Changes in the Delta Skymiles® Frequent Flyer Program, Possible Impacts to Your Corporate Travel Program, and Early Company Reactions

In late February, Delta Air Lines announced a number of changes to their SkyMiles frequent flyer program.  These changes have created a lot of discussion and some controversy within both the general travel community as well as the business travel community.

We’d like to take this opportunity to clarify the changes and report some of the feedback that we’ve received from our clients and others over the past several weeks.

PROGRAM CHANGES – THE FACTS

Delta’s biggest program change implemented to date is that miles will be earned based on a combination of dollars spent and status level.  Those travelers who have the highest status (Diamond), hold a SkyMiles branded American Express card, and are buying relatively expensive international business class tickets, will be seeing significantly more miles accruing within their accounts.  Those who have lower levels of status, who are traveling based on lowest logical fare, domestically in economy class, and who were used to racking up mileage based on these patterns, will be seeing their miles add up more slowly.

One important note is that Delta has not changed the process for achieving status.  It remains as it currently is in 2014, with a combination of miles (or segments) and minimum spend to reach each level as follows:

Note that, with the various Delta SkyMiles Credit Cards from American Express, you can earn MQMs (Medallion Qualifying Miles) based on spend (5,000 MQM sign up bonus, 10,000 MQMs for $25,000 in annual spend and a total of 20,000 for $50,000 on the Platinum card; a 10,000 MQM sign up bonus, 15,000 MQMs for $30,000 and a total of 30,000 for $60,000 on the Reserve card).

The addition of the MQDs (or Medallion Qualifying Dollars) was added to the program in 2013, and has been implemented by United, though not by American or US Airways (as of this writing).

Delta has also made several changes to the process of redeeming miles, including the ability to redeem miles for one-way segments, mix miles and dollars, and varying the number of miles required based on availability on various flights.

MARKET AND CLIENT FEEDBACK IN THE WEEKS SINCE THE CHANGE

Feedback from the general travel community has been negative.  People who have been able to accrue lots of miles buying very cheap domestic tickets, either for leisure or business travel, are not happy that they will not be accruing as many miles going forward.  Conversely, the road warriors who are traveling globally on company business and sitting in business class, will be rewarded, and are happy about the changes.

We have heard two schools of thought from corporate travel managers. Some are concerned that travelers may delay booking their tickets in order to maximize the mileage earned on each ticket, particularly those that are traveling internationally – buying a $8,000 (or higher) J class round trip to Europe will earn a lot more miles than (75,000 if they have sufficient status) than buying that same itinerary in I or Z class 60 days ahead of time and paying only $3,500 and earning only 38,500 miles.

Others are less concern about this with domestic, economy class travel where lowest logical fare prevails and waiting until a few days before travel only increases the cost of the ticket by a few hundred dollars.

Our feeling is that behavior will be driven by such considerations as travel budgets (if travelers start buying tickets that are thousands of dollars more expensive, they will have to curtail their travel sooner, and their managers are likely to notice as well).

Key feedback based on individual discussions with client travel managers & procurement executives as well as open forum feedback and thoughts at a recent industry event where this topic was discussed:

• Early consensus is companies are adopting a wait-and-see approach, but definitely with a higher focus level on employee travel trends on Delta.
• Executing immediate changes to programs or policy is not warranted at this point, especially since other major carriers have not responded or immediately followed Delta’s lead.
• Most managers and executives believe a large majority of employees “want to do the right thing” and will not purposefully abuse policy or process.
• One of the keys will be to proactively look for leading indicator trends:
  • Are advanced booking times declining?
  • Are ticket prices going up?
  • Are pricing trends on Delta diverging from other carriers?
  • Is policy /OBT booking compliance declining in heavy Delta markets?
• A higher priority for travel managers will be to conduct drill down analytics & reporting to individual traveler level in order to identify the “outliers” who might be abusing the system, especially for companies with robust data capture and reporting systems