Delta is testing redemption of miles for airline fees. The more fees they charge, the more miles they can claw back from you!
[Delta President Glen] Hauenstein said: “People who fly us all year round on business and then they take their family to Hawaii and they want to stay an extra day and we charge them those $150 change fees — We want them to be able to pay with their miles.”
Reading this sentence it’s almost like he’s going to say “we charge them $150, that’s absurd.” But no, he says we’re going to charge the $150, we just allow payment in a foreign currency (SkyMiles) at a presumably terrible exchange rate.
Put another way, ‘we want to take away the sting of the change fees from people who think their SkyMiles aren’t real money and don’t think they’re worth much’. Hauenstein doesn’t want you to use your miles for free trips.
Delta’s goal is “to allow this to be a living currency” rather than to make SkyMiles a currency that can be leveraged for aspirational redemptions.
Delta has told us the future of SkyMiles is 1 cent per point in value — but only that much when you’re buying products from them.
- Delta wants you to redeem miles at a penny apiece for Stella Artois beer. Never mind that what they’re telling you is that beer that’s free in their clubs — the clubs whose membership prices they raised — isn’t as good as Stella Artois.
- They want you to redeem miles for Dom Perignon in the club, for a penny apiece against Delta’s inflated prices. A $140 bottle has a $250 sticker price and costs 25,000 miles. Make no mistake, that’s really less than 6/10ths of a cent per point.
- You may be able to spend miles for a haircut in the future.
The problem here, for Delta, is that if miles aren’t worth much — just a penny apiece — why use their co-brand credit card to earn 1 mile per dollar on most spend?
Delta may reduce costs by $50 million or even $100 million at a time with these changes, but reducing the income stream from their co-brand credit card deal would be a $200 million hit to the bottom line. There’s a limit to how far a program can devalue before it shoots itself in the foot.