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-   Delta Air Lines | SkyMiles (https://www.flyertalk.com/forum/delta-air-lines-skymiles-665/)
-   -   First Class Monetization, or FCM: The Definitive Thread (https://www.flyertalk.com/forum/delta-air-lines-skymiles/1230437-first-class-monetization-fcm-definitive-thread.html)

VVF Mar 15, 2012 10:16 pm


Originally Posted by Thomas Hudson (Post 18210047)
Most good bartenders I know take care of their regulars. Whether it is calling them by name, giving their drinks a little boost, remembering their drink of choice, giving them another drink right before the old one becomes empty. Sure, they try to do this for all customers, but they certainly pay extra attention to their best customers and are typcially rewarded for it...

Yes, this!

Fascinating thread, just read it all. Yes, with reduced capacity, fewer seats, people paying a little premium (but not much), the effects of milking their top flyers may not be obvious. But it is a dangerous game to play in the mid-to-long run, especially with a nearly guaranteed second dip economical crisis. We'll just stop paying (at first), and will stop, or limit our flying too. I canceled 4 trips today (full Y and B), and so did colleagues from all over the country. So, today alone DL lost ~$30K of revenue. The DM agent asked several times whether I was sure. And I decided to call off two intl trips later this year (would have been 8-10 people, likely in BE or high coach fares). That's another $50-70K. I know, it is pennies for DL, but somehow I think I am not alone. Why suffer through travel unless you absolutely have to?

I may rebook later on a lowest fare, but I am actually considering (call me crazy all you want) trying AA. Bankruptcy may not be the end of the world. Will make their ExecPlat in no time and will do just fine. Went through Delta's BK, will survive AA just as fine too.

Zomba Mar 15, 2012 10:18 pm


Originally Posted by dcline414 (Post 18210118)
I think we've got two different economic paradigms being confused here.

With a commoditized product there will be economies of scale, increased efficiencies through learning, continuous process improvement, and constant cost DECREASES. But a supplier's margin will never improve if the product is commoditized. The price has to constantly be lowered or a competitor will undercut your price and steal all of your customers.

If you find your product being commoditized, you must realize that competition will eventually eat away your profit margin. To escape this cycle, you must find a way to differentiate your product so that your customer is willing to pay more. This is what SkyMiles was accomplishing for Delta.

By devaluing their loyalty program, Delta is essentially cutting their cost by reducing their product into a commodity. They are presently enjoying the residual loyalty of longstanding customers, but only for the moment. They are enjoying high volumes and a high profit margin for an inferior product.

But you are crazy if you think you can strip down your product to a cheap commodity and continue to sell it at a premium. At some point Delta is either going to lose volume or they will have to cut prices to match their service cuts.

Either way, their current profitability is not sustainable unless they can continually find ways to innovate and improve the experience of their frequent fliers (the opposite of what they are doing today).

+1

Much better said than what I was attempting to get across.

VVF Mar 15, 2012 10:33 pm


Originally Posted by dcline414 (Post 18210118)
If you find your product being commoditized, you must realize that competition will eventually eat away your profit margin. To escape this cycle, you must find a way to differentiate your product so that your customer is willing to pay more. This is what SkyMiles was accomplishing for Delta.

By devaluing their loyalty program, Delta is essentially cutting their cost by reducing their product into a commodity. They are presently enjoying the residual loyalty of longstanding customers, but only for the moment. They are enjoying high volumes and a high profit margin for an inferior product.

But you are crazy if you think you can strip down your product to a cheap commodity and continue to sell it at a premium. At some point Delta is either going to lose volume or they will have to cut prices to match their service cuts.

Either way, their current profitability is not sustainable unless they can continually find ways to innovate and improve the experience of their frequent fliers (the opposite of what they are doing today).

Thank you for making very accurate points very clearly!

StayingHomeIsBetter Mar 16, 2012 12:10 am


Originally Posted by bartendress (Post 18209861)
...

The party train survives as long as there are folks willing to pay for the gas and the booze. It will not persist if all the riders are waiting on someone else to bring the gas and the booze.

What you deniers will never concede is that some of us have been paying for "the gas and the booze."

I just barely have to go to the second hand to count the number of LUT fares I have purchased in the last 2 years.

Don't get me wrong. I firmly advocate that everyone has a right to share their opinion here. But, I'll put your opinion into perspective, based upon your vast experience within the DL system, as indicated by your FO status.

Perhaps we all should sense some "I've never been upgraded and to hell with them who have" sour grapes? ;)

VVF Mar 16, 2012 2:47 am


Originally Posted by StayingHomeIsBetter (Post 18210549)
What you deniers will never concede is that some of us have been paying for "the gas and the booze."

I just barely have to go to the second hand to count the number of LUT fares I have purchased in the last 2 years.

Don't get me wrong. I firmly advocate that everyone has a right to share their opinion here. But, I'll put your opinion into perspective, based upon your vast experience within the DL system, as indicated by your FO status.

Perhaps we all should sense some "I've never been upgraded and to hell with them who have" sour grapes? ;)

You got it, precisely the attitude I see. I took one trip below M last year, and most of my flights were Y or B (and I, S, J). So, I've paid my share for "the gas and the booze." Delta advertises its loyalty program as the best out there, and promises certain benefits (such as UDU at T-5 for DMs). In reality, they no longer exist on the routes that matter (I can manage flying in coach MCO to ATL or SAN to LAX), even if I want to use SWUs. Just come out and honestly say that we don't do that any longer, but we will continue to give you 125% mileage etc. Show us some respect, that's all.

As for all the "gas and booze and party train" comparisons, grow up already and try to look at it from a macro perspective. One doesn't have to be a genius to see the big picture, even in today's economy. Forget about the upgrades, just realize that driving away those who consistently pay high fares would cost everyone dearly, as LUTs will go up too to compensate for the YBM losses. And domestic FC will never become a luxurious product anyway, DL simply can't afford that.

DLdweeb Mar 16, 2012 4:14 am

Wonder what DL would do if they got a call from Boeing one day that went like this:

Boeing: Hello Richard, hows the family? Listen, I know you have been a very loyal customer in the past and we have given you very good pricing, reserved production slots for you even without firm orders, knowing you would probably need them, and jumped every time you had an issue. Well, we hired some MBAs recently who sold us on something called "FCM". Gotta admit, it was a hard concept to swallow at first, but we're taking to it like ham to a sandwich. That past loyalty was great, makes for a good story, but from now on it's gonna be more of a "what have you done for me lately" kind of relationship. Reserved production slots? Adios, we'll sell those slots to the highest bidder, be it you, RyanAir, United, Lion Air, whoever. And that extra service we have provided in the past? That doesn't really work for us anymore. Now if you call with a technical question, have that corporate Amex ready. Want to place a parts order? Use our dysfunctional website, but if you have to talk to a rep, whip out the card again. Need to place a warranty parts order? Hmm, I don't see any warranty availability in the next year, but if you want to pay for the parts we'll ship them out tomorrow. Oh, and I can only look up three more parts for you, then I have to end the call. Aircraft on ground? How much is it worth to you? We may be able to get to it next month, if we have nothing better to do.

Sure, this would probably give Boeing a short term P&L boost, but you can bet Richard Anderson would be having dinner with John Leahy of Airbus in a heartbeat. Now maybe Airbus won't be able to give DL the planes/support they request, but I suspect DL will never forget the way Boeing treated them, and that will influence future business.

bubbashow Mar 16, 2012 4:18 am


Originally Posted by GRALISTAIR (Post 18208287)
I fear a WN type scheme will be implemented by DL where mileage/segment based FF miles become a thing of the past and price plays more into the FF points earned.

Why would you fear such a program? With that program, Elite will be something special. Those that contribute to the bottom line the most will be rewarded the most. I wish that would start TODAY!

dcline414 Mar 16, 2012 4:26 am


Originally Posted by DLdweeb (Post 18211063)
Wonder what DL would do if they got a call from Boeing one day that went like this:

Boeing: Hello Richard, hows the family? Listen, I know you have been a very loyal customer in the past and we have given you very good pricing, reserved production slots for you even without firm orders, knowing you would probably need them, and jumped every time you had an issue. Well, we hired some MBAs recently who sold us on something called "FCM". Gotta admit, it was a hard concept to swallow at first, but we're taking to it like ham to a sandwich. That past loyalty was great, makes for a good story, but from now on it's gonna be more of a "what have you done for me lately" kind of relationship. Reserved production slots? Adios, we'll sell those slots to the highest bidder, be it you, RyanAir, United, Lion Air, whoever. And that extra service we have provided in the past? That doesn't really work for us anymore. Now if you call with a technical question, have that corporate Amex ready. Want to place a parts order? Use our dysfunctional website, but if you have to talk to a rep, whip out the card again. Aircraft on ground? How much is it worth to you? We may be able to get to it next month, if we have nothing better to do.

Sure, this would probably give Boeing a short term P&L boost, but you can bet Richard Anderson would be having dinner with John Leary of Airbus in a heartbeat. Now maybe Airbus won't be able to give DL the planes/support they request, but I suspect DL will never forget the way Boeing treated them, and that will influence future business.

Great analogy! ^

mother- Mar 16, 2012 5:31 am


Originally Posted by bartendress (Post 18209675)
But it will affect you negatively. If you're not tipping, I'll get to you when I have a free moment. You may have more money in your wallet, but it's entirely likely that you're the last schmuck who's 'partying like a rock star'... trust.

Your analogy is bad because DL isn't relying on tips (bartenders/bartendresses operate WAY below minimum wage). DL is going after the most PAX at the best overall price per seat.

Wrong, if this is a commodity game then not tipping has no bearing on the level of service you receive. Customers are only coming in for 1 drink at a time, and you don't have the ability to remember them.

If on the other hand you do remember them and reward their loyalty (tipping you and being nice, being repeat customers, or maybe taking a more expensive connecting flight) then you are arguing for a loyalty program:eek:, just an un-official one in that is in effect stealing from your employer in your case. :D

And don't confuse the issue of your relationship to your employer to the one between your employer and your customer. You still don't get a tip if I don't come in to the bar at all.

Thomas Hudson Mar 16, 2012 5:32 am


Originally Posted by mother- (Post 18211238)
Wrong, if this is a commodity game then not tipping has no bearing on the level of service you receive. Customers are only coming in for 1 drink at a time, and you don't have the ability to remember them.

If on the other hand you do remember them and reward their loyalty (tipping you and being nice, being repeat customers, or maybe taking a more expensive connecting flight) then you are arguing for a loyalty program:eek:, just an un-official one in that is in effect stealing from your employer in your case. :D

And don't confuse the issue of your relationship to your employer to the one between your employer and your customer. You still don't get a tip if I don't come in to the bar at all.

Thanks Momma.... you always know just what to say...:p

rwoman Mar 16, 2012 5:36 am

FCM did motivate me to go with a K fare ATL-LAX-ATL next month so I could confirm "G" on the 77L with SWU's...

howtofreetravel Mar 16, 2012 5:51 am

Alot of you people are very high revenue for delta.How about we have a strike for a month? maybe start a thread for that.That would certainly force dl to change some ways perhaps.

Often1 Mar 16, 2012 6:42 am


Originally Posted by Zomba (Post 18209814)
If that is the way my suppliers treated my company's business, they would be former suppliers! Our company uses volume at our key logistics depots to get prices that are far below what our competitors pay. If they started repairing our competitors' equipment for the same price or lower than our price, they would lose 100% or our business. The question for them is: do I value customer X's business more or do I value the slightly higher rates that others are willing to pay more?

How do you know what your competitors' pricing is without violating antitrust law?

You sound like the kind of customer one "fires" not one from which to seek more business !

Thomas Hudson Mar 16, 2012 6:44 am


Originally Posted by Often1 (Post 18211465)
How do you know what your competitors' pricing is without violating antitrust law?

You sound like the kind of customer one "fires" not one from which to seek more business !

I'd fire any sales guy that did not know his competitor's pricing...

Often1 Mar 16, 2012 6:45 am


Originally Posted by flymanbeast (Post 18211310)
Alot of you people are very high revenue for delta.How about we have a strike for a month? maybe start a thread for that.That would certainly force dl to change some ways perhaps.

There are a thousand of these comments on FT. Your comment should be matched with the threads on UA, AA and US, all suggesting that the tiny % of high-maintenance pax on FT will somehow all put their jobs on the line to not travel or to jump ship.

If all of DL's pax with $100K+ BIS spends jumped ship, that would be a disaster, but a tiny # of people at $20K BIS (and I really mean BIS, no frills) jumping to UA in return for a similar # from UA is a drop in the bucket.

With reduced competition, where are you going? WN? I always get lost trying to find the F cabin on their aircraft.


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