Dick Ginkowski

I've flown Delta for five decades. My first flight was an Air Canada Viscount even before that. It's time to review some history to understand the challenges and frustrations of the latest SkyMiles decimations. The "death by a thousand cuts" is nearly accomplished. It didn't happen overnight.

Two decades ago Delta's new CEO Leo Mullen planted the seeds when he started to devalue SkyMiles and move it toward defining loyalty based on spend. This community rose up and our Save SkyMiles group may not have won the war but we did win some battles. There weren't terribly many what some people today brand as "apologists" then.

Of course, the decimation of SkyMiles as we knew it was merely put on hold and accomplished with the proverbial "thousand cuts" that were sold to us as "enhancements." Often it was one step forward, two steps back. And a good question now is where is the "Save SkyMiles" uprising now? Apart from the "if we don't hang together we'll surely hang separately" problem and the fact that probably most people here weren't around this two decades ago, there is a much different landscape today.

Back then many of us didn't just protest we voted with our feet. I was one of the people welcomed by Northwest Airlines which truly did value our loyalty and its passengers. Northwest was allowed to be bought out by Delta without a blink by antitrust regulators. Delta promised it wouldn't raise fares or cut service. Two promises broken.

There were other options then. US Air, America West, Continental, United and American among them plus niche carriers like "best care in the air" Midwest Express which valiantly fought off attempts by Northwest to bury it.

Midwest Express is gone. Southwest swallowed AirTran. Continental and United merged (and Continental was a well run airline). American gobbled up US Air after it took over America West and, earlier, TWA. There are other carriers that fell off the radar, Alaska is still around. (I always wondered where an Alaska-US Air merger would have made sense.)

Not only were there other carriers but the major ones were competitive. Unlike the "me too" of the "Big Three" today passengers who were upset by Leo Mullen and Delta had viable options and many of us exercised them. Competition provided more choices, more flights and lower fares.

Today, Southwest is often pricier than Delta. Spirit and Frontier are, well, much like root canals without anesthesia with a pricing scheme that requires careful scrutiny to ensure that you don't get screwed. Jet Blue is a regional carrier that has devalued its product and Alaska has growth potential but seems to be slipping in terms of its once thoughtful customer service.

The assassination of SkyMiles was decades in the making. Unlike competition of 20 years ago, the "Big Three" are pretty much in lock-step. The "death by a thousand cuts" that devalued frequent flyers happened "because they can" given the absence of any meaningful airline competition. Antitrust laws were supposed to protect against monopolies. The federal government utterly failed.

There are those who will berate those of us who gripe about this. They don't get it. It's not just erosion of "perks" but some downright shady business practices that have gone unchecked. Higher fares and fewer choices were in the works pre-pandemic and less competition coupled with government's blind eye to antitrust violations affect everyone.

One particularly disturbing and telling aspect of the latest decimations is the sketchy relationship between Delta and American Express and business practices that are likewise "curious."

The "Sky Club" debacle is a good illustration. Access became more difficult and expensive purportedly as a means of addressing period overcrowding at SOME clubs. Some, not all. Instead of addressing the local situations Delta took an axe to all. These issues didn't exist before 2020. When Delta absorbed Northwest the number of clubs were reduced and membership fees steadily increased. The real culprit may have exposed itself less than a year ago.

Abruptly Delta announced even more cuts to club access and another sharp increase in annual dues. This was coupled with aggressive marketing of the Reserve Card (and Amex Platinum) by Delta and American Express as a means of unlimited club access at a far more advantageous price. Many of us took the bait, gave up our club memberships and bought the Reserve card (or Amex Platinum).

Less than a year later comes the switch. Those pricey cards will no longer get you the same club access. Reserve will be ten visits per year (six for Amex platinum) which is an extremely significant devaluation. If you hit the club before your initial flight and during the layover that's four visits for one round-trip. (I've argued that "visits" should mean one per itinerary vs.stop.) Two or three round trips and your club access is gone yet those pricey cards remain pricey.

This didn't just happen overnight. Obviously someone discussed and contemplated these changes for quite some time. You don't have to be a meteorologist to know when it's raining and likewise it would be absurd to think that some folks at Delta and Amex woke up two weeks ago and decided to do all of this. A conscious collusion was made to divert people to those expensive cards as a means of club access. Pretty classic bait and switch.

Some folks will argue that "because we can" is ensconced in the terms and conditions and they're right. But right can also be wrong. Delta and Amex induced customers with offers and decisions and then essentially reneged on them to the detriment of those customers.

So, what can be done? What should be done?

This is where "because we can" becomes important. Unlike 20 years ago there aren't competitors hungry for our business. Except for Alaska it's pretty much choosing the brand of razor blade to slit your throat. Alaska's Mileage Plan works fine for its limited network but fly on a partner and a mile flown does not always equal a mile earned.

The larger picture, though, is attacking the "because we can" with pushing vigorous antitrust enforcement. The "Big Three" should be broken up and more competition promoted. That may not necessarily save SkyMiles or roll back the devaluations but at least we may see more flight options and lower fares and, maybe, just maybe, a return to competition. Perhaps "Save SkyMiles" has morphed into "Hey, hey, ho, ho. The Big Three's gotta go."

jrl767

someone disparagingly referred to SM members as “ham sandwiches” a few years back, but more realistically we’ve been the frogs in the pot … DL has been gradually turning up the heat, and with this most recent announcement the pot is pretty close to boiling over

moondog

I'm pretty sure America West was the dominant party in the USAir merger (e.g. their board was left standing). They simply went with the US brand because it was stronger.

Visconti

After the breaking up of Ma-Bell, painting monopolies as benign began to gain traction. Afterwards, the argument often made is absent of regulation, how many natural monopolies have actually existed? So, it follows the best course of action would be a laisse faire approach, since private enterprises however large & dominant may still be in the best interest of consumers.

I don’t think any us bought it, but WS was paid to advocate it. We all knew consolidation while likely great for consumers in the short term would never last—businesses with monopolistic power will always prey on the consumer. To put simply, you cannot have a free market in any industry with monopolistic characteristics (it’s currently an oligopoly with what appears to be…er…some collusion), which is why we regulate them, e.g., utilities.

The regulators had gone along because they either didn’t know any better or were complicit. Doesn’t matter, we’re here. At the very least, don’t allow any more consolidation, at least not in this industry.

GrayAnderson

Correct. There's precedent - when the (railroads) SP and DRG&W merged, the latter was the "winning" party in the merger but the former was the name selected because it had broader name recognition.

The biggest issue with the mergers has been that more than a few of them were driven by weakness (sometimes even bankruptcy) on the part of at least one of the carriers. TWA went through three bankruptcies (one admittedly imposed upon it by Carl Icahn - I have to wonder if TWA or the shareholders might not have been able to either sue Icahn for self-dealing/breaching his fiduciary duty to TWA [by arranging a punitive deal to a company he controlled on the way out the door] or force a breach and make Icahn sue - from what I see about the deal it's not clear what TWA got in exchange for that ugly deal) while US Airways was in bankruptcy at the time of the merger with America West. I think every extant mainline US airline except WN went through bankruptcy in the early 2000s.

So at that time, I think there was a strong case to be had that there were, at one point, too many carriers (as well as some bad legacy deals in place). What was probably needed some 20 years ago (I'd say after 9/11, given the induced chaos there) was some sort of government-mediated restructuring of all of the old labor deals in exchange for constraints on subsequent mergers.

The other thing that probably would help (and not just here) would be restrictions on saddling corporations with the debt from leveraged buyouts (either outright or, in the case of a bankruptcy within X years of the takeover, forcing the entity that executed the buyout to take a murderous haircut and imposing restrictions on them reselling that debt). TWA was a victim of corporate bad behavior.

I will say that I think we missed the best opportunity to at least get a fifth "major" carrier a few years back when AS got VX instead of B6 because of the relevant route networks (B6 being East Coast-based vs VX being West Coast-based, as well as probably more compatible models/philosophies)...though I also recall thinking at the time that a three-way tie-up between the three of them probably made at least some sense in terms of scale.

In the end, I think this is a case of the pendulum swinging too far to one side after having been too far on the other side. Pre-ADA airlines were too hamstrung in what they could do (functionally not having any ability to vary fares and routes; the CAB was excessively ossified). Now, there's a case that they're far too able to change T&Cs at a whim and generally behave dubiously (e.g. publishing schedules they have trouble keeping and carrying out "blue sky" cancellations) due to an overly-constrained marketplace. At a minimum, we probably need a law saying "Okay, you're revenue-based on your FFPs - fine, but now you need permission to overhaul the programs", especially since the FFPs have essentially become credit card programs. Another option would be to partially re-regulate carriers with more than X% of the marketplace (I'm thinking 10% or 15% - the gap between UA (144m/about 16-17%) and AS (41m/about 4-5%) is so massive that either threshold has the same effect.

(I'm somewhat in favor of the proposed B6-NK merger, but more because I think we do need another 1-2 "major" carriers to pressure the "big three"/"big four" than a desire to see "more consolidation". B6's network isn't anywhere near broad enough to actually compete in a lot of places, and their lack of equipment both constrains frequencies and results in chronic OTP issues [I don't think I've [i]ever had an on-time trip with them outside of the Mint network].)

Visconti

By the way, had DL achieved their position purely by virtue of innovation and creating a product so superior and cheaper to drive out their peers would be one thing, but it appears to me, at least in this industry, you just buy out & absorb the competition. Enough of this, just compete vigorously.

GrayAnderson

​​​​​​The problem is how to approach bankruptcies, from two perspectives:
-On the one had, there's "this airline is in bankruptcy again and clearly can't compete as-is" (TWA). Call this the "collapse" problem.
-On the other hand, there's "airlines which have gone through bankruptcy get to rejigger their union contracts, pension rules, etc., so those that go through them get an advantage over everyone else". This was sort-of the problem in the early 2000s - I seem to recall that "everyone else has gone through bankruptcy" basically forced at least one bankruptcy (but I don't recall who it was) since that was the only way to get on an equal footing in terms of contracts.

In the former case, I think examining the viability of the airline under various conditions (e.g. discharging all debts and allowing a rework of major existing contracts) might be worthwhile. If a carrier over X size is truly doomed, then so be it, but if it's not then avoiding a merger (especially with a major carrier) should probably be prioritized.

And in any event, some sort of "conservation of size" restrictions on "large" carriers (say, more than 10% of US domestic market share) during mergers might be worth looking at.

jrl767

the return on investment for “innovation (to create) a superior and cheaper product” is nowhere near enough to simultaneously create shareholder value

it’s pretty clear what carries more weight in the DL C-suite

Visconti

RE: TWA

In my view, if they can't compete, they should disappear and make room for others who may. It's best to let bad businesses die and find a better use of resources, i.e., why throw good money after bad? In this case, absent of Gov't pressure, I've no qualms with a private business scooping it up pennies on the dollar. It's just the free market at play here, in my view.

Of course, the C-suite not only must make decisions in the best interest of shareholders, but also a fiduciary duty to do so. As a consumer, I couldn't care less about DAL shareholders, I care about me, which is the position, in my view, my Gov't should take. I want the best flights at the best available price, and I can't have that without vigrous competition.

AJNEDC

Is this a parody post? If it is not, I am beginning to think that some of you think this is some divine right being taken away from you. Bizarre.

DL is a business and it makes decisions as any business does. You have the option to vote with your pocket... or not.

Dick Ginkowski

Bankruptcies are not all the same. We have to remember that economic swings happen. Post 9/11 was one. 2007-2008 was another. Good management is able to weather storms better.

The point of my post wasn't simply to piss and moan about the latest Delta assault on frequent flyers. All the pissing and moaning won't accomplish much. They've been preparing as they have in the past to respond with insincere canned bloviation "because they can." The lack of competition makes it so. The general public isn't going to care much about how they're screwing us. BUT channeling our angst to looking at the broader picture and the real culprit of no meaningful antitrust enforcement may be a different story. I spent many years handling consumer protection cases and can say from that experience that "nothing gets their attention more than the three words 'summons and complaint.'"

The carriers need to be broken up and realigned. Jet Blue actually would be a fit for Alaska to give it an eastern presence. There has been off-and-on talk of reviving Midwest Express and Alaska would be in a good position to get into that. The Milwaukee hub would have affordable capacity and avoids ORD. Spirit and Frontier should remain as they are. They need to improve their product and regulators need to make them be more transparent about the cost of their tickets. Their fees need to be transparent. As it stands, the airlines intentionally reduced capacity in order to jack up fares and crowd planes and then they blame consumers. They broke promises and need to be held accountable. The latest Delta shenanigans -- except for the bait-and-switch credit card stuff -- won't matter much except perhaps to serve to channel the angst into pushing for the reform that's really needed: antitrust enforcement.

Dick Ginkowski

Not quite and that was one of the main points of the post. With the "Big Three" firmly in lock-step with each other and no meaningful competition it's pretty much choosing the brand of razor blade to slit your throat. Back in the "Save SkyMies" days there was competition and competitors happy to take our business. We were able to vote with our feet and many of us did. Those options were plentiful then but not now.

And, yes, Delta is a business and few people are going to cry over screwing frequent flyers. But there's a difference between being a business and a monopoly. Another reason why we need enforcement.

jetsfan92588

Ignoring any flaws in legal theories, let's say a judge allows you to break them up. How are you going to do that? Splitting an airline in half isn't like forcing a company to sell off divisions (a la Facebook and insta, retail banks and investment banks). Does Delta A get half the flights and Delta B get half the flights? Does that mean that the two flights per day on one airline that I can choose now forces me to just buy that one flight per day if I want to stick to one airline? And are there enough planes and crew to even make that possible? Or would both airlines have to increase their costs because they have to buy more planes and hire more crew? How do companies usually deal with increased cost? Doesn't sound good for consumers to me.

Or does Delta A get half the routes and Delta B get the other half? So now whichever airline I choose I can't get to maybe 25% of the places I want to go.

And if you think IROP handling is bad now, good luck when the airline has half the crew and equipment that it used to have to move things around.

Dick Ginkowski

The questions are good and that's part of the process. The courts use special masters to investigate and recommend solutions. Remember that airlines intentionally reduced capacity. There's aircraft in storage. A realignment might incorporate some existing lesser carriers as well.

Also, I'm not suggesting that Delta alone be broken up. All of the Big Three. And remember that when there were more carriers people still got to most places because there was competition and code share agreements.

IROPS need a revitalized Rule 240. One of the problems now is less competition. Adding choices should help with that.

shoodawg

Is it at all possible that the best answer to domestic airline woes is: ONE Domestic airline company?