More ink has been spilled over the major Delta SkyMiles devaluation this week and just how crazy it is. Perhaps it’s not crazy at all.
Devaluing The Least Valuable Program
Traditionally, Delta’s currency has been one of the least valuable to hold for redemptions earning it the nickname: SkyPesos.
But that’s really not fair to Mexico, especially since its currency is fairly strong at the moment and hasn’t devalued to the same degree or even close.
I shopped for flights for a client who held Diamond Medallion status via his spend on his Delta SkyMiles American Express card ($250,000/year or more.) A pair of business class tickets from Denver to Bangkok during off-peak periods would set them back 675,000 SkyMiles – each. After years of building up a balance, Delta wanted 1.35 million points to offset about $16,000 in tickets. For comparison sake, United priced the same pair of awards at 320,000 miles, American a little less.
There is always value to be found in the SkyMiles program for those who seek it, but for the average SkyMiles member, that horse has long left the barn.
This week they removed perks from its credit cards, limiting lounge access, and doubling requirements for top-tier Diamond elites. Oh, and it also eliminated flying from being a qualification for Delta’s frequent flyer program. American made a switch to financial-only qualification earlier in the year, United is suspected to do the same; Spirit did it but better than either entrant so far.
Backlash From Competitors, Customers
Hyatt Hotels and American Airlines have operated a reciprocity program for a few years now and sometimes grant challenges or status matches to the equivalent in the opposite program. They offered just reciprocity challenges with instant status for Hyatt elites on American Airlines just this week. Coincidental timing? Maybe, but probably not.
Some consumers outside of our points, miles, and status bubble (The Hobby) have taken to X to denounce the brand, display intentions to switch to another brand, and cut up their credit cards.
Inside our bubble, the slightest change in a perk is cause for a flurry of posts, pronouncements, and shunning. The truth is, most of the general public, the tens of millions (in the case of American, more than 100 million) loyalty program members don’t even notice the difference.
This is different.
Customers who put every charge on a Delta credit card might have dismissed skyrocketing redemption rates over the last couple of years because revenge travel has been crazy. Stories on the news tell of packed planes, and full hotels at all-time peak levels. They will have noticed the line to get into the lounge too, but can dismiss it for the same reasons. But when their $500+ credit card membership no longer gets them in at all after 10 visits, they will wake up.
When those same consumers no longer reach the elite tier level they used to and don’t get the early boarding or occasional upgrades – they will question all of it. What’s the point in striving to earn miles that are mostly worthless, especially if they bother to shop around?
Is Delta Crazy or Crazy Like A Fox?
Some of these changes could be Delta’s hubris that the current trend of packed flights and record quarters will continue indefinitely.
There’s a line from the 2011 movie, Margin Call, that might address some of this. It seems obvious to me, market economists, and many in the travel trade that revenge travel is slowing some – it has to. But the music is slowing.
Delta’s actions this week suggest that it doesn’t see the music stopping at all. The band will play on and on and on at the same volume it has been before.
Maybe they are right.
The truth is, Delta flyers are some of the most loyal but partially because the airline has been run well, and partly because they are hub captive in a way that industry peers haven’t been able to achieve. American and Delta both have strong presences in Boston, but American splits Chicago with United at O’Hare and Southwest at Midway (the nation’s largest domestic carrier.) United splits traffic with Southwest in Houston, American with Southwest in Dallas, United with American and Southwest across the NOVA/Washington DC/Baltimore market. Spirit, Southwest, and Frontier dominate Las Vegas, Phoenix is split between Southwest and American.
Atlanta is the busiest airport in the world by passenger volume and nobody can touch Delta there, or in Minneapolis for that matter. Maybe the inconvenience of taking a connection is still enough to keep flyers from leaving. It makes sense. SkyTeam is far and away the inferior alliance compared to Star Alliance and oneworld. Customers haven’t left over their miles becoming so uncompetitive that it’s laughable. Customers haven’t left overcrowded clubs, and limited acceptance of its American Express cards. Customers didn’t leave when Delta added a revenue requirement before other airlines, they didn’t leave when that requirement was 25% more than its nearest competitor, why would they leave now?
All of these changes have reached crazy levels. Airlines that have to compete in their primary markets can’t get away with making their mileage redemptions worthless or their elite levels absurdly high – Delta requires twice the amount United and American do. Twice.
But if the customers don’t leave – and they really might not – then Delta isn’t crazy, it’s crazy like a fox.
Some have said they will delete the Fly Delta app, cancel their Delta vacation packages, cut up their cards, and match to another program that appreciates them. It’s possible, that they are mad and when the rubber meets the tarmac they don’t, in fact, leave. Delta comes out with richer benefits for its most premium members, encourages some at the margin to spend even more, and doesn’t lose meaningful customers. Meanwhile, the other airlines will eventually raise their requirements too, but Delta comes out as the leader. Perhaps it’s a cynical view, but the very fact that Delta’s SkyJoke program is still making a billion dollars a year from American Express is a testament that my view, though cynical, aligns with reality, or at least recent history.
What do you think? Will customers ever punish Delta for any of the myriad gashes to its loyalty program?