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When loyalty programs change (as they invariably do), it’s easy to judge those changes based on how they impact your own travel. But looking at the bigger picture can help you assess whether a program is moving in the right or wrong direction overall. Today TPG Contributor Nick Ewen looks at recent changes to the Delta SkyMiles program, and explains who stands to gain and lose from each of them.
If you’ve been following this blog for the last several months, you’ve likely read TPG’s withering criticisms of Delta and their numerous recent devaluations of the SkyMiles program. As a loyal Delta flyer myself, many of the recent updates have stung, but in fairness, the effects vary from person to person, and some flyers may be coming out ahead.
In this post we’ll look at some of the key policies that have changed in the last year and consider who has profited and who has suffered as a result.
While the SkyMiles program has seen a lot of changes over the last few years, perhaps the biggest was the announcement at the beginning of this year that Delta would shift to a new revenue-based mileage earning system. It’s clear that this is aimed at flyers who typically pay high prices for last-minute or premium fares. Instead of earning mileage based on distance flown, starting in January 2015, you’ll earn miles depending on the base fare of your ticket:
- General Members: 5 miles/$
- Silver Medallion: 7 miles/$
- Gold Medallion: 8 miles/$
- Platinum Medallion: 9 miles/$
- Diamond Medallion: 11 miles/$
This new policy results in some pretty steep revenue requirements to “break even” between the 2014 and 2015 iterations of the SkyMiles program. Here are some examples for popular Delta routes at each elite status level (dollar amounts rounded up):
The common thought is that this policy will help short-haul flyers that tend to purchase a lot of last-minute tickets. Since those tickets are disproportionately expensive compared to the distance flown, it stands to reason that these customers will come out ahead in the new game. Unfortunately, that may not be the case. While I’m not a perfect example, much of my travel fits these patterns, and here’s what my 2014 flights would look like in 2015:
- Total MQMs: 42,604
- Total MQSs: 70
- Total MQDs: $7,896
- Total Miles Earned in 2014: 82,658
- Total Miles Earned in 2015: 67,868
- Difference: -17.88%
My butt-in-seat miles aren’t even enough for Gold Medallion, yet my MQDs are past the Platinum Medallion threshold. Despite that, my mileage accrual in 2015 would be a significant drop from this year. I’m paying $112.41 per segment and 18.47 cents per MQM. Maybe I’m wrong, but that doesn’t strike me as particularly friendly to frequent flyers at any level.
So what other changes have we seen this year, and who might they benefit? Here are the most recent ones in chronological order…
Overview: Last year, Delta instituted some major changes to their SDC policy, requiring the same fare class to be available when trying to switch to a different flight on the day of travel. After the most recent change in August, you can now no longer change from a connecting flight to a non-stop flight.
Benefits: The biggest beneficiaries of the new policy are Medallion members who are already confirmed on a flight. In the past, you could change your flight if there was any seat available in your ticket class of service, meaning that you could be on a ticket with a deeply discounted T fare and switch to a flight with a single seat in Y. Presently, if the original fare class isn’t available, you must standby for the flight, and you’ll only be confirmed at the gate. It’s important to note that standbys are usually cleared after upgrades, meaning that a Platinum Medallion at #2 on the list with 3 seats open could be bumped to first class before a Diamond Medallion is cleared into coach.
This is also important when it comes to the newest policy change. I have seen many cases where a non-stop flight is more expensive than a connecting flight. Just last week, I flew from Nashville to Minneapolis (as part of a larger itinerary), and flying through Detroit instead of taking one of the 5 direct flights actually saved me around $200. By not allowing me to change, Delta was “protecting” those who had paid a premium for one of those direct flights. This is especially true with Delta’s premium transcontinental flights from JFK to LAX/SFO/SEA.
Drawbacks: The most recent change really hurts at airports with limited direct flight options. For example, after my meeting in Minneapolis last week, I flew back to Tampa, and Delta’s last direct flight left at 1:26 pm. What if I had booked the 4:20 pm flight through Atlanta but got out of my meeting early? Instead of making it back several hours early, I would be stuck in Minneapolis.
Overview: Starting January 1, 2015, you will only be able to transfer a total of 250,000 miles per calendar year into your SkyMiles account from each external transfer partner. This mainly impacts Amex Membership Rewards and Starwood Preferred Guest members, but it also applies to other transferable currencies like Hilton HHonors and Marriott Rewards.
Benefits: Many award travelers wait to transfer miles until availability is confirmed, and unless you’re a Diamond or Platinum Medallion member (with waived change fees), it’s best to lock in the flights once and not have to change them. This new policy makes it more difficult to transfer the miles needed for premium awards at one time.
The new policy helps those who accrue SkyMiles through credit card spending or actual flying. In theory, award availability should increase because fewer award seats will be used by flyers who mostly transfer in miles from outside the program. It remains to be seen whether this will actually come to fruition.
Drawbacks: The biggest blow is to those looking to book multiple award tickets at once when availability suddenly shows up. For example, two round-trip, business class flights from the US to Australia will cost you 320,000 miles (at the lowest level). Under the new policy, only 250,000 of those miles can come from a single source. If you have a large pot of Membership Rewards points and you’re hoping to transfer them to Delta, you’ll need to build up your SkyMiles balance strategically before booking award tickets. Remember that this policy doesn’t go into effect until January 1, 2015 and since it is based on the calendar year, you could transfer some in 2014 and still have the full 250,000 limit for 2015.
Overview: A couple years ago, Delta began offering a new fare class (E) known as “Basic Economy.” At present you’ll only find this class on certain routes, mainly where Delta competes with low cost carriers (e.g., between Fort Lauderdale and Detroit, where Spirit Airlines is a direct competitor). The terms and conditions of E fares have always been restrictive, but beginning on February 1, 2015, these tickets have 2 important new restrictions:
- No paid or complimentary upgrades
- No same day confirm or same day standby
Benefits: To be perfectly honest, this change is a bit of a non-story to me. These fares are clearly targeted to the most price-conscious flyers, and I just don’t see any knowledgeable medallion members booking one. You’ll notice that the price difference between Basic Economy and Regular Economy is relatively small (just $10 one-way in the above example).
Drawbacks: My biggest worry with these fares is the slippery slope principle. If these limited routes are successful, Delta may expand E fares to all routes. Once they do that, maybe they’ll look at removing complimentary upgrades on X and V fares too. While I certainly hope that isn’t the case, Delta has shown a willingness to chip away at the program benefit by benefit, and such a move wouldn’t surprise me.
Overview: Starting in 2015, you’ll need to spend even more to earn (or retain) your status with Delta. The thresholds for Silver, Gold, Platinum, and Diamond Medallion MQDs are all 20% higher.
Benefits: This move clearly benefits top-tier Medallion flyers. With more stringent criteria, we may see fewer travelers attaining Diamond or Platinum Medallion status. Those that do will have less competition for upgrades. I have found my upgrade percentage dropping significantly since I fell from Diamond to Platinum this year, but these higher requirements will make more room at the top for the big spenders to truly feel like VIPs.
Drawbacks: I see two big issues with these requirements. First, they still don’t reward high-spenders flying short hops, and second, they negate the benefit of rollover MQMs. If you spend $10,000 in a year by purchasing 10 last-minute tickets that only earn you 4,000 MQMs apiece (assuming four 500-mile segments per trip), you will spend enough for Platinum but only fly enough for Silver. Moreover, those 15,000 MQMs that you rollover are essentially worthless, since your MQD spending is reset in the new year.
The way I see it, these changes are designed to benefit premium class or high-revenue flyers. This is especially true for business travelers (like me) who can’t book first/business class and are tasked with finding the lowest fares for a particular route. Some of the above “break even” fares are absurd based on current prices. For example, as I write this, there are numerous flights from LAX-JFK for $478.20 less than a week ahead of time. That isn’t anywhere near the break even point for any elite level. In fact, you would need to book at least a Q fare class to come out ahead as a Silver Medallion member, while you’d need to book at least H or even S to come out ahead at other levels.
These changes also target customers who earn miles from credit card spending and flying rather than through transfer partners, especially considering that the MQD waiver is unchanged in 2015. The new 250,000 mile transfer limit may not affect everyone, and it remains to be seen whether it will truly impact award availability, but it’s clear that Delta really wants you doing business with them (rather than third parties). This is also evident in their new relationship (or lack thereof) with ExpertFlyer.
Will you benefit from any of the recent or upcoming changes to the SkyMiles program? Please share your thoughts in the comments section below!
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