Delta: "Demand for Skymiles as a currency is increasing."
#16
Join Date: Dec 2018
Location: PHX
Programs: Delta DM, Marriott Lifetime Titanium, HHonrs Diamond
Posts: 1,336
The 12% growth in Sky Miles redemptions appear to be compared to Q1 of last year from my understanding of the conference call today. They attribute the rollout of "SkyMiles as currency" to mobile as the driving factor. People are probably more impulsive to spend those miles on an offer on their phone than logging in via web browser. Half of upgrades using miles happened on mobile. Mobile is now 20-25% of their direct bookings.
Much of what they say regarding AMEX revenue is annualized projections. One analyst pressed them how they can project a doubling of AMEX revenue by 2023 and wanted more transparency behind that. AMEX and DL have a confidentiality agreement regarding details of their agreement, although both are public companies and must post their respective revenue and expenses, they don't give breakdowns and numbers of AMEX members, average spend, etc in that partnership.
Joseph DeNardi -- Stifel, Nicolaus & Co. -- Analyst
Yes. Good morning. Ed, in 2018, you guys received $3.5 billion in cash from the selling miles and reported about $1.5 billion in marketing fee. You're on track for $2 billion in 2020. If you can get to $7 billion in 2023, you'll be doing $3 billion to $4 billion in marketing fee. How could you possibly not break that out as a separate business unit? I'm not talking about spinning it or selling it, just segmenting it out. What are your thoughts there?
Ed Bastian -- Chief Executive Officer
Well, my thoughts are as a good problem to worry about, Joe. We are -- first of all, we are pleased and thrilled with the new renewal. AmEx is an awesome partner and our two brands line up so well strategically and with our customers and our people. As we grow our loyalty program, you're right, there will be a question of disclosure in terms of providing better insight from an ownership perspective and a governance perspective into the drivers of our profitability into the future and whether that's in a segment or whatever disclosure format, I am not sure what it will take, but it's something that we've been giving greater disclosure to, as you know, and we'll continue to consider that.
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The AMEX component is not insignificant, and those 50% margins can really help ease the pain of a quarter when there might be a little pressure on flight operating margins.
Since nobody posted the link yet, here is Ed on CNBC this morning... https://www.cnbc.com/2019/04/10/delt...-earnings.html
Transcript of the Conference Call: https://www.fool.com/earnings/call-t...gs-call-t.aspx
I am a very happy shareholder this quarter and it's nice to see their performance be reflected in the stock price, since in 2018 it seemed that UAL got all of the love. But the street is fickle and once it became well-known that DAL did not have the MAX, it became the darling of the major airline stocks again, and then this quarter turbocharged that.
Much of what they say regarding AMEX revenue is annualized projections. One analyst pressed them how they can project a doubling of AMEX revenue by 2023 and wanted more transparency behind that. AMEX and DL have a confidentiality agreement regarding details of their agreement, although both are public companies and must post their respective revenue and expenses, they don't give breakdowns and numbers of AMEX members, average spend, etc in that partnership.
Joseph DeNardi -- Stifel, Nicolaus & Co. -- Analyst
Yes. Good morning. Ed, in 2018, you guys received $3.5 billion in cash from the selling miles and reported about $1.5 billion in marketing fee. You're on track for $2 billion in 2020. If you can get to $7 billion in 2023, you'll be doing $3 billion to $4 billion in marketing fee. How could you possibly not break that out as a separate business unit? I'm not talking about spinning it or selling it, just segmenting it out. What are your thoughts there?
Ed Bastian -- Chief Executive Officer
Well, my thoughts are as a good problem to worry about, Joe. We are -- first of all, we are pleased and thrilled with the new renewal. AmEx is an awesome partner and our two brands line up so well strategically and with our customers and our people. As we grow our loyalty program, you're right, there will be a question of disclosure in terms of providing better insight from an ownership perspective and a governance perspective into the drivers of our profitability into the future and whether that's in a segment or whatever disclosure format, I am not sure what it will take, but it's something that we've been giving greater disclosure to, as you know, and we'll continue to consider that.
------
The AMEX component is not insignificant, and those 50% margins can really help ease the pain of a quarter when there might be a little pressure on flight operating margins.
Since nobody posted the link yet, here is Ed on CNBC this morning... https://www.cnbc.com/2019/04/10/delt...-earnings.html
Transcript of the Conference Call: https://www.fool.com/earnings/call-t...gs-call-t.aspx
I am a very happy shareholder this quarter and it's nice to see their performance be reflected in the stock price, since in 2018 it seemed that UAL got all of the love. But the street is fickle and once it became well-known that DAL did not have the MAX, it became the darling of the major airline stocks again, and then this quarter turbocharged that.
#17
Join Date: Aug 2018
Location: SEA
Programs: DL DM
Posts: 292
There are not 4,000 PAX every day that think they need to unload Skypesos.
The upgrades must mostly be an impulse purchase from someone that don't understand the valuation. They may be sitting on bonus Amex signup Skymiles and fall for the sell.
The upgrades must mostly be an impulse purchase from someone that don't understand the valuation. They may be sitting on bonus Amex signup Skymiles and fall for the sell.
#18
Join Date: Jan 2004
Location: MSP
Programs: AA Plat Pto, IHG Plat, HH Gold, Hyatt Globalist
Posts: 2,538
I made a domestic redemption this week that worked out to about 2.5 cents per Skymile. That is the third one this year in the two cent neighborhood. Given that value I am apt to at least temporarily shift spend from 2% cash back to DL Amex to restock the miles. Delta traded distressed inventory for some future high margin income.
#19
Join Date: Dec 2008
Location: Mostly living in the basement
Programs: Newly minted free agent; MR LT(!)TE, HH SE, BA SECM, DL MM, UA PS, 2V Fanboi, CBP GE
Posts: 5,108
Sure there are occasional better redemption values out there, but I have a ton of SM, value them at $0.00, and these marginal redemptions dramatically improve my travel experience in many cases.
#20
Join Date: Sep 2017
Location: ATL
Programs: A few
Posts: 133
I made a domestic redemption this week that worked out to about 2.5 cents per Skymile. That is the third one this year in the two cent neighborhood. Given that value I am apt to at least temporarily shift spend from 2% cash back to DL Amex to restock the miles. Delta traded distressed inventory for some future high margin income.
#21
Join Date: Aug 2012
Location: VPS
Programs: IHG Diamond, Delta PM, Hilton Gold, Accor Gold, Marriott Silver
Posts: 7,268
I do think they’ve done a good job of driving up redemptions this year by adopting a retail store model of setting prices higher under normal circumstances and then offering short term sales whether published or unpublished. I know that when I do an award ticket search and get a result that’s cheaper than it would have been than under the award chart days, I find myself going ‘must book now’
#22
Join Date: Jun 2015
Location: DAY
Programs: Rapid Rewards, Skymiles, Hilton HHonors, SPG/Marriott Rewards
Posts: 4,948
While some here are waiting for the return of 80k J redemption to Asia, I've switched to exactly what you describe. 2500 miles to guest someone into the SkyClub? Sure, why not? 20k to upgrade a work trip booked in Y? Absolutely, especially since you don't have to play games with upgrade inventory. Perhaps one day Gogo passes will be available for purchase with SM.
Sure there are occasional better redemption values out there, but I have a ton of SM, value them at $0.00, and these marginal redemptions dramatically improve my travel experience in many cases.
Sure there are occasional better redemption values out there, but I have a ton of SM, value them at $0.00, and these marginal redemptions dramatically improve my travel experience in many cases.
#23
FlyerTalk Evangelist
Join Date: Jul 2003
Posts: 23,060
I was thinking this too. With DL's dynamic pricing model for miles redemption, this is less reason to hold onto miles for a better value (although, obviously, it does still exist. Especially on international partners). People would be less likely to hoard miles and just spend them as they go knowing the value is all going to be more or less the same.
#24
Join Date: Jun 2015
Location: DAY
Programs: Rapid Rewards, Skymiles, Hilton HHonors, SPG/Marriott Rewards
Posts: 4,948
I recall DL published a stat a few years back about the percentage of awards redeemed for domestic coach (unfortunately, I can't find it anymore). I seem to recall it was in the high 80's. It seems pretty clear that number of flyers who actually save up for J awards or obsess about "maximizing CPM" is actually pretty small and that FT's do not really reflect the typical Skymiles member.
#25
Join Date: Aug 2012
Location: VPS
Programs: IHG Diamond, Delta PM, Hilton Gold, Accor Gold, Marriott Silver
Posts: 7,268
And it's real money multiplied when you're talking more than one plane ticket. I come from a middle class family that's spread out across the USA. My side of the family tends to swap around domestic coach award tickets pretty regularly with a 'hey want to get together for a week' offered, and I carried that over to Spousal Unit's family when BIL was thinking of coming down for a week in the summer but the $1700+ for the tickets for a family of four was Real Money and it felt good to say 'yeah, I can cover that form my frequent flyer miles award stash for you'. (Though. yeah. like a good FTer I've got multiple FF accounts to draw from including a United one I'd been saving up for an international partner business redemption on because it would mean that only the first hop to Houston actually had to be on United)
#26
Join Date: Jul 2009
Programs: DL PM, HH Diamond, Marriott Plat, AA, WP
Posts: 840
Wow, I didn't know that AMEX netted Delta $3.5B, that is a good cash flow. I had fallen into the mindset of get rid of Skymiles before they devalue even more, but reversed course after getting some good international awards during flash sales, those are good for family trips, especially in J.
#27
Join Date: Apr 2011
Posts: 3,394
And it's real money multiplied when you're talking more than one plane ticket. I come from a middle class family that's spread out across the USA. My side of the family tends to swap around domestic coach award tickets pretty regularly with a 'hey want to get together for a week' offered, and I carried that over to Spousal Unit's family when BIL was thinking of coming down for a week in the summer but the $1700+ for the tickets for a family of four was Real Money and it felt good to say 'yeah, I can cover that form my frequent flyer miles award stash for you'. (Though. yeah. like a good FTer I've got multiple FF accounts to draw from including a United one I'd been saving up for an international partner business redemption on because it would mean that only the first hop to Houston actually had to be on United)
Most people don't travel alone, so getting a few domestic mileage tickets, even if you have to buy 1 or 2 makes the trip a lot more palatable on the wallet.
For international J most people don't have enough miles for even 1 ticket if we're at ~100k miles, and even if they enough for 1 international J class skymiles ticket, buying the cash ticket would likely bust the vacation budget.
So while many here on Flyertalk again on the extreme end of the bell curve focus on maximum RPM and the best values and nicest cabins and trips would could possibly want, the VAST majority of people it's a better deal for them to redeem 100k for 4 domestic round trip tickets to MCO saving a total of $1,000, than it is to use that same 100k miles to get one D1 ticket to Europe and save $4,000. As a trip to Orlando is practical for a family of 4 where a European vacation might not be.
#28
formerly jackvogt
Join Date: Dec 2015
Location: Atlanta, GA
Programs: Delta SkyMiles,
Posts: 822
The only thing that bums me out is that you can now buy BE fares with SkyMiles. The only difference is you can't select your seat but I like to pick my seat so I'll end up spending more.