Do Revenue-based Frequent Flyer Programs Help/Hinder Award Travel?
In Delta’s recent SkyMiles announcement, they say they are working on a better system of award availability. We hope that is true. One of the things we looked at in our analysis of the changes SkyMiles is making is the way the change to a revenue-based program at Southwest Rapid Reward affected award redemption for that program. Say what you will, but the SWA revenue-based program takes top honors for award performance.
In 2010, before the move to a revenue-based program, Southwest redeemed out 3.2 million awards counting for 7.9 percent of their revenue passenger miles (a loose approximation of the percentage of passengers flying for free). That jumped to 3.7 million awards and 8.3 percent of passengers flying on awards in 2011. The changes to that program began in March 2011. Even with a late start for the year, there was a nice 15 percent increase in the number of awards redeemed.
For the first full year following the change to a revenue-based program, 2012, award redemption jumped to 4.5 million award tickets and 9.0 percent revenue passenger miles. And in the year just ended, Rapid Rewards distributed 5.4 million award tickets accounting for 9.5 percent of their revenue passenger miles.
In just three years, they have seen almost a 69 percent increase in the number of awards distributed, and are approaching 10 percent of their entire passengers flying on an award.
While there is no current knowledge of what the revenue-based change will mean for SkyMiles, Rapid Rewards sets a pretty high bar on the positives of their revenue-based change.
A Look at a Possible 5-Tier SkyMiles Award Chart
As is well known, Delta SkyMiles currently has a three-tier award chart, with an announcement that in some markets it will go to a five-tier award chart. We were able to hunt down one of the proposed award chart changes to see how it will look in Jan. 1, 2015.
Currently to Europe in economy, you have Saver awards at 60,000 miles roundtrip, Standard awards at 95,000 miles roundtrip and Peak awards at 130,000 miles roundtrip.
We believe that the new levels that will fill in between the current levels will be 70,000 miles roundtrip and 105,000 miles roundtrip. We have no idea what these new levels will be named but it is interesting to note that they are slightly above the existing tiers—70,000 miles being closer to Saver’s 60,000 miles than the Standard award at 95,000 miles, and the same would be true for 105,000 miles.
With 10 months to go, this certainly may be nuanced but we do think it gives us a glimpse of where Delta may be going.
NOTE: Some of those analyzing the situation think that the early announcement by Delta is because they think someone else may be readying their own similar announcement. We’re not sure that would be wise unless there’s a leadership component here. For such a ‘hot mess’ topic, many would have opted to let anyone else make their announcement first and then ‘draft’ behind that news. Regardless, if anyone wants to sit outside the AA building on Amon Carter Boulevard in Dallas this evening or the Willis Tower in Chicago and count the number of pizza deliveries to each location well into the night, we’d be interested in knowing how many had anchovies.