Delta CEO Ed Bastian admitted that his carrier went too far, too fast with its recently announced changes to the SkyMiles program and Sky Club lounge access, but stopped far short of saying that these changes were unreasonable or
Delta CEO: Modifications Coming To SkyMiles Program – “I think we moved too fast”
Appearing at the Rotary Club in Atlanta, Bastian was asked about the recent SkyMiles changes and provided a surprisingly straightforward answer:
- “We’re listening to the feedback. We’re reading the feedback…The feedback matters.”
- “We’re still assessing what we do, but there will be modifications that we will make and you’ll hear about it sometime over the next few weeks.”
- “We need to make certain that we can serve our higher tiers with a level of premium experience that you deserve. And it’s got to the point, honestly, where we have so much demand for our premium products and services that are far in excess of our ability to serve it effectively.”
- “In terms of our assets, whether it’s Delta One, whether it’s the Sky Clubs, whether it’s the upgrade certificate, whatever it is, we have grown that population. COVID almost doubled the amount of Diamonds.”
- “No question, we probably went too far in doing that. Our team wanted to kind of rip the band-aid off, and didn’t want to have to go through this every year. I think we moved too fast. We’re looking at it now.”
(video on this matter starts at 29:10)
There are several takeaways from his conversation.
First, Bastian suggests that the problem was not the changes themselves, but how quickly and draconian they were implemented. I think he gets this wrong, but hold that thought.
Second, he suggests that the number of Delta Diamonds has doubled since 2019. I strongly question that. The days of status extensions are over and I do not think 2021 numbers accurately convey the field today.
Third, Bastian states that Delta has so much demand for its premium products (lounges and premium cabin seating) that it cannot serve that demand adequately. But this has nothing to do with too many elites! Rather, it is linked to Delta’s pricing modifications that effectively sell out the vast majority of premium cabin seats and its relationship with American Express which have inflated the ranks of those who have lounge access.
Finally, it is not clear what “modifications” will be made over the “next few weeks” but I think such changes will be made in concert with American Express in an attempt to stop more cardmembers from canceling or downgrading their Delta co-branded credit cards. I’ve heard from so many of you who have let American Express, Delta’s best customer, know loud and clear that the changes are unacceptable.
Biggest Problem Remains: SkyMiles Program Is Not Valuable
Whatever Delta may roll back, there remains a fundamental problem: the program is simply not valuable and Bastian seems oblivious to this. If earning top-tier elite status requires flying in premium cabins, then most benefits of elite status are already accrued on the flying side without needing elite status. On the loyalty side, particularly as it pertains to redemptions, Delta continues to show a hostile disregard for giving members any value as evidenced by its decision yesterday to devalue awards from Mexico.
And while Delta may slightly edge out Alaska, American, and United in terms of operational performance, all are within striking distance and the notion that Delta’s superior operational performance greatly reduces the need to offer a compelling loyalty program is foolishness…especially when we are talking about encouraging people to place at least $75,000 worth of annual spending on a Delta credit card.
Bastian says, “We need to make certain that we can serve our higher tiers with a level of premium experience that you deserve,” but Diamonds are not getting upgrades because Delta is selling those seats…upgrades are nonexistent on many routes and Delta’s algorithmic monetization of Delta One and domestic first class will not change.
Was This The Plan Along?
Some have suggested that this was the plan all along…rip the bandage off, but then put a smaller one back on, thereby showing Delta listens to customers and is empathetic.
While I would put nothing past Delta, I do not think that is the case. Instead, I think Delta unexpectedly lost a great deal of trust among not only its loyal flyers, but its valuable flyers. Furthermore, I think Delta heard loud and clear from American Express that cardmembers were downgrading their cards or closing their accounts.
The program changes as they stand now is the program Delta wants. It may take a bit longer to get there due to consumer backlash and competitive pressures, but we see the ultimate goal, which is to create the sort of loyalty program we see in countries without much competition, like Qantas in Australia. I’m not sure that will work in the United States…
The Delta CEO has promised to “modify” some changes to the SkyMiles program that went “too far” but stopped well short of saying Delta has had a change of heart concerning its long-term goals for SkyMiles. In the coming weeks, we can expect some changes to be rolled back, but it is not clear what those will be. In the long term, Delta sees these cutbacks as necessary to create a “premium experience” for those who hold top-tier elite status, at least according to Bastian.