MSPeconomist

I can just imagine the screams of those flying on OPM under good corporate contracts that provide D1 tickets for about half of the price that they're sold to the general public.

In fact, more generally, I wonder whether corporate contract discounts are taken into account in calculating MQDs since AFAIK under some of these deals, the employer gets a rebate at the end of the year but the traveling employee sees the undiscounted fare unless the corporate travel agent procures a bulk or consolidator fare.

gooselee

Or, y'know, they could just go to a completely opaque system where status is granted at certain levels based on DL's back-end rating of how profitable you are. Could also be manual flags for pax who are recognized as being consistently nice or consistently jerks to frontline staff, or pax who tend to "overuse" benefits, etc.

Seems like some FTers think that's the way to go. If we don't think all these arbitrary thresholds are bolstering DL's most profitable customers, just go on ahead and assign status and benefits based directly upon profitability itself.

GatorBlues

This is a good point. When Delta knocks 15 to 25% off for the big consulting firms at the end of the quarter based on total firm travel, does it go back and deduct 15 to 20% from the individual flyer's MQDs? I do not believe it does. I wonder how many touting their high spend and happiness with this change would still make Diamond if you take away 20% of their MQDs.

GatorBlues

It doesn't have to be opaque. Delta could come up with a formula if it wanted to. I'm sure the marketing people would nix it because the harder a system is for the general public to understand, the less effective it will be for changing their purchasing behavior. The concept -- that all revenue is not equally profitable -- is simple. Unfortunately, designing a rewards system around profitability is not simple.

xliioper

I wouldn't say that. Southwest's program seems to capture it more effectively than legacy programs while still being relatively simple. Part of it comes from dispensing with the use of miles as a metric.

hdtv4me

Since my company does not have a contract with Delta and receives no rebates or discounts, I would not be subject to my MQD's being reduced. So I'm still happy-and-high-spending and expect my MQDs to be awarded.

Now where I don't like losing MQDs is on partner airlines, such as Air China. If I buy a $6k J fare from JFK-TPE I ought to receive more than 25% MQDs. Especially since they only reason I'm flying them is because Delta's APAC routes have managed to get worse, not better, when it comes to TPE.

But I digress. If the main point is that it is unfair that those flying on big corp contracts receive full MQDs when the company actually doesn't pay 100% for the fares then I would agree. But it is also clear to me that Delta's strategy to cater to corp accounts, FCM, investments in NYC, etc. have all paid off handsomely. Do I think they are greedy whores? Sure. But welcome to free enterprise and capitalism.

One thing I wonder is how many Delta AMEX card holders are impacted by this change as far as MQD waiver for Diamond? Delta makes over $400m/yr off the AMEX partnership (or so I recall reading). How many Delta AMEX card holders are DMs that qualify with the waiver as a percentage of overall number of Delta AMEX card holders? If only 10% of card holders are impacted perhaps the gamble doesn't really hurt the AMEX partnership all that much, yet, gives big spenders more upside to shifting most or all of the spend to Delta.

cestmoi123

I would be shocked if 2% of Delta Amex card holders are affected.

gooselee

A formula to truly define profitability would indeed be too complex for marketing, and that's why I think it'd need to be opaque - at least externally. Customers don't want to see the machinations behind CASM costs, auxiliary costs, profit-from-fees, etc.

But, you could also keep the calculations opaque and remove passenger-specific adjustments, and just when someone gets to the purchase screen for a ticket, it tells them how many WidgetPoints they get for that purchase. A Q fare on a single 90 min flight might earn more WidgetPoints than a V fare on a 2-segment TCON or something.

All the customer needs to know, is how many WidgetPoints they must collect to pass "GO".

flyerUSA

No, it's not a good point.

A) I can tell you with 1000% certainty how it works – I book my flights through our corporate travel portal. Those prices for Delta flights are always cheaper than on delta.com. The higher the fare class, the bigger the discount. For example, an XSLUT fare on delta.com could be $100 and my corporate price in the same fare class will be $95. Cheap fares, small discount.

When those are sold out and the remaining classes are high - KHQMBY etc - the discounts are fatter. Public pays $200, I pay maybe $150 - end up ticketed in same fare class (although the full fare code may be different with slightly different rules.)

My MQDs are awarded based on the price of the ticket at the time of sale. If I pay $150 and you paid $200 (taxes aside), I get 150 MQDs and you get 200.


B) You believe Delta gives another rebate to my employer at the end of the year. I don't know that to be true, for a fact, but let's assume that it is.

You are suggesting a rule where, after I am already awarded MQDs and related miles/status...that at the end of the year Delta should claw back its awards from me. Ooops we thought you were valuable but actually you're not!

Imagine being in THAT position as a business traveler and try NOT being infuriated. Meanwhile some cranky FT poster is off in the corner making a Nelson Muntz "ha ha!" while I get demoted and booted out of my seat? Once you give people something, you will incur serious wrath trying to take it away later. It seems like reneging.

Also I think this raises an ethical concern because I am allowed to book personal travel (for me only, I can't ticket for anyone else), taking advantage of the corporate discount, and for those flights I pay out of pocket. It's true that a sophisticated accounting scheme could separate which flights were paid directly by my company and only rebate those...but .... I'm skeptical if that happens. And if they get some rebate of my own dollars - ie, they are actually profiting from me, via Delta...that would boil me too. But it just seems implausible. I'd like to see proof and I've never heard of this, in all my time of working for [anonymous giant consulting company].

GatorBlues

Whether you've heard of it or not, it was standard in the industry 10 years ago for the big consulting firms to receive a quarterly rebate based on the total revenue flown by their employees -- there were tiers where the rebate percentages would be higher above certain revenue thresholds. It is possible that this structure got phased out as a result of the feds' false claims act investigation of the big firms for pocketing the quarterly discounts while expensing the government for the full upfront amount paid for the tickets. However, my understanding is that the big firms changed the way they expense the government, and disclosed the discount (and that they would keep it to offset overhead) to other clients, and thus did not ask the air carriers to take away the additional discounts being paid as refunds each quarter based on total revenue flown.

I didn't mean to suggest that Delta should claw back the MQDs. You are correct that people would go ballistic. I was merely saying that these back end discounts are yet another illustration of how MQDs are often a poor measure of a flyer's profitability.

gooselee

It still is - for many businesses with travelling employees, not just the big consulting firms. Same for hotels and car rentals, too. It's one very large component of many corporate rate codes, and it's exactly why your company doesn't mind that you use their rate code for personal travel.

Agree that the employees would pitch a fit if there were a claw-back of MQD and/or benefits at quarter/year-end. But make no mistake that when you use a corporate rate code, there's a very good chance part of what you're paying is going back to the company who holds that contract.

flyerUSA

Well everyone here sure is confident about it. I'm going to ask around at my company.

Such a system seems needly complicated. Why give both an upfront discount AND also a rebate later? Why not just offer a discount on the next quarter or year's fares, based on the previous period's revenue? I'd like to think some older rebate system has been replaced by what I see plainly now.

Who knows.

cestmoi123

These discounts are definitely still around. I've encountered it in the past when our travel portal wasn't allowing me to book what to me looked like a cheaper option. Travel dept informed me that, while it appeared cheaper, it was actually more expensive for the company, on net, once the discounts that the company got (but which I couldn't see) were included. I've never seen a scenario where the fares in the travel portal were different from what's on delta.com/kayak/etc., the discount has always been in the form of a post-hoc volume-based rebate.

MSPeconomist

If you are really flying Air China (CA) JFK-PEK/PVG-TPE, you should *not* be receiving any MQMs, MQDs, MQSs, or DL RDMs. The mainland Chinese airline Air China belongs to *A, not SkyTeam.

Billy Mumphrey

China Air is part of SkyTeam, I've received MQMs and MQDs from their flights. Perhaps you're thinking of EVA Air? They are the only other airline (to my knowledge) that flies JFK-TPE, and they are, in fact, Star Alliance.