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Discussion in 'General Discussion | Miles/Points' started by Randy Petersen, Feb 25, 2014.
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Looks like the InsideFlyer blog has the scoop on a HUGE Delta Skymiles change.
This is horrible news. I'm not a Delta flier by any means but I'm afraid of when UA and AA will follow suit.
It depends. There will be winners and losers.
The current DL FF program just wasn't sustainable when you looked at the value of benefits that one could get or even the benefits that people frequently were getting versus what they spent on DL tickets to earn their miles.
For example, if you're GM (Gold at 50,000 status miles per year) with $5000 on DL tickets, you now get at least 100,000 redeemable miiles per year. That's a low business class RT to Europe (which would probably cost $3000-$5000). If instead the person spends the miles for two to four (low) domestic coach RT tickets, they're probably worth about $1000, which would still represent a 20% rebate. In facct, forget searching for award tickets and if you have a DL AmEx card (which would give you 10,000 additional miles for those tickets), just use pay with miles and save $1,100 on any DL ticket or tickets.
You're assuming that DL would be able to sell those tickets that they placed into low inventory.
If you think that DL's revenue management department was so incompetent to put inventory into low that wasn't severely impaired and unlikely to sell, I have a bridge to sell you. The entire point of mileage programs was to get rid of impaired inventory as a way to give something away that had high book value, but really didn't have a prayer of being sold, and so they might as well get something for that empty seat, even if it's customer loyalty- day-old bananas, as it were. Given that DL is the ultimate judge of what goes into award inventory, it's perfectly sustainable as long as DL manages inventory correctly. If you're running a casino where you can set the rules at your whim, if you're losing money, it's because someone else is able to do math better than you. All this is is Delta getting rid of the card counters at their blackjack tables.
The thing is, with cabins going to 90%+ occupancy a lot of the time... there isn't so much impaired inventory... thus we see the mileage chart with 2, 3 and now 5 categories.
I'm implicitly viewing it as a case of a GM who would have otherwise purchased those tickets from DL, so DL does lose revenue equal to the amount of the fare. If you think that award tickets are "new" travel that otherwise occur, then you're right, although revenue management errors can only cost DL when they're wrong in the direction of offering a seat as award inventory when it coulld have been sold. When DL makes the opposite type of mistake and holds inventory that isn't eventually sold (or sold at a sufficienttly high fare), the FF pays but not DL except in loyalty and goodwill.
I suspect the majority of programs will head in this direction sooner or later.
There could be a first mover advantage here. If DL announces these changes before its competitors, it can design the program in a way that's best for DL and the others will have to adapt to the DL rules unless they believe that DL is willing to make big changes yet to the way SkyMiles will operate.
If the giveaways are too much, why not get rid of them altogether? There us is money to be made regardless. Only DL management knows the exact motivation for the change, but they clearly feel they can reduce the payout while still retaining the customers.How does this account for the business traveler who isn't booking mistake or super low special fares, but does book the lowest cost available per company policy?
Being in this bracket, I will direct all my spend away from a model like this as I get higher value on the older model, but I'm hardly gaming the system. My spend patterns will remain the same regardless of the reward model. So in this scenario, current AA wins big with all my business. Even at coach lowest fare, that's still good for 20k or so a year. What I get in return is merely a fraction of this amount, but still a healthy profit and a lot of consistent repeat business where I feel most appreciated.
If the devaluation sticks and all the carriers pick it up, then the calculation changes again and we all reassess. Best of luck DL. Best of luck points/miles seekers. The game is afoot.
Don't assume that the changes must be bad for you. Try to estimate your situation and compare your status and mileage earnings under the current and future regimes. You might be surprised (either way).
I know what you are saying but I fly long haul (international) mainly and in coach.
Such a return trip typically nets me anywhere between 18000 - 25000 miles (base - 25% more for Silver and 100% more for Gold...) at less than USD 3000.
My earnings will totally be slashed come 2015 if I continue with Delta.
For me personally, the changes announced so far will have minimal impact, if any. The thing that has me worried is that we don't know how much the award chart will be devalued by. And even that wouldn't have a huge impact on me, because my SkyPesos balance is 0, and any DL flights in my future will be credited to (and likely would have been credited to, irrespective of this change) either VS, AS, or Flying Blue depending on my circumstances.
However, I still think these changes suck to high heaven.
$3000 per ticket X 8 miles per dollar for GM = 24,000 redeemable miles per trip, which is close to what you're earning now. Of course, it would help to have more precise numbers including taxes and fees on your tickets, but this is in the ballpark..
Interesting observation. I was talking to an analyst today and it was their theory that Delta had heard someone else was in the wings on this and wanted to go first which is why the unusual void in the middle of the announcement and the actual changes. Most would say that's an entirely too long period to leave customers in the social media verse to wonder, listen to every blogger wax on about the sky falling and generally have more questions than answers. Very intelligent observation, thanks.
Over HERE they have a look at what they believe could be the new proposed award chart for an economy ticket to Europe adding in the up to two new additional tiers. Not sure what other proposed chart levels might look like but I think that the earlier changes by Delta might have been the precursor and may not find much more toward the heavens on mile requirements. Still far too early.
@MSPeconomist, this was the sample I worked out yesterday on the other thread. The difference for me is 50% as I cannot apply for DL CC based in asia.
Same Trip (LAX-SIN)
Further out so cost is lower. Difference is HUGE.
OK, I used three thousand dollars for the fare, which was your estimate, but 8 X is the factor for GM. I wasn't assuming any AmEx miles.
I'd be happier if we could see a tentative award chart for a TATL RT in BE. That and BE TPAC are what interest me, perhaps with Australia/NZ thrown in for variety.
Unfortunately even if I buy a USD 3000 ticket .... there is still over a 10k difference in miles awarded as a GM
Based on 2013 mqds they are neutral. In 2013 I coasted on rollover and amex spend, and was driven by price to other airlines more than previous years. I did not do a paid longhaul/discretionary trip on dl last year and normally do.
For my business/domestic travel the effect isn't huge. For international and discretionary travel (ie tickets I purchase due to attractive pricing) the difference is dramatic, and unless partner earnings are strong really kills the value proposition there.
So basically on the flightsbi need to take there is little net change, but disincentive (unless the availability on the new swus is really good) to book any long haul coach.
I think this will be very bad for most long-haul or transcon flyers -- especially though who don't have to purchase walkup fares...
I guess for folks that have unlimited travel budgets they will make out well.
Don't consider the AMEX miles in making the comparison - these are the same AMEX miles that you can earn today in the mileage-based program.
For any travel that costs less than 20-25 cents/mile (not counting taxes and fees), you will earn less miles under the new program. Coach fares on long haul flights are generally less than 10 cpm, so the earning rates may be cut in half on coach long haul flights. Short haul flights that fares are often higher, so the effect won't be as great.
Given that Delta is, at best, the 6th program to make such a move it is not entirely clear what "barrier" they broke here. Yes, they changed their program. But they're hardly the first to approach it this way.
12 years ago a Delta employee (now executive) and I discussed earning based on spend rather than distance as it was a long-term goal for the airline but they had not found a way to make it palatable. Given 12+ years of research & refinement I am surprised that even with a rush to publish that there is still such a huge gap in the announcement.