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.
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).”
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.”