Delta says passengers are spending big on its premium products
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Delta Air Lines took its numerous premium product investments in 2019 to the bank today, unveiling revenue numbers that only re-confirm its already leading position among U.S. carriers.
Below the Atlanta-based carrier’s headline $4.8 billion net profit, growth in both premium- and loyalty-related revenues “outpaced expectations” with 9% year-over-year growth last year, Delta president Glen Hauenstein said during an earnings call Tuesday. The airline raked in nearly $15 billion in premium and $2.9 billion in loyalty revenue — nearly half of its overall operating results.
“We continue to improve and invest in the premium experience and are seeing increasing product affinity,” said Hauenstein, who added that 70% of passengers who pay for a premium experience on Delta do so again.
Many of the investments Delta made in 2019 came as it expanded the availability of premium products across its fleet. The airline introduced the Airbus A330-900 equipped with Delta One suites and Premium Select premium economy seats in July, replacing Boeing 767s that lacked either product. Other upgrades include the airline’s first retrofitted Boeing 767-400ER, and first Airbus A220.
That passengers are responding to Delta’s upgrades with their pocketbooks is not a surprise. After the airline rolled out an improved international economy inflight service in November, executives said they found a direct correlation between the improvements and higher fares in test markets.
Getting more people to pay for premium products has a downside. Delta is making a trade off between providing elite frequent travelers with complimentary upgrades, something it offers on most domestic flights, versus raising revenues by getting more people to pay for those same perks.
“The promise of upgrades are a prized benefit of frequent-flyer programs,” Henry Harteveldt, founder of travel consultancy Atmosphere Research, told TPG citing research his firm has done. “I don’t fault airlines for charging for first class… but what frequent fliers have said is if you’re not going to offer free upgrades, don’t promise it.”
American Airlines, Delta, and United Airlines all offer complimentary upgrades to elite frequent travelers on most domestic flights. However, changes in fare structures and increased “upselling” — when a traveler pays to move to a premium seat after booking a ticket — has made complimentary upgrades harder to snag.
Hauenstein does not appear concerned with putting off elite frequent flyers. When asked about travelers on the other end of the spectrum — those buying Delta’s no-frills basic economy fares — he called them “entry-level customers” that, once they fly Delta, come back and often buy more expensive fares.
“Once they see the quality of service that Delta people provide, I think they stay with us throughout their entire life cycle,” said Hauenstein.
Delta executives see strong demand trends continuing through 2020. When asked if they have any concerns, including any slowdown in corporate spending or the U.S. presidential election, CEO Ed Bastian said Tuesday that demand is “healthy” across the board.
“For all the fractiousness of the political environment, [Delta’s earnings] show Americans are still buying airplane tickets and drinking kombucha,” said Bankrate’s senior economic analyst Mark Hamrick. Bankrate is owned by Red Ventures, the parent company of TPG.
Featured image by Nick Ellis/The Points Guy.
Welcome to The Points Guy!
Earn 90,000 bonus miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new card in the first three months of card membership. Offer ends 11/10/2021.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Limited Time Offer: Earn 90,000 Bonus Miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new Card in your first 3 months. Offer expires 11/10/2021.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Earn 1X Miles on all other eligible purchases.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees