WBurcham

Really?

atldlff

You are absolutely correct about not letting the discussion/argument go unchecked. You and I are actually much closer in our thinking - don't throw the accounting logic out the window, but don't let it govern every decision either. Trust me, I am not afraid to push back at all - I will often offer my unsolicitied opinion, and certainly offer it when asked.

I am all for the wider use of SWUs - even if we only get 2 of the 6 for DM. Anything is possible. Under the current program it is a trade-off in costs vs. creating an even greater incentive and influencing future behavoir (and afterall, isn't that why they have a loyalty program in the fist place). The first is an accounting exercise, the second is really creating a shift in thinking. I think they are well aware of the feedback, and time will tell if changes will be made. To be very honest, I wouldn't count on it in the near term. With that said, we can help influence those decisions with rational and insightful discussions that really gets beyond the accounting to the influenced behavior, and why those choices make good sense. I am still looking for some of those discussions to happen soon.

avidflyer

This is what I have been saying all along: DL had a chance to lock in many of the high mileage fliers with the DM program (myself included). WBurcham is correct that it WOULD be at a cost to DL but the result would be a program that had people flying well past 125 (and stretching to get there) if there were a real benefit in the form of an UG instrument that allowed fliers to go J CHEAP after they got to the magic 125K mark. The problem now is that (IMO) there will be a lot of exactly what Mike is saying..avoiding DM and rolling the miles forward. The reason so many on this board have come out and said they are going to "hold short of runway 125" is BECAUSE the perceived value is not there. Add the value and I think DL has a MAJOR home-run.. At NW we saw an amazing shift in just 2 years of folks who would lock Plat at NW and then go get status elsewhere actually focusing everything at NW trying to get to 120/160/200k for the 6 SWU's that enabled them to take their SO to Asia in WBC for $1600.00-$1800.00 (3 times if you got to 200). That is worth focusing $$ you would have spent getting free bags at UA.

pbarnette

A home-run for whom? For the FFers or for DL? Why should DL be chasing fliers that are primarily concerned with booking J at Y prices? The challenge that DL (and the rest of the airline industry) faces is not filling the seats. If you price it low enough, you can fill your planes. The challenge that DL faces is filling the seats at a price that actually makes money.

And, no, this isn't necessarily a defense of DL, it is really meant as a means to determine what to expect in the future. Giving away J at Y prices simply isn't sustainable. If it isn't sustainable, then one should expect the DL system to be reflected elsewhere. The tide is already turning that way, when you consider CO's increased upgrade co-pays and UA's introduction of co-pays for mileage upgrades.

That being said, there very well may be a year or two of opportunity to take advantage of the idiocy of the airline industry, and those that can make AA or UA work for them should do that. Just don't expect it to last forever.

WBurcham

+1,000,000.

GUWonder

If DL SkyMiles management were to have the courage to admit the failing of its ways in recent times, it would be quite easy to make adjustments such that DL Diamond would be worth enough to entice more people to go for DL Diamond with their MQM activity this year rather than having Platinums consider stopping short of 125k.

It may even be sufficient if DL were to just adopt the NW Elite ExtraPerks program from years past.

avidflyer

A home run for DL. They are only going to hand out a few SWU's that will re-direct all of the business that would have gone to other programs back to DL. The folks flying 120-200k are absolutely buying J (or discounted J) and full Y. By your logic they should not hand out ANY PMU's... it is not sustainable there either. The key is it is should be a LIMITED amount of reward for a SIGNIFICANT investment and that is what 125k-200k fliers provide. BTW...they GIVE AWAY J tickets to me every year many of them in the form of miles so ...

WBurcham

What was the difference in ExtraPerks versus DL's 125K?

it was 2 SWU's, right? This compares to SkyClub access + 6 PMU's on DL or 25K miles or Gold Medalion, or some other TBD gifts.

Am I missing something?

By the way, I understand the PMU is broken and agree.

Missed this post before but good point. As a mostly leisure medallion, I'm making this status on my own $$. I probably would have considered jumping ship to AA if I could have had my status matched there to EXP...I don't like Y. However they don't do that so I stay with DL and use my PMU's domestically to lock upgrades in on tough (longer) routes. If the PMU were better, I would spend more money with Delta. Period

DP-340

Well said!

MikeMpls

6 PMU's that are unused by 80% of the recipients are not comparable to 2 NW SWU's.

When your wife's already Plat or Gold, what good is gifting GM?

When you already have a lounge membership, what good is another one?

Etc.

The purported choices are bogus for a large number of the intended beneficiaries. Most people want something that they themselves can use.

raehl311

The two SWUs were worth far more, as you could use them on pretty much any NW fare and I believe out of the same bucket that full-Y mileage upgrades came out of.

Additionally, you got 2 more SWU's with additional flying. So for those who flew 160k or so, they got 4 SWUs.

And I think many of us who fly a lot already have skyclub access, so that's not really additional value for many.

pbarnette

Really? Then why do they care about getting cheap SWUs? Do you really mean that their companies are buying them J and full Y? If that is the case, then DL should beef up their marketing and cater their pricing to the corporations buying the tickets, not the FFers. I seriously doubt that SWUs enter into most corporate purchasing decisions.

And were those fliers actually purchasing paid J, then why give it to them for free? Consider a true long-haul, premium cabin flier with AA, say someone that routinely flies DFW-NRT, for example. That would be roughly 10 round-trips in 12 months to reach 125k EQMs (assuming coach earning). Such a flier could, with AA, upgrade 60% of those flights for little more than the cheapest fare.

Is that really a winning strategy? To sell your "best" customers your most expensive product at 1/5 (or less than) the market rate? Even if you assume that the FFer pays for the other 4 flights in J, You could replace the entire incremental revenue of that FFer by selling little more than a single seat for J prices. Worse, since the FFer would get an incremental boost from paying for J for the other flights, then you could have fliers meeting the threshold with, say, only 9 round-trips, meaning an even higher percentage of their flights are sold at 1/5 (or less than) the market rate. Now, I didn't go to business school, but that sure doesn't seem like a good trade-off to me.

Put into numbers, for someone like the above flier, giving 12 SWUs, could conceivably cost AA $32k in revenue differential between an I fare and an upgradeable N fare (based upon prices for a 11/14-12/1 round-trip). Think about that - $32k. That must be one hell of a whale, because that is a huge investment.

It ain't just me. This is the official stance of CO, for example. And that isn't my logic. My logic is that the DL PMUs, as currently constituted, are more likely to maximize revenue than AA's. By forcing higher fares and restricting availability, it is pretty easy to get the expected value of the redemption to equal the expected value of the sale. An airline that seeks to do anything else is banking on a vague hope of future incremental revenue that has not proven to be the case with any airline.

WBurcham

Ok, that I understand, which is why I was asking a question

How often are spouses or SO's or anyone you can give it to already at that? More often that not I would say rarely. Heck, I could give it to my mom... if my partner didn't kill me.

Well it saves you $300 in spending next year. No renewal membership.

That I agree with and want to see what the "other options" are. If it's another $100 Marriott gift certificate, HECK NO. That's barely a night on vacation. If it's something that's worth the $250 (25,000 SM @ $.01/mi PWM valuation) maybe

Thanks for explaining a bit more, I realize that they are valuable which is nice. The DL PMU's also come out of the Y-upgrade bucket.

avidflyer

I am not quoting just because it is getting too long:

Corporate fliers are Frequent fliers. Not all of them, but a very big portion of them and yes, SWU and other instruments that keep employees happy while not costing the company anything ABSOLUTLY play a role in corporate travel. I think you are missing that DL could care less who writes the check so whether it is my company on my behalf or me it is still my butt in the seat and me they need to convince that I need to fly DL. In this way DL is creating an army of marketers on the inside of these companies...trust me that is how it works.Most fliers are, at some level, are decision makers on travel. Companies do not care (and should not care) which airline I use as long as the pricing is in-line with what is out there and DL knows that.

The rest of your argument is really just spelling out the demise of frequent flyer programs in general and while you make some good points and I fully respect your opinion I think it is flawed. Your argument about why give free J to someone even if they buy 4 J tickets is describing perfectly the "miles" system we have today. This is absolutely the same as buy one Jiff peanut butter get one free at the local grocery or walking into a car dealership and getting a better deal by purchasing 2 vehicles on the spot. Airline inventory has a shelf life...it goes bad the day the flight leaves. There is value in bringing the load factor up even at the cost of margin provided you still make money. Here is what I think you are missing:

1. The aggregated revenue per seat on an airplane does not recognise class. There is an average cost for every seat and an average return for every seat. I can 100% assure you that the airlines are doing the math. If the FF programs were not making them money they would not be doing it. It takes a lot of your "not best customers" who fly the lowest fares always to fill the airplane and get the aggregated return up. Those travelers are NOT bad customers and in-fact are the reason airlines reward customers for miles not fare (completely). The AL's also have been giving away EQM's to get more of these fliers on board because a high load factor = a profitable flight.

2. If the demise of the FF program is upon us then why are we seeing ENHANCEMENTS to those programs that are tanking the industry? The answer is simple: They are not tanking anything and in-fact are a great way to use seats that would have gone empty to market your product and fill more future seats.

3. Competition. If all the al's decide to kill FF programs then maybe it would be a very lucrative, albeit much smaller, endeavor. The reality is TOP LINE RULES and that is what drives the industry and why AA just fired a salvo across the DL deck in response to DL's assault on DM. This is just business and it does work.

The bottom line is that I did go to business school and margin is a scientific thing. You can figure it out very easily. "Market price" is unscientific and can change in an instant because of economic condition, natural disasters, etc. The 1/5 price you quote may well meet margin requirements. If it did not then the airlines would not be giving away 100% FREE seats in business on every flight. Free vs cheap...It does not take Harvard Business to figure that one out. The only thing that I am trying to point out is that DL is VERY close to a REALLY great program. The Faux Pas was not giving people a compelling reason to keep going beyond DM. That stalls everything right back to Silver and causes people to make decisions that actually move money away from DL.

DP-340

That would make me happy!