Delta Q&A Meeting with Execs - NOTES

 

Old Jun 29, 09, 1:23 am
  #76  
 
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Originally Posted by Robert Leach View Post
OK, playing Devil's Advocate: If you cancel and/or relinquish an award seat on a given flight and it then goes back into general inventory and gets sold as a revenue seat, how is that "costly" to the carrier?
Consumers are not indifferent as to when they buy the product. They will buy the product at the time they need it/want it. By the time the seat gets re-released, DL may no longer be able to sell it. Or they will have to sell it at a lower price. I don't see any way that, on the whole, cancellations do not cost an airline serious money.

I mean, do you think that all "revenue" (not an accurate term) tickets should be free from change or cancellation penalties? From an accounting perspective, there is no bottom-line difference between a revenue and an award ticket. Any costs DL incurs, including opportunity costs, to change a "revenue" ticket are incurred in changing an award ticket.

If anything, I would guess that the $150m is about incremental fee income. I would guess that it would understate the true cost of providing the service.

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?
Originally Posted by atldlff View Post
I won't quote anyone here, but I think the discussion was that CO had the stronger arm...
I would think it the case that CO has the upper hand, only because they have a relatively less generous program. Yes, they offer unlimited domestic elite upgrades, but from all accounts, it seems that CO is pretty aggressive in pricing their F product such that those upgrades are largely true excess capacity. In terms of benefits that provide a significant potential for revenue loss, CO has few that I can think of, while UA has a very generous international upgrade program.

And there are some areas where I think CO will match UA. I would almost guarantee that CO will abandon elite bonuses for most partner flights, to match the rest of *A. I also wouldn't be surprised to CO move toward offering no cabin EQM bonuses, as UA does for certain partners. And I doubt CO will give up on the 50% EQM policy for many partner flights.
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Old Jun 29, 09, 1:35 am
  #77  
 
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How does one square these two statements? We'll be bold and innovative unless we can get away with what everyone else is doing?

Phase II - Aligning the Two Programs

- Don’t follow the competition – lead and implement what is right for DL!

Phase III - Integration, Clean–up, and Launch the 2010 Medallion Program

2. Elite Bonus Miles – Aligned with the industry
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Old Jun 29, 09, 3:28 am
  #78  
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Originally Posted by ADLFO View Post
I think we are talking apples and oranges. For domestic travel, it would be cost prohibitive to give SQ first class service when a majority of domestic passengers are shopping for the cheapest fare in Y.
Where did I bring up SQ?

Or do you think that the European short-haul market is that different, or the service on AF intra-Europe Affaires any better than DL "First"?

The difference is that LH and AF and a few others actually make money (the extraordinary environment of the current year excepted), and that's why DL should look at them.

Such benchmarking is shown to be even more idiotic when one considers that generally, for US carriers, international routes are a lot more lucrative than domestic ones, and that the FFP in question offers not much differentiation between domestic and international flyers.

In other words, Delta are benchmarking against failed competitors with a view to satisfying the customers who actually make them LESS profit!

That's a lot of business sense right there...
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Old Jun 29, 09, 5:07 am
  #79  
 
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Originally Posted by me4yankees View Post
1. Fee – Huge revenue impact ($160M swing) in whether we take DL or NW fee structure:
- Not a top 10 customer benefit or primary purchase
Make the difficult decision to increase the NW fee structure rather than find “financial benefit” in other “more valuable” benefits (e.g. upgrades) DL will not abolish the unlimited complementary upgrade benefit – customer benefit outweighs the financial benefit.
I wonder how much of the $160 fees are calculated by extrapolating prior year award travel changes and late changes. Those used to be free or cost much less so I expect these to go lower quite a bit. At $0 or even $50 I don't think much about changing the date on a ticket but $150 becomes a whole different ballgame. That alone is enough to start looking at WN for the "cherry-picked" routes.

So how much of this $160 will actually translate into actual dollars in the bank this year?
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Old Jun 29, 09, 6:15 am
  #80  
 
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A lot of the money talked about was in general terms and not necessarily actual income or expense numbers. For example the $150MM refereed to in connection with the cost of unlimited upgrades was the amount generated at AA for the paid upgrades at AA and therefor represented a lost revenue stream to DL. Jeff said AA would love to see Delta go to their upgrade model, he also said in effect "not gonna happen". This lost revenue stream was only mentioned as a possible offset that would be needed to offset the lost revenue by taking the more popular benefits of both programs and implementing them. It was never mentioned as an cost just a "lost" revenue stream, since they knew how much this generated at AA. As was pointed out this Q&A could have easily been another 2 hours and it still would have covered everything, there were quite a few people (like me & MikeMpls) that never got a chance to ask a question. All the questions were germane and I felt all the answers given were honest and as factual as is allowed by law.

A few other things I remember that I don't think have been mentioned yet are: One of the presenters (the name was omitted to protect the guilty) while talking about the new fourth tier (during the cocktail hour) refereed to it as "Diamond" but that could have been a diversion as well as a real "slip of the tongue". I believe Jeff said that all 4 tiers would have some improvement added when the details are published by the end of July. Jeff also mentioned that Mr Anderson made it clear that he was "interested" in the FF program. He said the asked many questions during the present ion and the meeting went way longer than originally planned. The take away I had from this was that we do have an advocate at the very top. I also got a real feel for the enthusiasm Jeff has for his job as well.

Great notes me4yankees and it was a great meeting.
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Old Jun 29, 09, 6:36 am
  #81  
 
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Originally Posted by MikeMpls View Post
DL has had a lot of practical experience already in that area. About 8 years ago they eliminated upgrades for sLUT fares and -- after 3 years of denial & the SaveSkyMiles.com movement -- they were forced to backtrack. Just imagine what the aftershock would be if they cut upgrades for YBMHQKLUT.

At least I would hope that someone at DL has a memory that goes back farther than 2004.
Eight years ago? You're still focusing on what happened eight years ago? And then you criticize DL for doing the right thing by backtracking?

The real question is why you continue to submit yourself to what you consider a far inferior airline.

Thanks again to all the posters who were there for continuing to update us on the Q&A session.

Last edited by tonypct; Jun 29, 09 at 6:45 am
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Old Jun 29, 09, 7:10 am
  #82  
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Originally Posted by graraps View Post
Or do you think that the European short-haul market is that different, or the service on AF intra-Europe Affaires any better than DL "First"?

The difference is that LH and AF and a few others actually make money (the extraordinary environment of the current year excepted), and that's why DL should look at them.

Such benchmarking is shown to be even more idiotic when one considers that generally, for US carriers, international routes are a lot more lucrative than domestic ones, and that the FFP in question offers not much differentiation between domestic and international flyers.

In other words, Delta are benchmarking against failed competitors with a view to satisfying the customers who actually make them LESS profit!

That's a lot of business sense right there...
If you benchmark against European carriers for service, you'd also have to benchmark for frequent flier programs. In recent decades, US carriers have exchanged one for the other. Despite the believes of some participants here, you can't have both. If you want an industry-leading hard and soft product, fly a non-US carrier. If you want both a competitive product and generous frequent flier program, fly a US-based network carrier.
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Old Jun 29, 09, 7:15 am
  #83  
 
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Originally Posted by MikeMpls View Post
In terms of making my points & getting my answers, I feel that I succeeded 100%. I distributed 60 copies of The Merger as Viewed by NW Frequent Flyers on the tables prior to the meeting. I did it this way to avoid wasting any floor time getting bogged down in details. Anyone who was interested could read it. Most people were reading it. Jeff appeared to be reading it.

Is there anything I should add to this?
MikeMpls - small update to your list (thanks for compiling) - the EQM bonus on Extraperks appears to be back in the program. Check post 77 on this thread:
http://www.flyertalk.com/forum/north...eleased-6.html
Also, if you're up for any additions - there is the Skyclub degradation. We're losing the CO network and they are still closing clubs (IAD goes in Oct) despite the large loss from CO.
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Old Jun 29, 09, 7:15 am
  #84  
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Originally Posted by sxf24 View Post
If you benchmark against European carriers for service, you'd also have to benchmark for frequent flier programs. In recent decades, US carriers have exchanged one for the other. Despite the believes of some participants here, you can't have both. If you want an industry-leading hard and soft product, fly a non-US carrier. If you want both a competitive product and generous frequent flier program, fly a US-based network carrier.
However, at this point, both BA and LH offer competitive and I dare say better redemption options for F/J than DL. As a SEN I can get two F tickets to Europe for 210,000 miles. I also get 300 percent when I fly F and 200 percent when I fly C. BA offers Upgrades for 2 when you hit certain levels, and these upgrades can be used off of redemption tickets, so again I can redeem two RT F tickets to Europe on BA for 200,000 or two CW tickets for 150,000 miles. Both also have affinity cards to earn mileage, and offer 2 miles for every one spent on the airline. BA had a big Mileage Sale last Fall where they offered major discounts on redemptions, with no extra conditions.
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Old Jun 29, 09, 7:37 am
  #85  
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Originally Posted by tonypct View Post
Eight years ago? You're still focusing on what happened eight years ago? And then you criticize DL for doing the right thing by backtracking?

The real question is why you continue to submit yourself to what you consider a far inferior airline.

Thanks again to all the posters who were there for continuing to update us on the Q&A session.
Who criticized DL for backtracking? Do you just make it up as you go?

Their assertion that they are retaining elite backups despite its "cost" of $150M is in indication that some at DL are still stuck in a static mode of analysis where they don't evaluate the shifts in customer behavior that results from the changes DL makes in its program. Superficially, the upgrade program costs $150M, but they will lose more than $150M in business if they drop it.

Jeff of all people should understand that the costs of dropping the upgrade program far exceed $150M. He was one of the rev. mgmt. bean counters during the sLUT fare debacles. So yes, I hope his memory goes back farther than his current position.

Originally Posted by robbert View Post
I wonder how much of the $160 fees are calculated by extrapolating prior year award travel changes and late changes. Those used to be free or cost much less so I expect these to go lower quite a bit. At $0 or even $50 I don't think much about changing the date on a ticket but $150 becomes a whole different ballgame. That alone is enough to start looking at WN for the "cherry-picked" routes.
I've already recovered almost $800 by repricing WN itins this year. It can really add up if you're diligent about it. In fairness, however, what drove us to WN for most domestic travel was NW pricing practices. DL & the merger had little or nothing to do with it.

Originally Posted by robbert View Post
So how much of this $160 will actually translate into actual dollars in the bank this year?
Probably not $160M because it appears they haven't taken into account lost business from alienated NW elites. Their model, as usual, is too static.

A good chunk of it might be there, however, because it represents fees that DL elites were already paying. The question is, is this offset by lost of business from NW elites?

Last edited by MikeMpls; Jun 29, 09 at 8:08 am
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Old Jun 29, 09, 8:05 am
  #86  
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Originally Posted by graraps View Post
But what do you expect from the people who will happily admit to benchmarking against United?!?!?
This reminds me of the joke about the two campers encountering a bear. The punchline was one camper stating:

"I don't need to outrun the bear... I only need to outrun you."

Hopefully, DL's definition of success will be more challenging that "anything, but not last."

In fairness, being above United would mean at least third from the bottom... there is always USAir below United.
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Old Jun 29, 09, 8:17 am
  #87  
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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? This last quarter they reported minor operating loss which for all practical purposes is at the break even point.
Per reports in the Chicago Tribune this week, you're sugar coating it. WN has been in the red since last fall. Their costs are going up, and they're now focused on trying to attract business travellers. LGA is a needed gamble for them- it's not a quick, efficient airport like the ones they're used to, where they can turn a plane around in minutes and get the first take-off slot, and labor costs are high.
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Old Jun 29, 09, 8:28 am
  #88  
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Originally Posted by MM/PM widget View Post
A lot of the money talked about was in general terms and not necessarily actual income or expense numbers. For example the $150MM refereed to in connection with the cost of unlimited upgrades was the amount generated at AA for the paid upgrades at AA and therefor represented a lost revenue stream to DL.
Perhaps someone with AA experience can comment. Did AA formerly give unlimited elite upgrades, only to replace that policy overnight with the current policy? If not, how can DL imply a likelihood of success in shifting paradigms overnight to an AA-type system? The $150MM is relevant as a precedent only if DL has a chance of realizing it. As asserted before... if DL thought it could get away with it, upgrades would be gone tomorrow. Citing AA's policy, but ignoring CO's and US's policy, and implying that DL is somehow being generous... or implying that it was either a choice of doing away with upgrades (which they cannot pull off) or removing other benefits (which they have done) is disingenuous.


Originally Posted by MM/PM widget View Post
... there were quite a few people (like me & MikeMpls) that never got a chance to ask a question.
Mike... say it ain't so!
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Old Jun 29, 09, 8:49 am
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Thank you to everyone that attended the event and posted their notes and observations here. I have read through the thread and no where does anyone mention if anyone from Delta acknowledged the most laughable part of Delta.com, the award calendar. Did this item come up in any of the presentations, and if so, did they acknowledge how awful it is and commit to fixing it?
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Old Jun 29, 09, 9:24 am
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Originally Posted by res1968 View Post
Thank you to everyone that attended the event and posted their notes and observations here. I have read through the thread and no where does anyone mention if anyone from Delta acknowledged the most laughable part of Delta.com, the award calendar. Did this item come up in any of the presentations, and if so, did they acknowledge how awful it is and commit to fixing it?
I did ask and really didn't get much response other than the search is difficult due to complexity etc. etc. etc.

I intend to write a letter in the next few weeks, and I may try to make a video of the award booking process. I'm not sure they grasp how poorly it works out of the smaller markets where connects or double connects are required.

David
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