jeff30189

This idea has been touched upon in other threads, but I wanted to have a dedicated discussion about this hypothesis so that we can consolidate the various points of view.

I firmly believe that Delta flooded the market with Skymiles because it was in panic mode to raise cash and selling third-party promotional miles was a quick way to raise money without directly impacting their customers thru even more fees or higher fares.

However, once the market was saturated with all of these new non-flying miles they were faced with a new problem: how do they retire them so that they arent sitting out there on a balance sheet?

One solution was Skymiles Marketplace where you can redeem them for products and services, but that siphons off a mere fraction of the total glut. The only way to really make an impact is to somehow drive consumers to part with larger blocks of miles per transaction.

Hence the 3-tier innovation, which on paper SEEMED like a good idea - if you absolutely HAVE TO fly on a certain day and time, you can... but only if you pay thru the nose.

I honestly believe that some beancounter on Virginia Ave saw the "potential" to game the system by artificially restricting the availability of "Low" awards to force customers to redeem at "Med" and "High". Ma/Pa Kettle dont know enough to gripe; its only the high volume savvy flyer who smells a rat and calls Shennanigans.

My prediction is that Delta eventually succumbs to pressure and "fixes" the award calendar issue, but they are holding off as long as possible because lets face it - the broken calendar is doing exactly what they want it to do which is siphon off (slowly) that HUGE ocean of miles that they put out there in the past 3-4 years.

Thoughts?

gt_croz

no doubt about it

AndyTLe

Good observations, but really nothing new or surprising. DL gives miles out like candy so it was inevitable that there would be inflation.

MisterNice

When DL increase the number of ff miles to book a ticket, when DL allots less ff seats almost monthly, when DL sells ff miles to every hotel, every car rental, every bank, every stock broker etc what do you expect if one floods the market with anything.

MisterNice

RobertS975

It is all a house of cards, and not just Delta... it is the same at every carrier. And it is nothing particularly new... it has been that way for years.

MikeMpls

I don't think they planned this outcome.

I do believe they intended to devalue SkyPesos and expected the rest of the industry to follow their lead. Instead Delta has been reminded of the power of competition.

Sometimes 800 pound gorillas can be a bit headstrong.

BearX220

I agree, and while the industry hasn't fallen completely into line it's half worked -- plenty of SM members are still not hip to the program's collapse, and won't be until they try to trade their miles for something.

I don't think the devaluation strategy is really a conspiracy theory. DL was trying to emulate the British Airways Executive Club, I think, which sharply narrowed its appeal back in 2003 or 2004, making it relevant to a lot fewer customers and effectively "firing" price-focused customers who bought discount tickets. DL hypothesized, pretty openly, that it could "fire" a broad swath of consumers who count miles, assess their value, and care about redemption values. The jury's still out on whether it's hurt DL much.

Meanwhile the recession has shown up the folly of BA's strategy to fawn over premium-cabin high-revenue flyers and pee on everybody else; when the economy tanks the former become "everybody else," and BA is in real trouble now. So I doubt the BA case study is still held in such esteem in Atlanta.

ADLFO

I would add that DL certainly seemed to be trying to follow the Flying Blue model of decimating their FFer program and eliminating value to those they deemed lower value customers. Maybe they should stick with the American "customers first" attitude instead of copying the "that is not possible" attitudes of these euro-trash programs. (Only referring to the FFer programs, NOT the very nice people who live there)

RealHJ

I'd agree, except I'd state that the calendar is not the real issue. That's just a side-issue. The real issue is the abysmal low award availability, both domestic and international (on the majority of routes; for many 4+ months in a row not a single low to be had!).

GUWonder

DL didn't plan this outcome very well, and no amount/type of DL smoke and mirrors messaging is going to change the situation: the outcome for DL's SkyMiles customers is generally awful and DL is getting the criticism DL deserves for its customer-unfriendly ways with regard to SkyMiles customers.

[Elimination of one or two of the many DL award ticket fees while hiking award ticket fees is not a sign of DL management acknowledging its wrong-doings committed against SkyMiles customers.]

brad9696

And in the middle of all this, add the NWA merger and the additional "voices" of PMNW flyers, who were used to numerous favorable WorldPerks policies (PU465 redemption for LUT fares, ease of booking Award Travel via NWA.com, etc.).
This just makes the "devaluation" look even worse

JSFox

I think DL used the merger (never let a crisis go to waste) to intentionally devalue a number of customer things from Skymiles themselves to increased fees and stricter rules. They are then giving us back a little bit of what they took away in hopes that we'll think that from a relative standpoint we're better off today than we were yesterday (true) and not realize that we're worse off than a year ago or worse off than other carriers.

patom

There is another aspect to this which bothers me. Because of the lack of "low" availability I have found myself buying tickets rather than using miles.
This could be a serious mistake. If DL doesn't fix the low availability problem the value of existing miles decreases even further. Trying to determine when to use miles vs paying cash makes sense gives me a headache.

I have a hard time believing that someone in Revenue Management figured out this strategy that makes it a win for Delta either way. The customer uses double miles or buys a ticket. Doesn't get any better than that. (for DL)

nas6034

On the other thread(Companion upgrades for LUT) there was a link and somewhere down the page it said coming Fall 2010 a fix of the award calendar..so who knows..

mspman

I think that the three-tier system, as well as the non-availability of "LOW" awards is specifically designed right now to keep the liability of Skymiles low. I don't think it's to drain the miles, I think they're purposely devaluing them so their balance sheet looks better.

At some point, they're going to open up the "LOW" awards more, hence increasing their liability and decreasing their revenue per seat, but also getting the miles off their books slightly faster.

It's a balancing act. The one assumption that DL is making is that their best customers will stay loyal while this process happens, and I'm not convinced that's the case.