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Delta Makes an Industry Shaking Change

by Lux Joseph 7. March 2014

Just recently Delta has made a public announcement in regards to their frequent flier program and the major changes travelers can expect to see in effect one year from now. For years since Delta’s SkyMiles Program was put into place, travelers would earn miles based on the miles flown. For example, if you were traveling from Fort Lauderdale to Los Angeles the basic traveler on the bottom tier currently earns approximately 2,343 miles. However, if you were just going from Fort Lauderdale to Atlanta you currently only earn 581 miles. This wouldn’t matter if you paid $382 for your ticket or a full fare of $1012.00. The current program is beneficial to that frequent traveler that scores low fare tickets, but with the release of the new program that will not be the case. 

The new Delta SkyMiles program was unveiled to consumers on February 26 and the buzz is definitely out there. If you look at the demographics of travelers, it is very mixed. There are some travelers who travel frequently on the lowest fares available. There are other travelers who travel with a mix of class (economy and business) and mixed fares. Then you have your elite customers who travel primarily business class and on higher fare tickets. With the current program, that elite customer could travel round trip business class from Miami to Paris and earn approximately 13,000 frequent flier miles on Delta. If you are familiar with the Delta SkyMiles redemption program, that isn’t even enough miles for the lowest award ticket in coach. With the implementation of the new program, this same traveler will earn more than 50,000 frequent flier miles on Delta.

At Commercial Medical Escorts, most of our repatriations and medical escort transfers are completed within 24-72 hours of a request. In terms of air travel we probably purchase some of the last seats available on each flight. Typically those last minute ticket prices are significantly higher than if a traveler purchased their ticket 14 days in advance. For our medical escorts, this program change could mean a significant increase in the number of miles they earn each year when traveling on Delta. But what is the response going to be from the other major airline carriers within the United States and also internationally? This is an industry shaking change that could definitely impact not only the travelers, but the other airlines. Southwest, JetBlue, and Virgin America currently already award frequent flier points based on the fare paid by the customer. However, if you look at the three carriers just mentioned, none of them compare to the size and volume that Delta has.

From a management and on the financial side it is important for Delta to keep their customers who are high value travelers in the SkyMiles program. Those travelers are most profitable and loyal to Delta. One way the frequent flier program works is that the airlines sell their miles to credit card companies for bonus sign ups and therefore the program is a cash generating system. The new Skymiles program will not affect the credit card customers and that is a huge target market for the new Delta program. Vinay Bhaskara of Forbes recently commented that, “If Delta can keep high value travelers in the program, the net impact on profitability will be huge (small reduction in costs, more credit card earnings because the credit cards are more attractive)” (http://www.forbes.com/sites/airchive/2014/03/05/delta-skymiles/).

The average traveler based on reviews, comments, surveys, and other tools to measure satisfaction doesn’t seem pleased with the direction Delta is going. However, as the year progresses I believe we will be seeing American Airlines and United exploring similar modifications to their loyalty programs. Should other airlines remain with their current program in earning miles, it could potentially lead high value customers to fly Delta. Earning 50,000 miles as opposed to 13,000 for the same routing seems like decision should be apparent that the traveler will fly with Delta simply to earn an additional 37,000 miles. This industry shaking change will prompt other global competitors to re-evaluate their program and either match it or risk losing premium customers. As we enter into 2014, we look forward to keeping you updated on the progress on another major change in the airline industry.


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