Delta Air Lines hosted the Freddie Awards at its Flight Museum in Atlanta last week and extended an invitation to a handful of aviation bloggers for a reception the night before (also hosted by Gogo) at Volare Bistro in Haperville, just down the road from ATL.
Sandeep Dube, Vice President of Skymiles, was at the event but the star of my evening was Karen Zachary, the Managing Director of SkyMiles Global Program Development. I cannot tell you what the food at Volare was like, for I spent more than two hours talking to her and came away with a much greater respect for what Delta is doing while at the same time somber pessimism for the future of our beloved airline loyalty programs.
Zachary has decades of industry experience in a variety of roles. She spent 25 years at Continental Airlines before coming to Delta in 2008 in Network Planning. In 2010, she became Director of Latin America Pricing & Revenue Management before becoming Director of SkyMiles International Partnerships in 2012. Last April, she assumed her current position.
Working in operations, revenue management, and alliance partnerships has given her a unique perspective on managing SkyMiles and she has played an instrumental role in all of the changes that we love…and the ones we hate.
What I loved about talking to Zachary was her candor and her oft brutal honesty. No, I do not have an inside scoop of when Skymiles may be going to a purely revenue based redemption model, but Delta does not either…and that date may never occur, though I continue to believe we must prepare for it.
Delta will continue to be an industry innovator and Delta will do whatever it feels is best to bolster its bottom line. With the best product in the sky (at least among U.S. carriers), it has the luxury of not holding on to an unnecessarily generous loyalty scheme and it will dynamically engage in cost-benefit analyses that will drive any changes to loyalty. That was the message and not a very surprising message either.
But what was surprising was the sober-minded clarity in which it was communicated. Delta is not looking to cut back wherever it can for a few dollars here and a few dollars there — it is seeking to create the most efficient and profitable airline, of which its loyalty program is but one component. That may entail adding more benefits or it may entail further cutbacks. It will certainly mean rewarding high spenders more and budget travelers less. And I take Zachary at her word when she says that the point is not simply to scale back benefits.
What a refreshing contrast to the doublespeak coming from other loyalty programs — the garbage about “creating the BEST program for our members” or “great new ENHANCEMENTS” when they are devaluing award charts and chipping away at benefits. I would never call SkyMiles a consumer-friendly loyalty program, but I do not expect it to hide mountains of bad news behind molehills of good news.
Make no mistake: there was nothing comforting about the conversation. Even without specifics, it is abundantly clear that loyalty programs are on track to become stingier in the months and years ahead. With reduced competition and good economic times, the impetus for generous loyalty programs is eliminated and even as America’s legacy carriers remain wed to the credit card companies who buy their points, their interests–even in cutting back–may actually be mutual. That does not bode well for Award Expert, but I never expected that company to be viable for more than the next handful of years in its current form.
There were no apologies for the removal of Skymiles award charts but there was an apology for the website glitches that are causing awards to misprice. I think Zachary is filled with integrity — I came away convinced that Delta is not deliberately ripping off consumers through the website errors in the story below but that the new mentality is that “award charts are so 1980s” and that more dynamic pricing, even if not purely revenue-based lies in the future.
> Read More: Delta Defiantly Removes Online Skymiles Award Charts
> Read More: How to Outsmart Delta’s Broken Website and Save Miles
Why the relegation of Korean Air to virtually pariah status (i.e. no mileage earnings)? “Because it made sense to do so.” Why the elimination of stopovers on awards? “Because it cost too much.” What refreshing candor.
I call Zachary the “Most Powerful Woman in the Airline Loyalty Business” in my title for a reason. When Delta acts, others follow — has that not been the constant story of United Airlines? Flush with cash and frankly having no need for a loyalty program (that is my opinion – not one expressed by Zachary or anyone at Delta) it is inevitable that we will see further cutbacks from the “good old days” when airlines had to court flyers through generous loyalty benefits.
It is surprising to me that Delta does not run on its record even more. It has a great fleet, a great group of pilots and friendly FAs and ground staff, great operational reliability, great equipment, a great route map, great partners, great service, and great onboard amenities. Unlike United and American, I really do believe it could survive — and even thrive — with no loyalty program. The thing is — and a saving grace for us price-savvy consumers — is that loyalty programs are still quite profitable and severing that deal with American Express is probably not worth the benefits that would be forfeited.
The great mystery to me continues to be why airlines reward spending (mostly to corporate flyers who are stuck flying their respective airline anyway) rather than discretionary flyers at the margin who will spend a bit extra to be loyal to one airline and fill seats that would otherwise go empty but have no incentive when their frequent loyalty and frugalness translates to no recognizable elite benefit. But I can only conceptualize this from a theoretical construct – not based upon looking at raw loyalty/spending numbers. The trend of rewarding “loyalty” based on spending will squeeze me and many others out of the game for now, but we must accept this reality and learn to adapt to it.
Zachary was a breath of fresh air — earnest, charming, and scary…in a good way. She is the most powerful woman in the airline loyalty business and as Delta rolls out more changes to Skymiles and others follow, you can give her credit for being one of the great innovators.
Our selfie. Karen Zachary, center, with Ben from One Mile at a Time
“The great mystery to me continues to be why airlines reward spending (mostly to corporate flyers who are stuck flying their respective airline anyway) rather than discretionary flyers at the margin who will spend a bit extra to be loyal to one airline and fill seats that would otherwise go empty but have no incentive when their frequent loyalty and frugalness translates to no recognizable elite benefit.”
I think the simple answer is, the numbers just don’t add up. I am currently the poster boy for a discretionary flyer at the margin – zero work travel, but enough flexibility and means to travel several times a year for pleasure. I did the math the other day and found that through personal travel currently scheduled for the year, I will accrue roughly 20,000 EQMs on American. However, even though I am flying several segments as an actual revenue passenger in a premium cabin, AA will receive roughly $5,400 from me. And since I have zero chance at flying enough to gain status based on personal travel, I’m highly unlikely to do something like move up to a higher fare class for more EQMs or the chance at an upgrade. That makes me worth very little to the airlines, The corporate traveler who is forced to use AA at $300 a pop for 75 round-trips will lap me nearly four times, even before actions like booking a higher fare for more miles.
I get why the airlines don’t care. But then they shouldn’t act surprised when people like me choose not to be loyal to a single carrier.
Oh come on! Delta is not that good, is that the others are bad. It’s way to clear that Delta is using a lot more marketing, but that only fools some. All those devaluations they tried to sell like enhancements, “Delta One”, Middle East carriers are evil, etc. They can put lipstick but…. Look at some trends that are coming: ULCC growth in ATL, ME3 competition, AA competing more aggressively. Hope Delta enjoys their 15 minutes of fame.
The thought that any American legacy carrier will discontinue their frequent flyer program is purely supposition. Even though competition between the carriers is much less than it was 10 years ago, the frequent flyer programs give each carrier different advantages. Delta will play this card just like any other business. You think, you received new info, actually not. The changes Delta made Jan. 1, haven’t been fully absorbed. Even Delta will not know exactly what the outcome will be until after Jan. 1, 2016. Some time in the first quarter of 2016, the effects will be known and Delta will make the necessary changes. Delta has been know, for over 20 years, as the “double connection” carrier. That hasn’t changed one bit! ATL is their only hub that creates envy with other carriers. JFK is a pitiful mess. MSP, DTW, and SLC are connection hubs with much less origination traffic. Yes Delta has more hub captive passengers than American or United. But because of hub captives and double connections, Delta, during the Great Recession had to discount more than American and United. I would take anything stated by execs of these frequent flyer programs to you, as info being specifically released for you to repeat. The “award charts are so 80s” to me, is an insult and I would have called her out for saying that! That is a really dumb statement to make. But, look at person making the statement and that says it all!
You should have asked her about the decision to cap Membership Rewards transfers to Delta.
Sorry, no. Delta does not have “the best product in the sky” even among US carriers. That would be JetBlue or Virgin America.
Saying that the Korean changes were “because it made sense to do so” is not an answer, but at least it is better than blaming it on Korean like they tried previously.
Which Delta partners are “great”? Korean is nice but with the way Delta treats them they are less attractive for Delta flyers. Virgin Australia. maybe? Otherwise their partners are pretty weak when compared to the other legacies or Alaska.
Great story and insights..keep up the good work!
@STVR: I did. Her answer was to the effect of “Glad we worked that out.”
I find Zachary’s answers evasive and false: Korean – “Because it made sense to do so.” Non-answer, essentially “We did it because we wanted to”. No more stopovers – “Because it cost too much.” Nonsense, stopovers cost them the same as connecting flights.
Matthew, I’m afraid this woman charmed you (power fetish?) enough so that you gulped her cool-aid and are repeating Delta’s marketing nonsense (“best product in the sky”, “will continue to be an industry innovator”) like you really believe it… Does she master mind-control?
@Sam B: I just fly AA and UA too much to deny that DL has a more consistent in-flight experience! 😉
Stopovers don’t cost the same when they now can collect miles for two awards instead of ones.
You have to understand that nothing she said made me feel warm and fuzzy — I just appreciated her honesty: there was no lip service like we get from SR at American. No sugar coating. That I appreciated.
Good article! Thank you for sharing your thoughts on the event and your meetup with Karen. I fly Delta a lot and similar to other commenters, I travel 100% pleasure (or at least on my own dime) so the revenue based earning does not apply to me. The whole award chart issue never really bothered me since the only time I ever looked at award charts was for redeeming AAdvantage miles for CX and EY. Why? Because I couldn’t do it online. I used to be a CO premier plat and UA 1K and rarely ever looked at the UA award chart because overall the UA award search tool was comprehensive. If DL continues to improve its award search booking tool, then I, too, think it doesn’t need an award chart anymore.
Mathew, time to put down food and work out to lose weights.
Ouch!
The reason that Delta rewards spending is because of flyers like me – 207 segments in 2014,Diamond by May of each year, using CONCUR or a similar corporate travel program. The change rewards those of us who can figure out how to schedule our loyalty – I.e. Choose times that favor our preferred carrier. Delta is rigorous in its administration of SKYMILES, and gives nobody – not even 360 Diamond flyers consideration when they need it. I am tired of their dogmatic BS
I know this is a date post but noteworthy comment – Karen should lead this program – Dube is a dupe. Takes credit where it is not du(pe)e