Thursday, February 27, 2014

Is Delta Airlines alienating the average high yield traveler?

Rewards Canada contributor Sol Zia gives us a quick commentary on the Delta SkyMiles changes that were announced yesterday. See our post here for more details.

By biasing SkyMiles earning towards high price, high yield, tickets I think Delta is overestimating business travelers preponderance for a last minute ticket purchase. If you talk to the average 100,000 plus mile flyer they will admit to a mix of ticket classes. I'd estimate at least 1/3rd of business travel is project-able and is made up of consistently scheduled monthly management meetings, conferences, training and other easy to forecast trip reasons. Even with more immediate trips, like client meetings, most travelers, and certainly their corporate travel desks, book the lowest flexible fare. I think Delta is running a big risk over-applying the Pareto rule and that many of their loyal FFP members may move up on the miles based FFPs. Time and analysis will tell.

Sol Zia, a loyalty consultant, has been an Air Canada Super Elite (100K) member since he first fast-tracked out of Elite in 2003.

1 comment:

  1. I tend to agree with Sol. If UA and AA/US are shrewd about it and don't follow DL, they could gain tens of thousands (if not hundreds of thousands) of regular flyers at very minimal added cost -- particularly mid- and top-tier elites -- who fly on discounted fares. I book the lowest fare when I fly (when I can) because I pay my own way, or consider the client's money is not there to squander. I use my elite status judiciously to maximize the benefits in the air and on the ground. That said, I represent between $10K-$15K a year to AA and UA (I cover off both alliances holding top tier in each program, said goodbye to AC SE/E status for the first time in 25-years) which is not an insignificant sum. I get upgraded when there are unsold F and J/C seats, so the airline has another economy seat to sell, incremental cost is thus marginal to them and they've sold the same seat twice. Assuming there are 10,000 of me over at DL who make a move each to UA or AA/US, that's new customers those carriers can easily accommodate without increasing capacity and incurring added hard costs while picking up several million $s each year...and a net revenue loss to DL.

    Most of the media reports suggest that the other two US legacy carriers will follow DL down this road. They posit this on the view that earning miles by flying has become secondary to earning them with credit cards and support this by referencing the hundreds of million $s Chase and Citibank (and others) pay the airlines for miles each year. Of course this runs the potential for US airline FF programs to go down the slide that AC has taken, and the mess that we know as Aeroplan. After several years, AC realized it had to reassert its branding as a FF program and not an adjunct to frequent charging/buying program, thus launching Altitude, though at the same time brought in its own form of $-related flight mileage earning, for better or worse.

    It will be interesting to see if UA and AA/US make a similar move as DL has, or start to counter by hyping status match challenges for DL elites. This ploy seemed to have worked well for AA two years ago when it went after disaffected UA 1Ks. Then again, Atlanta-based DL may have joined its fellow Atlanta-based corporate giant, Coke, in a major marketing fiasco and by dint of consumer pressure, drop its radical initiative and return to the tried and true formula!