Delta made a number of very revealing comments at today’s Investor Day. And I think their upsell plans, and vision for the future, paint very clearly the end of elite upgrades.
Elites Used to Get Better Treatment in Exchange for Giving an Airline Lots of Business
It used to be that 100,000 mile flyers found themselves in first class nearly all the time, and even mid-tier frequent flyers found themselves in first class most of the time.
Some still do have good upgrade success, it depends on the routes they fly — and when they fly them.
We’re Seeing a Perfect Storm Now Limiting Upgrade Success
There’s little question that upgrades are harder than they were 5 years ago and 10 years ago.
- Airlines are selling discounted first class fares far more than they ever used to.
- Airlines are making aggressive buy up offers to first class.
- The economy is doing better than it was (hey, the Federal Reserve even raised interest rates!)
- Airlines aren’t expanding as quickly as they used to. As air travel grows, and airlines ‘practice capacity discipline’, there’s more demand for a dwindling number of available upgrade seats.
- Lots of people confirm their upgrades in advance – in part because of all the miles that are out there, and in part because of how tough the competition is.
All of these things combine to depress your upgrade percentage.
A decade ago discounted first class fares were rare. People paid $2000+ for an airline ticket up front, or they got the upgrade for free with their coach ticket. Back then revenue first class was usually less than 10% of the cabin, although on some routes of course it was higher.
There was very little in-between. Now airlines are more aggressive in taking some incremental revenue for the seat instead of only offering first class at full fare. Lower prices mean more people outright buy them.
Not only are airlines selling the seats cheaper, they’re making it easier for people to buy them. Go to an airline website to buy your ticket and you’re likely to be prompted with the suggestion that it’s “only” a certain amount more for first class. When people don’t look for that cheap price, it’s suggested to them. Some say yes.
Didn’t buy first class? If there are seats left the airline may try to sell it to you in person. While airlines usually say they are trying to accommodate free elite upgrades before selling those first class seats for “tens of dollars” to non-status frequent flyers, it doesn’t always work out this way. United’s systems are notorious for the cheap buy up offers, sometimes made only to non-elites. But it’s not limited to United.
All of this is in the name of maximizing revenue. What was once given to frequent flyers for free is now something that airlines are extracting money from. It’s part of how they’ve turned unprofitable to profitable.
And whether paid, paid at a discount, or purchased at a deep discount last minute, the fact that people have more money these days — and that more people are traveling while the airlines have maintained capacity discipline — mean that there are more elites chasing a fixed or even declining number of seats for upgrade.
All of that leaves elites clamoring for extra legroom seating in back. Fortunately there are things you can do if you want to make sure your upgrade clears! Here’s How to Make Sure Your Free Upgrades Clear on Domestic Flights.
Things are Going to Get Worse for Elites Especially at Delta.
When United and Continental merged, Continental management expected to get rid of Economy Plus extra legroom seats. Continental didn’t have them. But a funny thing happened — they discovered they could sell those seats.
First class upsells have been on the upswing. When Delta began upselling into first class, only 11% of premium cabin passengers had paid something to be there. Since then:
- In 2011, 31% of domestic first class passengers have paid something to be there
- In 2012, 36% of domestic first class passengers have paid something to be there
- In 2013, 40% of domestic first class passengers have paid something to be there
- In 2014, 45% of domestic first class passengers have paid something to be there
- In 2015, 57% of domestic first class passengers have paid something to be there
In 2018 Delta expects to be up to 70%. And they expect to go from selling 36% of extra legroom coach seats to over 50% by that time.
- Delta Investor Day Presentation
Delta has made their extra legroom seats a separate booking class, which will help them to sell the seats and will also make life difficult for elites who can no longer select those seats during the booking process (they must first be ‘upgraded’) and who may get moved from an exit row aisle seat to a ‘Comfort+’ middle and be told it’s raining.
Not everyone will go as far, as fast, or as successfully as Delta. American has to get their extra legroom product into the legacy US Airways fleet before they’re able to sell it, of course. (So far they’ve only announced plans to do so in their Airbus A319s.)
Delta jedi mind tricks their members, and claims they’re just as happy — because they’re still sitting up front (only paying for it now instead of getting it as a loyalty benefit).
When it comes to loyalty, Hauenstein explained that “we do a Medallion Pulse survey, and we just got out November results yesterday. The pulse has been the highest it has been in 2.5 years. We have increased paid upgrades from 13% to 54%, and we have not disturbed the happiness of the medallions, and there is a trick. We look at who is purchasing the seat which appears to be the [Medallion fliers] who are being rewarded with more loyalty points.
Delta’s Chief Revenue Officer Glen Hauenstein sees the end of free upgrades, with everyone buying exactly what they get:
What we would like people to do in the next few years is to pick the airline and the product that works best for them.
So does that mean upgrade policies will change — for instance making upgrades simply to extra legroom seating rather than first class?
Travel Zork points out that analyst Jamie Baker asked this very question, and thinks it’s telling that there was no outright denial.
I disagree — any change in policy at that point is beside the point – though likely enough to follow, it would simply make de jure what will have become de facto. So at some level I think they have a direction they can see going, but decisions will ultimately depend on ‘facts on the ground’. But if things go the way Delta plans, then it certainly seems the end of first class upgrades are almost upon us at Delta.
How You Should Respond
It’s all well and good, each airline offers a value proposition and there’s nothing set in stone about that. Airlines that used to recognize and reward their best customers may choose a new strategy of viewing each transaction separately and giving you only and exactly what you pay for (if only you could hold airlines to those promises…).
But if that’s the case then there’s no reason to remain loyal. Loyalty programs should be loyal. And if they aren’t, there’s no reason for you to be. If it’s just about schedule and price from the airline’s perspective, so too from the consumer perspective.
And that’s the goose that will kill the golden egg of loyalty programs, which sell billions of dollars a year in miles to their partners at a very high margin.
Of course since not everyone else will be as operationally successful as Delta is today or as successful at upsells. So they will have a choice to make: the easy route of doing what Delta does and not going out on a limb or what’s probably best for their own businesses and generating business by recognizing and rewarding those customers who provide it. What is best for Delta may be best only for Delta. But as we have come to see, there are few bold movers in the industry willing to stake their own ground.
If there turn out to be any loyalty executives willing to stand athwart
history Delta yelling “Stop!” then they need to be rewarded with your business.