javabytes

No. By attempting to reward dollars you were going to get anyway, although the common thought is that this will increase profitability, it is actually the opposite that happens. You need to incentivize marginal dollars, get people excited to spend money they wouldn't otherwise have done. This truly increases profitability. Frequent flyer programs are successful in attracting an airline's second best customers. The best customers are those that would pay high Y or F/J fares even if the FFP didn't exist. And they frequently don't care about FF program benefits since they get most of them by paying for their premium tickets.

AA_EXP09

Neither have I.

rylan

Lol, a semi-secret 5th tier? Yeah, lets make the program even more complex and dilute the rest even more.

My guess is that those who would qualify for the HVC tier probably wouldn't even care about things like enhanced upgrades or non-crappy SWUs since they are flying in paid F/J anyway.

javabytes

It really wouldn't be all that different than UA's program of Silver, Gold, Platinum, 1K and Global Services as the white envelope tier. Along with what the HVC tier would add, I'm very curious about what Platinum and Diamond would lose.

GatorBlues

Not necessarily. These are often business customers who fly FC on business and use the free awards for leisure when the ticket would have come out of the flyers' own pockets. These travelers can pick other airlines, especially outside Atlanta. The airlines compete like crazy for the business travelers. There are corporate discount deals galore that allow road warriors in big companies (like the consulting firms) to fly premium seats at discount prices the rest of us never see. Rewarding the high revenue customers in the FF program is another effort to pull those customers into Delta's seats rather than its competitors.

On the other hand, Delta would be wise not to gut the awards tiers. Planes taking off with empty seats is bad for business given that most of the costs of getting the planes aloft are fixed. The lowly silver and gold medallions fly Delta even when it's a few bucks more because of the FF program. Gut the program, and Delta will push those customers to fly on nothing but price, a battle Southwest is better situated to win. Delta would lose not only the slight price premium it enjoys for its lower level coach sales, but also volume, which is a bigger problem, again, because of the high fixed costs of getting a plane off the ground. (Employees would love it though, since non-rev travel has been very tough in recent years since Delta has done much better at filling seats in recent years.) Delta might also depress its AMEX revenue if it guts the award seat program. I'd drop my reserve card for a gold Skymiles AMEX in a heartbeat if the award travel is no longer attractive (keeping the gold card only for the free baggage check), and then shift my $130K in business expenses to some other rewards card.

Delta's FF program needs to thread the needle to please both sets of customers. They want to sell as many expensive tickets as possible, but they also need to fill the plane with as much incremental revenue as possible once they have sold all they can sell at a premium. Without having seen the data, I actually think their current program does pretty well based on anectdotal reports from business friends who fall into various categories of status.

mooper

Of course It wouldn't make sense to incentivize dollars that would be spent anyway. They should incentivize profitable activity in a manner designed to yield more of it. For example, offering bonus miles (more aggressively than what is offered now) on the most profitable fares with elastic demand. I can't think of any place where subsidization results in less of something - can you?

Precisely! Note, however, those marginal dollars need to be profitable ones. It is counterproductive to incentivize 3x as much activity at a 5% margin when you can spend the same amount to incentivize 1.5x as much at a 15% margin (for example).

We might be saying the same thing. I've never suggested targeting inelastic areas. They should align awards with profitable activity that can be leveraged through subsidization. Tying award earning to revenue or fares isn't the optimal way to accomplish this. Just as importantly, redemption costs should be tied to the cost of servicing the awards. For example, it is impossible to get a one-way award for less than 12.5K miles on most airlines (a couple exceptions are at 10K), despite the fact that it would behoove the airline to let someone step on board for half that amount as a standby because the marginal cost of servicing would be negligible.

jsmith50

It's a big assumption that those who would qualify for a HVC tier are all flying paid F/J or wouldn't care about the added perks. Corporately, I can not purchase a full F/J ticket. However, I am often flying on full Y and automatically upgraded to F (space available) or am relying on my status to get me into the front cabin. That said, the sheer volume that I fly added to a fair amount of expensive international tix, even in discounted Y, means that my personal spend through our corporate account often breaks $100K/year over a total of 300K+ BIS miles. Because I am ATL-based, DL is the easiest airline for me to fly and as such, I rely on the status I have earned to make the volume I fly as comfortable as possible.

If there was a way to add perks to a HVC tier, I would be all in favor. However, my personal opinion is that it should be in the form of value-added to being a DM and not value at the expense of DM. In other words, find perks that make flying a bit easier without devaluing the other levels. How about little things like an HVC tier card that gets you unlimited free drinks in the air or snack boxes, free Gogo, international upgrades, expanded access to partner and, more importantly, non-partner lounges worldwide, free Global Entry, priority Porsche service (when available), etc.?

javabytes

Here's my question:

If DL did not offer the upgrades and other things that make your travel more comfortable... would you still fly DL because you are ATL-based and it is the easiest?

AA_EXP09

I can tell you that even though I got upgraded more on AC, I ditched their program because of 50% earning, non upgradable fares TPAC.
I now only fly them TATL, typically on very cheap tickets (K, L, S, T)

jsmith50

Not necessarily. Being hub captive means it is more difficult to get the variety of schedule options DL offers but not impossible and it certainly doesn't govern how I schedule flights away from ATL. Given my erratic travel schedule, I'm often flying out of and between other airlines' hubs and in those cities it would arguably be easier to fly another carrier. For example, last week alone, I flew ATL-BHM-MEM-LAX-DEN-JFK(via MSP)-ATL. Because of weeks that routinely look like some combination of this, I completed a UA challenge earlier this year based strictly on my flying away from ATL as a hedge against the chance that the SM program as we know it would be gutted. As I have posted elsewhere on FT, I wasn't that impressed with UA. I honestly feel that DL offers a better product and a better elite program than UA (at least at this time). However, if UA had offered me GS status and made the perks such that I valued their program over DL, perhaps it would've been worthwhile to adjust my schedule to take a UA flight from ATL that is 2 hours earlier or 2 hours later than the DL flights I have become accustomed to taking because they fit my life better.

jeff30189

I live in PHX and fly DL simply because of the upgrades and in spite of the inconvenience when US at least USAir would be more convenient. Take that away with a monetized and fare-based reward system, and I'm definitely done with DL.

Even AA and UA become viable options are they are then no less rewarding of my travel habits and potentially would be easier to qualify for one of the Top 2 customer tiers.

LedgeT

I still have the slide. They were not "fantasy".

Deadtail

Why are you so unwilling to believe that whatever it is you have, was part of working material that has gone through at least one iteration since you received it, or was a concept that Delta decided not to adopt?

Why are you nonchalant about receiving stolen property?

ADLFO

Why DL still employs a head of loyalty who is so anti-customer is beyond me. Under the NW model, we were led to believe that Bob had to battle their RevMgmt for FFer perks. I think under DL's current model, RevMgmt probably has our backs more than loyalty.

itsaboutthejourney

Mr. Robertson may not be great at communicating with customers (ego), but he's not the devil many make him out to be. The core of the problems with the SkyPeso program come from Rev Mgmt. driving the bus. DL loyalty isn't nearly as empowered as the team was at NW.