Delta announced requirements for its SkyMiles loyalty program elite levels would increase by 50-100% but after backlash reduced those adjustments to 25-67% increases. That’s not going to be good enough.
Delta Announces Big Changes In September, Reduces A Month Later
Ed Bastian and co. in Atlanta have a very high opinion of Medallion Status and the SkyMiles program more broadly. Too high, like 50-100% too high.
That requires some qualification.
Delta (and the other network carriers) have more or less captured the available elites they can. With few exceptions, traveling executives (those most likely to hit meaningful elite status levels) from Houston or Dallas are unlikely to trade non-stops for one-stop service in Atlanta, or Minneapolis, or anywhere.
There are some hubs where Delta might be able to steal some elites, notably New York, Seattle, and Los Angeles, but that’s about it. Two areas of growth remain: infrequent flyers and new flyers. American Airlines highlighted that it has seen great growth from infrequent flyers. All carriers stand to gain from new flyers, especially in markets where a connection is required anyway.
Delta is looking to grow by increasing incremental spend. Are there trips its customers take that are not on Delta? Most likely yes. The carrot of achieving status could cause some of those customers to move even more trips to Delta. The threat (it’s always carrot or stick, right?) of losing that status might encourage a customer to open a credit card and earn more miles to retain that status.
For those who haven’t been closely following the changes, Delta initially doubled entry-level Silver Medallion status requirements, increased Gold & Delta SkyMiles Platinum by 50%, and Delta Diamond requirements by 75% from 2023 levels. Due to uproar from customers and the media, those changes came down to a 67% increase for Silver, 25% for Gold & Platinum, and a 40% increase for Diamond. Matthew wrote earlier this week about how the program still wasn’t worth engaging in, but to be fair, it wasn’t before the changes were announced so any increase made SkyMiles even less attractive to outsiders.
Why It Won’t Work For Customers
Many SkyMiles customers were, respectfully, asleep at the wheel. Many of my travel agency clients weren’t aware of just how little SkyMiles are worth and how they compare to others. I have one client who’s been putting every flight and all of his business spend on a Delta SkyMiles Reserve American Express card. Had he placed his $250,000+/year spend on an American Airlines credit card, not only would he hold a similar status to Delta Diamond, but he would have earned enough points for an annual business class trip to Asia for he and his wife – every year. Earlier this year, he explored a similar redemption on Delta that would have cost him 4+ years of spending to redeem.
That woke him up. Many other Delta loyalists are so entrenched in the program that they haven’t looked around. Or at least, they hadn’t until September.
Another example came from the owner of a travel consortium, someone who is incredibly plugged into the travel world and flying is part of their job. This person was struggling with the requirement of $20,000 in Delta purchases – they use a corporate card for business expenses that is not a Delta product. At $35,000 it was completely out of the question and they were re-examining their relationship with Delta already. But at $28,000, it remains out of reach and the customer might be lost.
For those at the lower end of the market, $3,000/year excluding taxes and fees for Silver was attainable for many SkyMiles members. At $6,000, this is good enough for an entirely higher tier on other carriers, dropping that requirement to $5,000 in spend or a 67% increase over 2023 levels will not be attainable.
Too many customers have become wise to the new requirements and how hard it will be to obtain/retain their status level. If they are really smart, they will look at redemptions too and see just how little they get in return for their loyalty.
Why It Won’t Work For Delta
Many customers voiced their concerns.
“I have read hundreds of your emails, and what’s been most clear to me is how much you love Delta and the disappointment many of you felt by the significance of the changes,” Bastian wrote. – Associated Press
Something tells me that’s not what got his attention.
Granted, this is just a theory, but I think that an awful lot of customers decided to materially terminate their relationship with Delta by starting with American Express. Its co-brand relationship is worth billions to Delta annually and accounts for the majority of the carrier’s net profit.
Part of the aim might have been to thin the herd and make status more valuable, after all, being a Delta Diamond doesn’t mean much if your upgrades don’t clear and there’s an hour wait to get into the Sky Club.
But at least part of this was to get that incremental spend outlined above and this is a step too far. Much like boiling the frog, the secret is in heating up the water slowly lest the frog doesn’t leap out of the pot. Even the adjusted changes are just too much too quickly. Not only does Delta not get the incremental spending gain it hoped for, but risks losing customers altogether as they move carriers.
Atlanta flyers might not do this, but with spending requirements out of reach and diminished benefits of holding premium Delta credit cards, they may move the more important of the two relationships – credit card spend – elsewhere. That doesn’t help Delta either, even at the revised lower requirements.
The latest bout of unabashed hubris will actually cost Delta more than it gains. Don’t be confused by the latest earnings report, it’s the next four to watch.
Delta made huge increases to its SkyMiles elite requirements. It walked them back slightly, but not in a meaningful way. It will wake some sleeping giants to how Delta values their relationship and how little they get for their loyalty. Their revised requirements still exceed reasonable levels when compared to other carriers and it’s my belief that Delta will lose net customers and earn less in the next four quarters.
What do you think? Will Delta lose customers?