Yesterday MJ On Travel captured what many are speculating, including in the comments to my post about Delta removing award charts from its website.
I’m pretty sure I know what the Delta award chart of the future is going to look like.
The thing is, I don’t even care. I don’t think Delta hates me or doesn’t respect me. They’re an airline, not my wife. I just think they’ve moved on.
The idea many people expect is for Delta to go revenue-based on the redemption side, with one point earned equal to one cent in airfare like the Capital Ones of the world.
I do not see the problem with DL moving to a 1 Point = $0.01. With the revenue-based point earnings, it becomes like a variable-rate rebate program.
By variable-rate rebate program, I mean that you earn points based on 2 factors; how much you spend, and your elite tier. Redemptions are at a fixed rate of 1 Point = $0.01. So if for a given flight you have a 1% rebate if you are a basic member and an 11% rebate if you are a DM.
With current earning rates it would actually represent 5% – 11% back on spend depending on elite status.
I disagree. I do not see Delta implementing fixed value, fixing points as worth 1 cent each.
Revenue-based fixed value redemptions are common with low cost and limited service, limited route-network airlines like Southwest and JetBlue.
Take the Southwest program, even they don’t have a single fixed value for their points. Points are more valuable when redeemed for less expensive tickets, and less valuable for more expensive tickets.
This model works reasonably fine for domestic travel. But international travel starts to be beyond reach.
And airlines offering premium products overseas price those products way out of reach. A $5000 ticket becomes 500,000 miles (instead of the current 125,000 roundtrip to Europe, for instance). A 4x increase in the price of an award is almost unthinkable, even for Delta.
Partner awards are tougher to do revenue-based, and Delta has plenty of partners. Traditionally a limited number of seats are offered and only at the lowest mileage level. However I passed on some speculation last summer that Delta was working on a solution:
…they’ve apparently been renegotiating their contracts with partners – at least with joint business venture partners Air France and KLM – to give them access to any seat with points.
Delta would pay their partners a percentage of the lowest price for a ticket to their partners in exchange for any available seat, and the idea was they’d price the award accordingly. (For instance, I imagine a $2500 ticket might cost Delta $2000 and cost members 200,000 miles or likely materially more).
Still, I don’t expect fixed value per point. I understand some of the original technical challenges that delayed rollout of the revenue-based program were on pricing.
One cent a mile is relatively easy. Variable pricing, sometimes (often) lower than one cent per mile but that could be slightly more — dynamic pricing of awards without fixed value is harder. But I also think it’s more likely, because there’s been some interest at Delta for this in the past, and it’s consistent with a desire to simply tell members that the price is whatever they’re presented with rather than a simple statement like from JetBlue or Southwest about what a mile is worth and when.
Either way though there’s a lot of talk about Delta turning its frequent flyer program in to Southwest’s and JetBlue. JetBlue never even really wanted a program but started TrueBlue because they needed something. And Southwest points couldn’t be used for dream trips. And it’s plausible enough to many that the essences of both are what Delta is shooting for.
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