Delta has made a few recent moves that would cause some to ask if they are the smartest airline in the sky. Before you get all worked up, hear me out.
Investments In Future
First of all, there is the FAA grounding of the 787 this week. Delta was not impacted at all by this move because they took steps to avoid it. Taking (late) delivery of a plane that is now grounded is not, “Ok” as one person put it, especially if you are an executive decision maker of a global airline. Instead, Richard Anderson said:
“We need to have some certainty about delivery schedule…So instead we made an investment in our existing fleet, put interiors in the existing fleet..We need to see the 787 and A350 be successful …We need certainty about when airplanes are going to come.”
Notice the mention of the A350 and the need to know when planes are going to come? An obvious dig at the delays to the Boeing 787. Delta also has a few Airbus planes flying around as holdovers from the Northwest acquisition so they could be holding these are cards during discussions with Boeing, but I don’t know that, just suspect it.
Even though Delta picked up 18 orders for the 787, they deferred the delivery of those orders until 2022. Instead of making costly investments in an airplane that was delayed and is now grounded, they invested in their current fleet, picked up some cheap planes from other airlines like AirTran and American Airlines. In addition, they bought a refinery and made a significant expansion play with an investment in Virgin Atlantic for an expanded presence in London. I’d say these were all smart moves. Would you agree?
Loyalty Program Change
Now to the 800 pound gorilla in the room, Delta’s tilt towards a revenue based model is not yet proven out. It could be a great business decision that drives incremental spend towards their flights or their American Express credit cards. Or it could be a costly decision that drives away loyal customers. I will personally benefit from the change. To remain in the elite ranks one will have to meet the following criteria:
SILVER Medallion Status
- 25,000 MQM – OR – 30 MQSs
- And $2,500 MQDs
Gold Medallion Status
- 50,000 MQM – OR – 60 MQSs
- And $5,000 MQDs
Platinum Medallion Status
- 75,000 MQM – OR – 100 MQSs
- And $7,500 MQDs
Diamond Medallion Status
- 125,000 MQM – OR – 140 MQSs
- And $12,500 MQDs
Beginning January 1, 2014, top tier elite members that fly international business class on a paid ticket will earn a 200% bonus MQMs. If you buy one full fare business class ticket to Asia, you’ll likely have enough MQDs to qualify for the Platinum level. And there is always the option to spend $25,000 on your Delta branded American Express card.
The MQDs requirement will be waived if you make at least $25,000 in Eligible Purchases in the qualification year with your Delta SkyMiles Credit Card from American Express.
So on paper, it looks like driving your customers who like elite benefits to spend more on flights and on their credit card is a good business decision. Until you think about they still have a broken SkyMiles award booking engine that we’ve proven hides low level award flights on partner carriers in favor of displaying 200,000+ flights on Delta metal. Also what about future changes to redemption options? So I still believe this move is yet to be proven a wise one or not.
Given these two recent moves, do you think Delta is the smartest airline so far in 2013? If not, then who is and why?
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This all makes great sense, as long as passengers don’t mind flying in older planes and being treated like their loyalty has a well-defined price. There’s a reason United and American don’t have quite the same image problems as Delta.
Personally, I don’t mind the change in policy since I believe there should be a difference between folks that truly spend “butt-in-seat-time” and folks getting status other ways. (I know that MRs are still in my category and might not be as great but I will continue doing them)
I like DL and have done enough flying over the past years and will continue flying a lot of within-US M-Class which are costly enough to make up the MQD.
For the planes, I am undecided since I have seen too many 3+ hours flights on very old planes, that don’t have any entertainment or even just a little power socket in FC. They need to fix that!
It’s Virgin Atlantic, not Atlanta 😉
Nice post!
I think the decision to wait for the 787’s is a sound one. It’s a bit like “never take version 1.0 of some new software” – lot’s of benefits and most customers choose a flight based upon price, timing etc. with equipment not being the primary decision maker.
While loyalty schemes currently compensate well those who MR efficiently, they compensate relatively much less well those who drive tens of thousands of dollars in premium spend. I think adjusting the balance so that the latter do relatively better is probably healthy for the airline.
The 200% mqm would benefit very few since it only applies to *full-fare* F and J …. how often does someone book those ?
Replacing old cramped RJs with MD-80/88/90 type aircraft even if older is far more meaningful than a few shiny new 787s. More importantly since aircraft interiors can be refreshed, something Delta has been doing with some of the products, why spend $$$ on a a few new planes with all of the burn in headaches when instead you can spend less $$$ and upgrade the interior of your entire fleet?
As to the elite qualifications, I think it’s great. Your status shouldn’t be based on how many $300 transcon MRs you go on but on how much $$$ you spend. I flew enough last year to make gold based on segments. My spend was well over $10k yet because my flight routine was a bunch of shorter flights (which due to layers means the same amount or more hours traveling) I get worse treatment than someone spending less than me whose flight pattern involves longer flights.