You may have noticed I don’t post much about Delta compared to other US airlines.  From what I hear, their actual flights are pretty nice compared to other US airlines, but their frequent flyer program is pretty bad compared to other programs.  As a result, I don’t mess with them very much.  They are typically the leader in making changes to their frequent flyer program that miles and points junkies don’t like, and now they have made another big change that was likely a long time coming, but still very much unwelcome.

Delta has officially announced a change to a revenue based frequent flyer program beginning January 1, 2015 In everyday language, this means that the number of redeemable miles you earn will be tied to how much you spend on your airline tickets, as opposed to how many miles you fly.  For Delta-marketed (flight numbers that include the “DL” airline code) or Delta-ticketed (featuring a ticket number beginning with “006”) flights, SkyMiles members will earn miles based on ticket price, including the base fare and carrier-imposed surcharges, but excluding government-imposed taxes and fees.

Specifically, here are the earnings rates that kick in on 1/1/2015:

Base members earn 5 miles/1 USD
Silver Members earn 7 miles/1 USD (represents 40% bonus over base members)
Gold Members earn 8 miles/1 USD (60% bonus over base members)
Platinum Members earn 9 miles/1 USD (80% bonus over base members)
Diamond Members earn 11 miles/1 USD (120% bonus over base members)

 Delta Mileage Calculator

Using a Delta co-branded credit card will add 2 miles per dollar spent to the above totals.  Delta touts this system as more rewarding to those who spend the most with them (ie their best customers).  However, really even those who spend a lot on airfare will often lose in this new system compared to the old system.  The exceptions are those who fly almost exclusively on very high fares and/or on expensive short flights.  To give you an idea of how this will look in practice, here are two real world examples based on ticket prices displaying this morning.

Family trip from Seattle to Orlando June 19 – June 25 where the cheapest economy ticket displayed on Delta.com are $609 each.

In the current system this would earn about 5328 miles based on the distance flown (ticket priced went through MSP on outbound and SLC on return) not including any elite bonuses.  Under the new system, this (pretty expensive economy) ticket would earn 3045 redeemable miles not including any elite bonuses.  If you also had the Delta credit card, this would earn 4,263 total miles, which is still worse than the current system.  Remember, this is for a pretty expensive ticket.  Imagine how much different the results would be if the ticket was in the $250 – $350 range that many leisure travelers search for.

Last minute round trip business trip from New York City – Chicago on Friday February 28 where the cheapest first class ticket displayed at Delta.com for $786 each.

In this case, I priced the cheapest first class seat for a round trip flight two days from now.  Obviously flights like this would more commonly be booked by business travelers than family travelers.  Under the current system this ticket would earn about 2,209 miles for a non-elite member including the 150% earning rate due to the first class “A” fare class for the miles flown from NYC to Chicago and back.  Under the new system, this flight would earn 3,903 miles for a non-elite member.  If paid with a Delta card it would earn 5,502 miles.

In my two limited examples, the short and expensive flight does indeed come out ahead under the future system than the current system in terms of earning.  The longer (and still expensive) flight that the family might book falls short under the future system as opposed to the current system.  Most people will earn fewer miles on Delta flights beginning January 1st.  All flights not marketed and not ticketed by Delta will earn mileage based on a percentage of the distance flown as determined by the fare class paid.  Details on this have not yet been announced.

Changes to Award Redemptions:

Of course, changes to earnings are just a part of the issue.  The impact of the changes to the earning side can only be truly understood if you also know what the changes to redemptions will look like…and we don’t have that full picture yet.  We do know that there will be one-way awards allowed for half of the price of a round trip, which is a good change.  There will be a miles + cash option that we don’t know much about yet.  They give the example of redeeming 25,000 miles + $159 instead of redeeming 35,000 miles for an award ticket.  We know that there will be five award tiers for a given route, compared to the three tiers of mileage pricing that are currently in place.

They say that there will be more award seats available at the lowest redemption levels and an award calendar with expanded search capabilities.  Those are good changes in theory, but don’t matter much until we know the rates.  The actual award chart isn’t expected until late 2014, so we will be left to guess for several more months.  My bet is that for those who use their miles to travel domestically in economy and/or on routes that are historically not very expensive, that rates won’t really increase, and may even decrease slightly in some cases if availability at the low levels is improved.  Of course, since earning is also reduced this isn’t exactly a net positive, but I’m betting it won’t be a terrible change on the redemption side in those cases.

My bet is that for those who want to redeem miles for expensive premium cabin international travel, you will be at least partially hosed.  Of course, I hope I am wrong, and it could have been worse if redemptions were tied 100% to fares the way Southwest does it, but I’m still betting the situation gets worse for those who want to fly in a premium cabin across the ocean or on other expensive tickets.

Elite Status Qualification:

Elite status qualification will still be based on miles flown…which frankly seems rather odd given the changes to earning redeemable miles.  There will still be a revenue component to elite status the way there is for 2014 where you have to not only fly a certain amount, but spend a certain amount for each tier.  The spending requirement can be waived by putting $25,000 in a calendar year on a Delta Amex.  How far you fly doesn’t matter for earning miles that you can redeem, but it still matters in terms of elite status.

Delta Elite Status

Analysis:

It’s pretty much all bad news.  The redemption side still has many question marks, but anyone who thinks any slight positive changes on the redemption side will offset the changes on the earning side must be on a Rocky Mountain High in Colorado.  Also, simply avoiding Delta likely won’t protect you from this revenue model forever.  Other airlines are very likely to follow Delta’s lead as that is how the airline industry works.  They’re a bunch of copycats, often in all the wrong ways.  With the direction United has been headed in, it won’t surprise me if they are the next to follow with a similar program if not in 2015, then by 2016.  Of course, I hope they don’t, but hope only gets you so far in these situations.

The ace in the back pocket here is that many of us don’t actually earn the majority of our miles by flying.  We earn them via credit cards.  This may serve as a buffer against the full weight of these changes, and may mean we simply need to earn more miles via using credit cards than we are now.  Also, the miles you have in your account already won’t be converted to some sort of Monopoly SkyMiles, they will remain as-is.  However, the unannounced changes to the redemption side still scare the pants off me, so I would not sit on more miles than you need to since what they will get you is also changing.

The miles and points community is a resourceful bunch, and earning (almost) free flights will continue despite these or other changes.  It may look different, and eventually it may be in coach seats more than in premium seats.  It may rely more on earning in foreign programs than domestic ones.  It may emphasize credit card spending more than flying.  Cards that earn points you can use as cash toward travel may be even more useful than miles in some programs.  All of those changes are already in play to some extent, and I don’t know for sure what the future holds, but I know the game isn’t over.  It is just continuing to change.  This in particular is a big and bad change, but not the end of the party.  Heck, I was never partying with Delta anyway. 

Stay tuned and I’ll keep you updated on what I learn about not only these specific Delta’s changes, but also on how to keep the award travel party rolling despite whatever changes the programs decide to throw at us.

Posted by Mommy Points | 11 Comments

11 Responses to “Big Changes Coming To Delta Frequent Flyers…and Likely All of Us”

  1. I agree that the changes are negative, but I think you hit the nail on the head when you talked about earning miles from CC spend / bonuses.

    That’s how I do it, and I’d imagine there are many more like me. Sure, the era of the mileage run is dying if not already dead, but we’ve known that for awhile.

    It remains to be seen what comes out on the redemption side. If they can fix their website that would be great!!! :-). I do like the addition of one-way awards which they don’t have now.

    Someone on another post bemoaned the new redemption program as being “too complicated” but to me that’s a good thing. The more complicated it is, the more that you, me and the good folks out at Flyertalk can figure out the sweet spots / loopholes

  2. lbotez says:

    Time to start flying American!

  3. Santastico says:

    I am a Delta hater but forced to fly them since my hub is at MSP. However, these changes may be working on my way. As a MSP based flyer I am a typical passenger that spends a lot of money to fly very few miles on Delta today. My typical weekly flights are to IND, OMA, RDU, BMI, DSM (yes, I know that my travel is not very exciting) which give me very few miles (sometimes they are 500 miles round trip) but cost always around $1000 per ticket. Yes, tks to Delta I pay $1200 to fly MSP-OMA-MSP and earn 563 miles round trip. My other flight schedule is on paid business class to Europe which also does not earn huge mileage compared to flying to Asia or Brazil but still costs around $7000.

    Thus, Delta may be doing me a favor since I spend a lot of money to earn very few miles with them.

  4. Nancy says:

    I am kinda excited about the one-way awards. My husband and I have a combined 130k Delta miles accumulated from credit cards, but we’ve been discouraged trying to book cheaper award tickets. We were going to use the miles for hotels since it seemed like we couldn’t get a good deal using them for flights. But now I’m wondering if we should save them for one-ways to Europe in coach? (We always fly coach)

  5. Grover's Bathtub says:

    I played around a bit with the calculator, and it looks like base members come out ahead with the new plan if you pay 20.0 cents per mile (on the base airfare) for base members. Silver Medallions have it slightly better, with a breakeven point of 17.9 cpm. Gold Medallions are the least likely to benefit with a breakeven of 25.0 cpm, and Platinum and Diamonds break even at 22.2 and 20.4 cpm, respectively. $2+ per mile travelers such as Santastico will definitely come out ahead :).

  6. JEM says:

    The world’s getting a bit more rational. It makes no sense to me that Delta should reward (“earning” free travel has always seemed a misnomer when you’ve actually gotten the service) the $250 SEA-MCO flyer at the same rate as the $609 flyer (or worse, the 2-day $1190 flyer). While there are other business factors besides fare (e.g., load predictability, time value of money), I’d guess that the majority of $250 flyers won’t be swayed by 2300 SkyMiles, especially compared to, say, a competitor’s $225 fare.

    OTOH, a DM getting 11000+ miles on the $1190 fare may well choose Delta over a competitor’s $1100 fare, especially if, as they’ve promised, that means nearly half a more available domestic award ticket.

    Rewarding customers based on the amount of our resources they consume, regardless of what they pay us, would never even be considered in my business. Rewards, discounts and extra services are given based on revenue.

  7. KennyB says:

    One-ways are a possible huge plus, but of no use unless DL actually releases award seats.

  8. Bill says:

    As a United frequent flyer, now lifetime Premier Gold thanks to having flown 1 million miles on United/Continental in the past, I am relieved to have achieved Lifetime Gold status well before the airlines began switching their earning/redemption models to include revenue. This latest Delta change is likely to eventually be adopted by United and American at some point in the future, after all, unless people start to abandon Delta because of this change.

    I agree, however, that there has been a seminal shift in how people really accumulate miles: from flying to credit card spend.

    Airlines obviously earn a good deal of money from their co-branded credit cards; otherwise, they wouldn’t offer so many mileage perks and try to attract so many people to their cards. For those who spend a lot of CREDIT CARDS, the earning potential for miles is much higher than those who spend a lot on flights or who earn miles by flying a lot. Spending on credit cards is also much less exhausting.

    This trend looks to continue. The real winners are small business owners and executives who spend a lot on credit cards, as they will be channeling far more dollars via credit cards than the regular consumer, earning them far more miles/points than even those who frequently fly. As always, the winners are those who spend the most–who often are those who earn the most.

  9. Nick says:

    I think the main distinction I would make is that it is no longer a loyalty program once you make this change it’s just a fixed percentage rebate. The average consumer even the average business traveller then has no incentive to give these companies any loyalty. If you have to travel a lot and your company pays the bill sure there may be an advantage to sticking with one airline, but for anyone else – no way. The big winner here will be Southwest.

  10. Robert Hanson says:

    You mean to tell me some people actually BUY airline tickets, with real money, instead of using miles for awards? Who knew? ;)

    Every article I’ve read on this implies this is going to be upcoming on all of the legacy carriers.
    But there are two things no one seems to mention. First, Delta wasn’t a traditional loyalty program to begin with. Thus the Sky Pesos label. Their typical frequent flyer was someone willing to forgo a generous loyalty program for other factors. So this change won’t hurt Delta with their elites the way it would hurt AA with it’s elites.
    Secondly, as much as Delta is moving even further away from that model, they are also moving into conformance with some aspects of the other traditional programs. Allowing one ways, at least promising to increase saver availability, and maintaining Elite status qualification based on miles flown.

    Delta has always been an odd duck, so I’m not sure that these changes are necessarily going to sweep the industry. There is a reason why, back when I was in fact buying tickets, and doing mileage runs, instead of acquiring miles, I achieved Lifetime Gold with AA, and never once flew Delta. I’m guessing AA understands that their elites are far different from Delta elites, and will act accordingly.

  11. jamesb2147 says:

    And the Delta AmEx loses nearly all value as a mile-earner.

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