Worth sticking with one airline?

VINO WONG / VWONG@AJC.COM

VINO WONG / VWONG@AJC.COM

Moderated by Tom Sabulis

Recently, Delta Air Lines shook up it SkyMiles frequent-flier program, saying it will begin awarding free flights based on dollars spent, rather than miles flown. The move rewards higher-spending customers, while hurting bargain-hunting travelers who earn thousands of miles by flying long distances across the country on cheap fares. Delta vows the changes will make it easier to redeem miles for flights. Today, two air-travel consumer experts weigh in on Delta’s changes.

Commenting is open.

Frequent flier programs scam travelers

By Christopher Elliott

Loyalty programs may be the single greatest scam pulled on the traveling public. Want to segment customers into castes of “haves” and “have-nots”? Create legions of blindly brand-loyal passengers? Lift your profits to avaricious new heights? Nothing does it like a clever frequent-flier program.

Yet as a consumer advocate, not a day goes by that I don’t receive a despondent email from a platinum card member who spent every travel dollar with a company, only to come up empty-handed, betrayed by a program’s vague promises.

Who wouldn’t be fatigued after hearing from thousands of unhappy passengers whose miles expired or were denied “elite” status or were banished to the back of the plane on a trans-Pacific flight? Who wouldn’t be furious at the travel companies whose adhesion contracts allow them to pull this barely legal bait-and-switch?

And that is why I love Delta Air Lines’ new loyalty program. The nation’s No. 3 air carrier recently announced it would restructure its SkyMiles program in 2015 so that awards travel would be earned based on ticket price instead of the number of miles flown. For the first time in decades, the cold reality of the SkyMiles program will send many of us into mileage-collecting rehab, where we can be weaned from our frequent-flier addiction and finally make a more informed and rational booking decision.

It’s about time.

Let me be clear: SkyMiles remains unfair to most air travelers. According to its terms, Delta can change its program rules at any time without notice, confiscate your miles, or terminate your membership whenever it wants to.

Delta, no doubt, is licking its chops at all the extra money you’re about to fork over in exchange for the possibility that you’ll be treated with just a little dignity on its flights. Studies suggest loyalty program members spend roughly 40 percent more than non-members.

Delta apparently believes it can move the goal posts on its program again and get away with it. Granted, the experience in the back of the plane is beyond awful today, from seats squeezed closer together to a “you-get-what-you-pay-for” attitude from flight attendants. I can’t blame anyone for playing the points game and trying to score an upgrade to an Economy “Comfort” seat, which has roughly the same amount of legroom as a pre-deregulation coach class seat. At the same time, in an unintentional moment of honesty, Delta admits the other seats in steerage class are “uncomfortable,” which they are. But something tells me a lot of Delta’s passengers aren’t going to fall for it this time.

As a major critic of travel industry loyalty programs, I’m truly grateful to Delta. The new SkyMiles effectively clamps down on many of the mileage-earning shenanigans, such as earning “free” flights by collecting the sides of pudding boxes or U.S. Mint coins. It could also curtail mileage runs, the foolish act of spending your employer’s money to fly nowhere at the end of the year, just to become a preferred customer and have access to scarce space-available upgrades. Also, and perhaps most important, it ensures the biggest spenders get the best perks — not the fanboys who learned to hack the system.

Maybe, just maybe, more customers will make a rational decision about their next flight itinerary — not one distorted by a pathological obsession with miles, but based on ticket price and convenience. A veil is slowly being lifted from the traveling public, and at last, they’re seeing loyalty programs for what they really are: habit-forming schemes that impair your ability to make a clear-headed decision about travel and that almost always benefit the travel company more than you.

Christopher Elliott is the author of “How To Be The World’s Smartest Traveler (And Save Time, Money and Hassle).

Loyalty memberships have value

By Tim Winship

Delta’s recent announcement that its SkyMiles loyalty program will begin awarding miles based on ticket prices instead of distance flown has induced a predictable outpouring of vituperation and hand-wringing, much of it misdirected.

To be sure, airline loyalty programs deserve much of the animosity they’ve engendered. Unregulated lotteries? Guilty. Bait and switch? Arguably. Gratuitously (if not insidiously) obfuscatory? Indubitably.

But for all their warts and detractors, the programs have survived. Nay, prospered. That’s due to a simple fact: Millions of travelers have been able to squeeze solid value from these programs, in the form of free travel (which can be viewed as a form of rebate) or special perks. Which gives the lie to the broad contention that the programs are so scammy or irrelevant that they’re best avoided outright.

What is true is that the programs are not for everyone. If you travel only occasionally, and mostly for vacations or to visit friends and family, you’re probably best served by choosing airlines and hotels based on price, and letting the frequent-traveler points fall where they may. The extra cost of channeling your travel dollars to a single supplier will almost certainly exceed the value of any program-derived benefits.

It is also true that the programs increasingly favor customers who might be best described as the one-percenters — travelers whose disposable incomes or job descriptions make it possible for them to travel often, and on expensive tickets. Try as they might, the other 99 percent just don’t stand much chance of reaping significant rewards from loyalty programs that recognize dollars spent rather than miles flown.

There’s nothing nefarious or revolutionary about equating loyalty with a customer’s contribution to a company’s bottom line. After all, that has been the goal of the airline programs from their inception. Miles were merely a handy proxy — an imperfect one — for a traveler’s spending. But once embedded in the programs’ sprawling computer infrastructures, and in airlines’ marketing ecosystems, miles were difficult to excise. That’s due largely to the fact that shifting from a program based on miles flown to one based on dollars spent is a hugely expensive, enormously complicated undertaking. It took Southwest three years to make the conversion, with costs rumored to total almost $100 million. No wonder the legacy airlines, with their legacy mileage-based programs, were reluctant to make the change.

Delta may be the first of the surviving legacy carriers to adopt the so-called revenue model for its program, but it certainly won’t be the last. And it’s hardly breaking new ground. In fact, viewed in the context of the travel industry overall, Delta’s move is late in coming. Southwest, JetBlue and Virgin America already have revenue-based programs. All major hotel programs award points according to spending, as do travel-rewards credit cards.

In making the considerable investment required to convert its SkyMiles program, Delta was simply acknowledging that the business case for spending-based programs is overwhelming. It is an axiom of modern marketing that a relatively small group customers account for a disproportionately large percentage of a company’s profits. The first priority of any sensible loyalty program must be to reward those high-profit customers for their past business, and to encourage their future business.

That’s just what Delta’s new program will do, and what the great majority of other travel loyalty programs do as well. And really, wouldn’t it be financially irrational to do otherwise?

Here’s a tip for Delta loyalists who will earn fewer miles under the new scheme: Ditch SkyMiles and buy the airline’s stock. You’ll save money by buying the cheapest-available tickets (probably not from Delta). And even as SkyMiles is rewarding you less, your shares will be gaining in value as the program, now better aligned with Delta’s financial goals, plumps up the company’s bottom line.

In other words, follow Delta’s lead and forego the miles in favor of the money.

Tim Winship, founder of FrequentFlier.com and co-author of “Mileage Pro — The Insider’s Guide to Frequent Flyer Programs.

9 comments Add your comment

Numa Delgado

April 23rd, 2014
7:35 am

“Also, and perhaps most important, it ensures the biggest spenders get the best perks — not the fanboys who learned to hack the system.”

Fanboys who learned to hack the system? Christopher Elliott, you are far off the mark with this statement and no doubt speak with unfavorable bias. No customer has ever managed to manipulate Delta’s Skymiles program (as if they could get into Delta’s network and engineer Skymiles benefits to satisfy their personal needs). Instead, Christopher Elliott, there are many customers who benefited from Delta’s Skymiles program simply by adhering to the policies and guidelines that Delta established. That is hardly hacking the system. I tire of you and others, both internal and external to Delta, proclaiming that some customers abused the program. That’s pathetic corporate speak, something in which Delta excels.
The fact is that Delta feels some of its customers are benefiting from the Skymiles program and it wants to curbs those benefits. Delta has every right to do that. But, it is completely insane for you and others to assert that those customers have somehow taken advantage of the system. That is simply a flat out lie. Delta would instead prefer to take advantage of its customers. And, it will successfully continue to that; for short period of time anyway. It won’t be long before the next economic collapse, industry adjustment, or other disaster occurs and Delta has to make an overhaul to the way it treats its customers.
I always find it entertaining to reflect on how well Delta treated its customers in the face of bankruptcy and poor economic times. I loved the service when the flight attendants and other customer-facing staff knew they were at risk of furlough or complete job loss. That “you-get-what-you-pay-for” rude behavior you highlighted in your piece takes a back seat when poor performance could mean standing in the unemployment lines. I am confident we will see those days again. However, if we do, I hope that Americans will not allow our tax dollars to be used to bail Delta out. We did it before, and look what is happening now. How quickly Delta forgets. I didn’t forget. And, I understand that it is ok to allow an airline to fail. That’s what competition is all about!

Kevin

April 22nd, 2014
6:43 pm

My father was a flying colonel, I am a medallion flyer and have been for the past 10 years. Point is, my family has been very loyal to Delta…long before we moved to Atlanta. Just this month I am dropping Delta and their AMEX. Their program keeps offering less and less. When was the last time they made a change that benefited loyal customers in a meaningful way? I will miss International routes, but I’m moving over to Southwest. I am looking forward to spending 25k miles per flight vs 40k and above. Not to mention I will easily hit the requirement for a Companion Pass …my wife will fly with me for FREE …no miles, no cash, for free… and its unlimited. Could you imagine if Delta offered the same?

Delta, you are the premium carrier. You are suppose to be an industry leader. The only thing you’ve been good at lately is screwing your loyal customers out of earned rewards, increasing fees across the board, and generally just sucking overall. But hey, you’re making a profit now, am I right? I mean your stock is up 3% today and 100% from a year ago…probably time to add another layer of fees, increase miles required for flights, and add another hoop to jump through to earn Medallion status…only way to keep that streak going. As an Atlantan and longtime Delta customer, I am really disappointed in the actions they have taken over the past decade…starting with the first mini recession after 911 and their implementation of baggage fees. “Hey guys, I’ve got an idea, lets needle the everyday passenger on baggage fees while we give those who are traveling on the corporate dime a free pass”. Congrats on shaking that extra $150 out of that family traveling …meanwhile you’ve created an atmosphere of “I must get on the plane first so I can get an overhead spot for my carry-on”….. They all probably collectively scratch their heads as to why people hate their industry.

Steven

April 22nd, 2014
5:48 pm

Part of the problem is that the airlines started to hand out miles like candy. While miles earned for non-flight related things don’t count towards elite status, they help get the needed miles for an award ticket faster. They promise you X amount of SkyMiles for signing up for the Amex and even the SkyMiles branded debit card SunTrust offers (I’ve had it since they came out with it several years ago and the annual fee on it has increased several times and is getting nearly as expensive to have as the SkyMiles Amex.).

The thing is that if you’re a member of the FFP at airlines like JetBlue and Virgin America, getting points/miles based on the dollars spent is something you’re already used to (Virgin America’s Elevate FFP you earn 5 points per $ on the base fare. On JetBlue’s TrueBlue FFP, you earn 3 points per $ spend, but if you book directly from JetBlue’s website you earn 6 points per $ spent.).

In time members of SkyMiles will get used to the new system even though right now it’s not exactly a good thing. I’m not happy about losing a couple of thousand SkyMiles a trip due to the changes.

@Michael Hannigan Richard Anderson flies in coach on Delta, but when he flies internationally, he usually flies on a competitor, mainly to take notes and see what they’re up to and if it’s something Delta could learn from.

luckysnap

April 22nd, 2014
2:49 pm

Need to rename the program “Shymiles”, or “Skydollars”.

Mike

April 22nd, 2014
2:17 pm

The frequent flier racking up miles and segments because they connect will be impacted. I fly from Atlanta with no connecting flights. So adding the $ piece does not matter. I look for the cost of the trip 1st.

I will say having the availability of free exit row seating at time of booking and no bag fees is definitely a perk I use every trip. I will still fly Delta and still shop for the best ticket.

Uh, wrong, Mr. Hannigan...

April 22nd, 2014
1:40 pm

…with all due respect to Mr. Woolman and Mr. Dolson, but Leo Mullin and Vickie Escobar had a much more profound effect (and not in a good way, either) on Delta than any CEO and first whatever you want to call Vickie – they ran the airline into the ground, capitulated to the pilots (who complicitly assisted in the bankruptcy of the company) and laughed all the way to the bank with their golden parachutes while the rest of the Delta employees lost millions and millions of dollars in REQUIRED pension fund contributions into Delta stock (via the 401K matches) that became worthless once bankruptcy was declared…

And, they are probably still laughing at the thousands and thousands of employees who got shafted…

GlobeTrttr

April 22nd, 2014
1:02 pm

The change in Delta’s Skymiles program will benefit the short-haul, more expensive flights frequently taken by business travelers on short-notice. A good example is a Newark-Atlanta one-way trip I did recently which cost $355 and got me 745 Skymiles. Under the new 2015 Skymiles rules, you’d get 888 Skymiles. A Silver Medallion using the Delta AMEX would get 1243 miles. What remains to be seen is how/if Delta will devalue the miles over the next few years after the end-of-year mileage runs to the west coast, Europe, and Asia all but cease completely. After all, the net result is a change in customer behavior and shifting the privilege of mileage accrual from the junkies to the high-revenue customers.

Michael Hannigan

April 22nd, 2014
1:00 pm

Won’t argue with you about Charlie Dolson but I would submit that Mr. C. E. Woolman had a much larger and more profound effect on Delta than any President/CEO has ever had or most likely will have.
Can you imagine any President or CEO of Delta today sitting in the “back of the bus” and chatting with his customers all the while not letting on who he was? That, my good friend, was Mr. Woolman.

Neil

April 22nd, 2014
12:46 pm

Charlie Dolson would be flipping over in his grave if he saw how Delta treated it’s loyal customers…