StayingHomeIsBetter

I don't claim to be a HVC in any respect. But I am a sustaining customer. DL would not have domestic aircraft to ferry HVC to their international departure airports if it weren't for a lot of sustaining customers.

As to "revenue", fair point. I'll make the change.

dcline414

I believe revenue and income are interchangeable terms that mean the same thing--gross intake before expenses. NET revenue/income is the same as profit, what is left after paying operating costs.

But since Delta's operating costs are more or less fixed in the short term (unless they cancel less-than-full flights), it is fair to say that any revenue increases their profitability. The added weight of a single passenger doesn't really increase the fuel cost significantly, so there are virtually no variable costs, only fixed overhead.

Thus a $20k TPAC fare is no more valuable to Delta than 20 $1k fares, assuming those seats would have been empty otherwise (or sold at a much lower fare).

I am also a $20k+ customer that doesn't hit PM unless I go out of my way to get additional segments, and I can't believe that Delta would possibly value a 1-2 time per year TPAC flyer over a weekly K/Q/H/M domestic flyer.

TheMadBrewer

Certainly one would take the single $12K TPAC guy over SHIB (or me who spends less but still over $10K). But my guess there are lot more $10-15K frequent travelers. I guess the $64,000 question is the ratio. If it is 100:1 then Delta will screw themselves if what is reported is true. If it is 2:1 then they make out like bandits.

But the margin over a LUT (or HQK) flyer over marginal costs is quite large. If they say "you're not worth it" then they get $0 from us. The seats must be filled so they will fill them with people who pick a flight based on price. Not a good place to be.

Let's do a thought experiment: Say Delta does switch everything (earning, status, redemption) to strictly revenue based -- and they don't credit the real HVC -- the entity which pays for the flight but they say something like this...

"On advice of our tax professionals, since the new system is basically a rebate system, we will be sending all members a 1099 showing their SkyBucks earnings as misc. income, at a rate of 1 SkyBuck = $.10"

Do you think they're would be any howls of protest from those people who now are slamming us lowly $10K/year flyers?

ksweeney

So where I am absolutely clueless is what will happen with carryover miles. If a cut over to points happens at the start of the program year how will carryover be treated:

a). Carry over miles will be dropped
b). Carry over miles converted to points based on some ratio (hopefully 1 to 1)
c). DL goes back and calculates points based on the customer's previous years flights.

The other possibility is cut over to points in the middle of a year. The same questions apply to that scenario as well. I fly AA quite a bit and they currently track both and points or miles whichever you attain first apply to status attainment.

5khours

Not quite true. It's about 4% per hour of incremental weight (200lbs for luggage and pax on average) for fuel. So on a 24 hour RT trip TPAC that works out to 192 extra pounds of fuel or about $160 in extra fuel.

EZE

Number one cost is fuel which is variable - they are cutting total seats. Even labor is somewhat variable.

SkyBuck

I make no claim to be a HVC, but would like to think I'm worth more than that.

dcline414

Right, but that's not exactly short term. By short term, I mean a route scheduled to fly with a 757... sure they could reduce it to a 737 if the larger equipment wasn't profitable, but they can't just swap the plane out because tomorrow's flight might not have filled up enough.

And the labor cost for an individual passenger is more or less fixed for a particular departure (i.e. they decided to use a 737 with 3 FAs and 1 GA). If 5-10 seats are empty, they can't just cut a FA/GA. Again, this would be mid/long term.

Plus, Delta can perhaps downsize equipment on a route, but that still leaves them with idled equipment (which comes at a cost). And they have a limited number of planes by which they can downsize to. At some point it isn't worth parking a 757 and buying an extra 737 to right size a route that is borderline profitable.

My point is, a $1k domestic flight is likely last-minute, as is a $20k TPAC. If these were available for purchase, then the seats would have otherwise been left empty. So there is negligible cost incurred by accommodating one extra passenger on either flight.

Considering all of these factors, 20 $1k domestic flights are likely of equal value as 1 $20k TPAC to Delta. Both would add $20k of incremental (top line) revenue with at least 99% of the revenue translating to (bottom line) profit.

jsmith50

Even believing strongly that major changes are coming and waiting for confirmation that I can begin my UA status match, I still continue spending on my DL AmEx. Why? Because a UA status match is a hedge for status against a SM account that, with rollover, will keep me DM for 2+ more years and as long as there is not major devaluation in SMs, we know the DL-AmEx contract is solid for several more years. While the accrual method, points versus miles, may change, the partnership will continue to reward AmEx spend and that will be good for something on DL.

pmaddock

I don't know about that - its likely DL will include some level of devaluation for current miles. Personally I'm switching back to the MR card I use after I pass the MQM bonus on the DL plat.

sbjnyc

Really? The current promotion for a DL platinum Amex is 40k miles including 15k MQM, a $100 statement credit for a $150 annual fee. Using the PWM feature, that's essentially being given $350 for signing up and spending $1k on the card assuming the MQMs are worthless. It might not be worthwhile to keep the card beyond a year but it seems very worthwhile to sign up.

It really depends on the routes you fly. Ignore the incremental cost of fuel/wages on operations (fuel + wages makes up about 50% of Delta's operational costs). If Delta was operating at 100% load what you say would obviously be false since if you didn't fly there'd be someone else to take your place. But Delta has ~80% loads so it really depends on the routes you fly. If you consistently fly routes that have empty seats than you are right since 100% of your ticket price is marginal revenue. I'd guess for most people it'd be somewhere in between. I think it's clear that Delta wants higher loads so chasing away the guy with 20 $1k tickets on non-full flights would be a mistake. Plus, the guy buying 1 TPAC in J once per year si not loyal to Delta at all and will buy a ticket based on schedule and service and maybe price.

BobH

Delta has made a statement that none of this will happen

see (towards the end)

http://www.freep.com/article/2012040...xt|FRONTPAGE|p

Maybe they've heard us?

but maybe not ?

<lol>

Bob H

DavidAL

Website won't load. Can you copy and paste?

jsmith50

You and I must be reading different articles...

The link you posted says:

"He declined comment on another rumor – that the Delta SkyMiles frequent flier program soon will begin awarding miles based on how much you paid for the ticket, not how many miles you have flown."

Declining comment and commenting that there will be no changes to the program are two entirely different things. Declining comment is essentiallly what the DL reps on this board have been doing since this thread began.

KLC

removed - same comment as jsmith50.