Delta Q&A Meeting with Execs - NOTES

 

Old Jun 28, 09, 8:01 pm
  #46  
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Originally Posted by secretsea18 View Post
I doubt they were really concerned about customers not being able to find award flights because of this... so now they get the award seat becoming a revenue seat + the fee from the award change.
Ding. Ding. Ding. We have a winner!
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Old Jun 28, 09, 8:11 pm
  #47  
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Originally Posted by GTITAN View Post
So is it folks collective guess that the 4th tier will have system wide upgrades that can used on something lesser than YBM internationally or is it looking like that will not change for the new tier? Seems like some change would be required to make it "market" with AA and/or UA. Please forgive me if I missed it being discussed!

Safe Travels.
No real details were announced on 4th Tier, but Bob Soukup mentioned to me at dinner that benefits would be similar to United Global Services.
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Old Jun 28, 09, 8:16 pm
  #48  
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Originally Posted by mersk862 View Post
No real details were announced on 4th Tier, but Bob Soukup mentioned to me at dinner that benefits would be similar to United Global Services.
which means mainly hand holding?
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Old Jun 28, 09, 8:19 pm
  #49  
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Originally Posted by elitetraveler View Post
which means mainly hand holding?
I'm just reporting the news...we didn't go into too many details. Though my understanding of UGS is a lot of fee waivers, upgrades clear at 7 days out, I think a couple of redeem SkyChoices at SkySaver levels, etc.
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Old Jun 28, 09, 8:30 pm
  #50  
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Originally Posted by MikeMpls View Post
Meanwhile, over at Southwest where there are no change fees they reported profits for how many consecutive years?
You constantly compare DL to WN, but they are entirely different business models. WN cherry picks the most profitable routes; they fly between third tier airports, where fees are significantly lower. They only fly one airframe, greatly reducing training, maintenance and other costs. They provide a bare bones product that only does a few things, and they do that extremely well. As you saw this weekend, DL provides an incredibly comprehensive and complex product, and does many things extremely well.

It's like comparing apples to bicycles. The points you make aren't relevant.
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Old Jun 28, 09, 9:24 pm
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Originally Posted by StayingHomeIsBetter View Post
Someone enlighten me... how does giving elite upgrades cost DL $150 million dollars a year?
You have to take in much more into account in the analysis. Since others have questioned this, let me see if I can shed some light to how it was explained. I may not do it justice so others chime in and help with the details if I get this wrong.

First off, I don’t think it was funny math. This discussion about upgrades was in the context of a review that was done at the CEO level. This review was line by line, feature by feature of the new combined program, not just pre-merger Delta. Each item was benchmarked against the industry standard. If it was below, what would it take to bring it up to that standard. If it was above, what is the cost of leaving it that way vs. aligning with the Industry standard.

Second, I don’t think you can look at last years numbers for just pre-merger Delta in making an analysis, you would also need to add in pre-merger NW. As stated in the notes at the beginning of the thread, each item was evaluated against 3 criteria - Customer impact, Financial impact, and Technology impact.

Third, it wasn’t stated that Delta would gain a $150M in incremental pure revenue. It is the value placed on leaving the current elite upgrade program as is vs. the industry standard. Comparing Delta - offering unlimited complementary upgrades on all flights for all levels of its elite program vs. AA and UA. The point was that Delta could have benchmarked themselves against the competition and offered the industry standard of AA and UA of unlimited upgrades to Platinum members ONLY, with free upgrades for Y & B only for Gold and Silver. That would leave a huge segment of Gold and Silver (on M,H,Q,K,L,U and T fares) that would have to purchase upgrades either by paying $$ or using miles to get the same benefit they currently have today. I won’t debate the value of the miles used for the upgrade. In the end, the REAL $$ number wasn’t even the real issue as this was one of the items that falls into the category of changing this would have “Greater impact to the customer” that far outweighed any financial impact to Delta. I would absolutely agree with that statement.

Jeff’s presentation didn’t show the full details on “how the bean counters” determined the $150M value, for the combined airline, but I am personally not surprised by that number at all. Maybe I have too much faith in what was stated, but it does have a monetary value that can be associated with it. If it didn't have a real number, then one would have to ask, "if it isn’t generating real revenue or reducing incremental costs for AA, UA, why don’t they simply expand their program to offer unlimited upgrades for all levels of their elite program and match Delta?"

Hope that my clarification helps. There were 60 other sets of ears in the room, so please chime in and correct me if I mistated anything.

Last edited by atldlff; Jun 28, 09 at 9:59 pm Reason: Fixed it... thanks mersk862
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Old Jun 28, 09, 9:33 pm
  #52  
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Originally Posted by atldlff View Post
You have to take in much more into account in the analysis. Since others have questioned this, let me see if I can shed some light to how it was explained. I may not do it justice so others chime in and help with the details if I get this wrong.

First off, I don’t think it was funny math. This discussion about upgrades was in the context of a review that was done at the CEO level. This review was line by line, feature by feature of the new combined program, not just pre-merger Delta. Each item was benchmarked against the industry standard. If it was below, what would it take to bring it up to that standard. If it was above, what is the cost of leaving it that way vs. aligning with the Industry standard.

Second, I don’t think you can look at last years numbers for just pre-merger Delta in making an analysis, you would also need to add in pre-merger NW. As stated in the notes at the beginning of the thread, each item was evaluated against 3 criteria - Customer impact, Financial impact, and Technology impact.

Third, it wasn’t stated that Delta would gain a $150M in incremental pure revenue. It is the value placed on leaving the current elite upgrade program as is vs. the industry standard. Delta is the ONLY US Airline to offer unlimited complementary upgrades on all flights for all levels of its elite program. The point was that Delta could have benchmarked themselves against the competition and offered the industry standard unlimited upgrades to Platinum members ONLY, with free upgrades for Y & B only for Gold and Silver. That would leave a huge segment of Gold and Silver (on M,H,Q,K,L,U and T fares) that would have to purchase upgrades either by paying $$ or using miles to get the same benefit they currently have today. I won’t debate the value of the miles used for the upgrade. In the end, the REAL $$ number wasn’t even the real issue as this was one of the items that falls into the category of changing this would have “Greater impact to the customer” that far outweighed any financial impact to Delta. I would absolutely agree with that statement.

Jeff’s presentation didn’t show the full details on “how the bean counters” determined the $150M value, for the combined airline, but I am personally not surprised by that number at all. Maybe I have too much faith in what was stated, but it does have a monetary value that can be associated with it. If it didn't have a real number, then one would have to ask, "if it isn’t generating real revenue or reducing incremental costs for AA, UA, CO and others, why don’t they simply expand their program to offer unlimited upgrades for all levels of their elite program and match Delta?"

Hope that my clarification helps. There were 60 other sets of ears in the room, so please chime in and correct me if I mistated anything.
Only correction I have is that both CO and US give all elites (low-tier to top-tier) free upgrades on all North America (save Hawaii) flights. For comparison sake, AA will give free upgrades to all ExPlats as well Gold/Plats on Ys, and UA will only give free upgrades on Y/B - doesn't matter if you're Global Services or Premier, no instruments=no upgrade.

My guess is they figured as to the $150m figure, it would be based on a combination of people buying First Class fares more (rather than use an instrument to upgrade) or by selling the e500s. Those e500s aren't cheap - they're around $200 for a set of 4 - it's a big revenue stream, especially since you only get 4 per 10,000 miles - on a transcon, you'd need to top-off the account, so it's either fly another 10k miles, or pay for the certs. Either way, it's another opportunity for them to either sell that F seat, or to get another person to pay up for the certs package.
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Old Jun 28, 09, 9:40 pm
  #53  
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Originally Posted by atldlff View Post
Hope that my clarification helps. There were 60 other sets of ears in the room, so please chime in and correct me if I mistated anything.
Thanks. It does help.

Yes... I had overlooked including the NWA numbers (not intended as a slight to our NWA brethren). NWA had about 40 million enplaned passengers in 2008. So maybe 4 million more elite upgrades (maybe higher since NWA planes have bigger FC sections ).

Bottom line... while I am gratified to see that DL did not tinker with the upgrades, I cannot envision this as a "gift" to the FF community. DL had to see that maintaining the status quo was to DL's financial advantage... or changes would have been made.

Perhaps they saw the likely mass exodus of elites that would have resulted as what it would have been... a tremendous "cost" to DL.
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Old Jun 28, 09, 9:49 pm
  #54  
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Originally Posted by Gargoyle View Post
You constantly compare DL to WN, but they are entirely different business models. WN cherry picks the most profitable routes; they fly between third tier airports, where fees are significantly lower. They only fly one airframe, greatly reducing training, maintenance and other costs. They provide a bare bones product that only does a few things, and they do that extremely well. As you saw this weekend, DL provides an incredibly comprehensive and complex product, and does many things extremely well.

It's like comparing apples to bicycles. The points you make aren't relevant.
The points are quite relevent. Delta has yet to show that it can offer products that its customers will pay the costs of, hence the ever increasing addiction to fees & rationalizations to justify them.

3rd tier airports? Like MSP, BOS, LGA, MKE & your own MDW? I think you need to fast forward a decade.

Last edited by MikeMpls; Jun 28, 09 at 10:05 pm
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Old Jun 28, 09, 9:50 pm
  #55  
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Originally Posted by StayingHomeIsBetter View Post
Perhaps they saw the likely mass exodus of elites that would have resulted as what it would have been... a tremendous "cost" to DL.
No doubt about it. The FF community, with FT being probably the biggest group who have a voice, have a lot of influence on these decisions. If a good % of FT'ers are outraged by something then you can extrapolate that to the whole install base. The bottom line is that these folks are in it to make money (and rightfully so) and they do not do a thing unless they have weighed all of the impacts, both tangible and not. These events where they can pick our brains as well as the constant and dynamic (I call it loud ) feedback from the blogs and boards do have a real impact on decisions.
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Old Jun 28, 09, 9:54 pm
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Originally Posted by mersk862 View Post
Only correction I have is that both CO and US give all elites (low-tier to top-tier) free upgrades on all North America (save Hawaii) flights. For comparison sake, AA will give free upgrades to all ExPlats as well Gold/Plats on Ys, and UA will only give free upgrades on Y/B - doesn't matter if you're Global Services or Premier, no instruments=no upgrade.

My guess is they figured as to the $150m figure, it would be based on a combination of people buying First Class fares more (rather than use an instrument to upgrade) or by selling the e500s. Those e500s aren't cheap - they're around $200 for a set of 4 - it's a big revenue stream, especially since you only get 4 per 10,000 miles - on a transcon, you'd need to top-off the account, so it's either fly another 10k miles, or pay for the certs. Either way, it's another opportunity for them to either sell that F seat, or to get another person to pay up for the certs package.
Thanks for the clarification - your absolutely right. I knew that, but somehow my brain is still not functioning completely the way it should be. It's slowly coming back to normal, well... as normal as I was before, and many have, as they should, questioned whether or not I was ever sane to begin with! Now that I think about it, Jeff did say AA, and UA. I also remember somewhere in there -a brief discussion about who would win that battle as UA and CO align closer.
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Old Jun 28, 09, 10:02 pm
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Originally Posted by atldlff View Post
I also remember somewhere in there -a brief discussion about who would win that battle as UA and CO align closer.
A bit OT (unless I decide to status match away from DL)... what was the "conventional wisdom" as to who would have to give to align the disparate policies between UA and CO?
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Old Jun 28, 09, 10:12 pm
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Originally Posted by StayingHomeIsBetter View Post
A bit OT (unless I decide to status match away from DL)... what was the "conventional wisdom" as to who would have to give to align the disparate policies between UA and CO?
I won't quote anyone here, but I think the discussion was that CO had the stronger arm...

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Old Jun 28, 09, 10:13 pm
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Originally Posted by StayingHomeIsBetter View Post
A bit OT (unless I decide to status match away from DL)... what was the "conventional wisdom" as to who would have to give to align the disparate policies between UA and CO?
CO will be in the drivers seat.

Not discussed at the Q&A, but UA is close to going back into bankruptcy. UA won't be in a position to dictate much of anything. Their rating was recently dropped from B- to CCC. DL in contrast just dropped to B-.
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Old Jun 28, 09, 10:22 pm
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Originally Posted by MikeMpls View Post
3rd tier airports? Like MSP, BOS, LGA, MKE & your own MDW? I think you need to fast forward a decade.
So it's a mix of second and third tier. Jackson MS, Lubbock, Austin. I guess OAK and SNA would be 2-1/2 tier. (and I've been to all of those)

Doesn't really matter, you're still arguing whether apples are better than bicycles; they two business models are completely different, and they serve very different markets. Might as well compare Ryanair with AF; what's the point?
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