubt there were IT challenges. Points weren’t going to be worth a fixed amount. Instead, awards were going to be priced dynamically and sometimes points would be worth more and sometimes less.

Nonetheless, I thought they were about ready to pull the trigger back five or six months ago. There were nervous board members at Delta, but management was pushing for this and displaying confidence.

And yet.. it didn’t happen.

These Frequent Changes Suggest a Revenue-Based Program Isn’t Close

In August they announced an award price increase. Why increase your prices if you’re going to change your system right away. That was the first sign that things weren’t moving along the way they were expected to.

Then in September Delta renamed its current award levels. As I noted at the time, why do that if you’re on the verge of replacing your award redemption structure?

And now they’ve increased award prices for travel even prior to June. Again, that has to be Delta not on the verge of implementing their revenue-based changes to points-earning and redemption.

And that’s the good news here — that Delta miles, while worth less than those of their major competitors, aren’t about to become worth a whole lot less.

If Delta Doesn’t Pull the Trigger on Revenue-Based, Others May Not Either

And that’s good news even for folks who don’t accumulate Skymiles. If Delta doesn’t go first, if revenue-based earning and redemption doesn’t look ‘all the rage’ no matter what consultants selling it at conferences say, then perhaps other programs won’t take their own plunge. US Airways and Alaska have both been rumored to be considering it.

US Airways of course either is or is not merging with American, and that puts off any changes. Alaska has invested a ton in its partner online award booking. I didn’t expect either to go first. Alaska could have most easily followed (and remember both Alaska and US Airways followed Delta with three-tiered award charts for their own flights).

So another round of no-notice devaluations at Delta could mean no revenue-based program on the near-term horizon, and that’s good for members of all programs, everywhere.


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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Comments

  1. It is going to happen. To say we’re all lucky that it hasn’t happened yet so we should be thankful is damning with faint praise.

    Also, the part where they’ve shown a willingness to make changes with great frequency and without notice belies your suggestion that making a change now means they won’t make another one soon. Similarly, if the June changes were the “stay of execution” for revenue-based programs as you suggest then this latest change has no impact on that.

    On the plus side, decent word count in the story.

  2. Wishful thinking…again.

    I guess time will tell who is right again.

    My gut feeling is that they are not ready yet and are still working on it. We all know that IT can be challenging, especially with Delta lol.

    Or they are waiting for the US/AA merger dust to settle and let them take the “lead” in being the first legacy airline to do this.

    I say 2015 or 2016 at the latest.

    Your caviar is in danger 🙂

  3. @TravelBloggerBuzz – no danger to my caviar from a Delta devaluation! And did you know that even United’s award chart offers a 23% *reduction* in first class partner award prices for a key route (that I will post on tomorrow)? Some of the best first class experiences can even be had from United’s program!

  4. There is no good news from this DL devaluation.

    The increase in frequency of devaluations, the increase in the devaluations, and the decrease/elimination of advance notice is a warning sign — not a sign of hope.

  5. I thought that Delta’s FFP generated well over a billion dollars in revenue for the airline. At what point do they kill the goose that lays the golden eggs? Are “loyalty programs” dead in the post merger hub/route captive world?

  6. I would argue a revenue system is better for most people. Jetblue and Southwest have shown many advantages with things like award tickets on all flights that have available seats. It has benefits for the airline to reward people who are most valuable not those who arbitrarily fly more miles.

    Us junkies find ways to get outsized value from the system, which will most likely be harder/impossible to do in the new world. But at least the new world would likely be predictable. Many of the rules and restrictions are put in place to hurt us junkies, perhaps simplification has benefits. But I suppose the devil is in the details…

  7. Southwest recently demonstrated that revenue-based programs are not immune to devaluation. Southwest devalued its program effective just after its third birthday. We can hope that this was a one-time adjustment, but I doubt that.

    I hope DL and others don’t switch to revenue-based redemptions, because they will set new benchmarks for speed and severity of devaluation for revenue-based programs. Southwest won’t be able to resist following that lead.

    Incidentally, there comes a time when a program which cannot be gamed for thrills is welcome. It’s less stressful, like a warm marriage rather than a series of hot and cold relationships. You have to admit, we’ve seen a whole lot of cold lately.

  8. GUWonder is right.
    Warning signs that changes are a-coming soon everywhere.

    nsx
    When all miles are worth 1c each at most, then it is time to dust off the Fidelity 2% cash back and the Schwab 2% Visa card and save money. I am already there on my cards for everyday spend.
    The bonuses, (thanks to bloggers as well) will continue so they can get their referral credits. I will get bonuses when useful, but stay with cash back for most things.
    Most miles accumulation today is on cards. It will perhaps go back to days of flying for free miles and saving cash on cards.

    I look at opportunity cost a lot when evaluating offers. Even an SPG offer of 25k for 5k spend is actually costing you 100$ for 30k SPG points = 40k Airline miles for 100$ or about 0.25 cpm
    That is Pudding Guy territory without the hard work of clipping coupons.

    I was telling my friends, if they were going to spend 50k a year on cards, to do it on 10 cards each offering bonuses of 25k each for 5k spend, so they can get 300k points and not 50k by spending on 1 card. Loyalty gets you very little in cards. The opportunity cost of 50k is 1000$, better to get 3000$ min value from it than 500$ at 1 cpm reward that will soon be the new standard in redemptions.

  9. Re: “dusting off the 2% Schwab card” — it was buried (actually worse, turned into one of several BOA cards) several years ago. R.I.P. Sniff. …

  10. As much as we all hate your credit card shilling, we do appreciate some of your content and respect the fact that you have a full-time job. When the miles game is over, what will these other full-time bloggers do for work?????

  11. FF-

    The Schwab 2% Visa ended a couple of years ago. I believe it is now a FIA/B of A card with 1% cash back, and Schab is not involved.

  12. @noah

    That may be true for carriers with few or no partners that fly only a coach cabin within the United States. Gary is on record, and I tink the community accepts, that if your interest is in domestic coach travel, then a cash back card is the way to go. Revenue based award programs are pretty much the same thing.

    But the whole allure of the e ff programs for the major carriers is that you can get something that you could never afford on your own – the aspirational ticket. That still means something. And to kill that, well, that could be killing the golden goose. There is a lot of ancillary business driven from these programs that just goes away.

    Some people like to poo poo credit card users. But you know what? They are huge, and presumably profitable business. Airlines aren’t essentially giving away first tier elite status to mere credit card holders for no reason. To move away from these traditional models would greatly upset the banks. Would you even bother with the WN card if it wasn’t for the massive signup bonus? I sure wouldn’t.

  13. CC signup bonuses are only a one-shot deal unless the banks introduce new cards, or you cancel and wait 12 to 24 months to apply again. Is it just me, or are there fewer new cards than there used to be?

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