RealDLInsider

Happy holidays to all of you and I hope you are already out on vacation. I’m still in the office but will be wrapping up things today and heading out for a few days. I’m staying in Atlanta, so no big surprises, and the family is heading this way. Thought I would take some time in this posting to address what are the most heated comments around a change we made this year, and then wrap up this year with a thank you!

First off, it’s clear that within this forum, the SkyChoice change is probably the most heated debate, with more people on the side of “negative” than “not a big deal” mentality. I’ve read your comments, and almost daily. I’m the kind of person that generally absorbs everything holistically, and then replies. Also, as a few of you have mentioned and not surprisingly, I travel quite a bit and am out of the office often. This results in me replying less often than I’d like.

So here it goes …

The SkyChoice change that we made has been done and with the intent to protect those flights that are the highest revenue generating and have significant premium demand. I define premium fares generally as any confirmed Business or First Class fare (FJDAI) and several of the higher coach fare classes (YBM). In a world with only two award fare levels, one at the existing SkySaver levels and availability, we are left with only one award type to play with. With one level out there, there were several options that we could have taken that would have placed restrictions on this highest award level, and after extensive analysis, we found this mapping change to be the least impacting to our customers. We worked very carefully with our Revenue Management team on this, and analyzed revenue and award booking curves, demand across high award redemption markets, the number of redemptions, and the availability in each fare class. We also examined the mileage levels of competitors as well as blackout dates, Saturday Night stays and restrictions that other airlines have on award seats. After reviewing all options to protect these high revenue generating flights or seats, we made this decision.

Was it done to reduce the overall number of award seats given away? Although some of you may disagree, the answer is affirmatively no. Because of the way we account for mileage redemptions that now impact the P&L of the company, it’s not in our best interest to close down award seats when seats are going out empty. Rather, it was done to shift the SkyChoice award seat request to the flights that aren’t displacing the highest fare. For example, if we have a 5 pm ATL to LAX tomorrow with only two seats left for sale (at $1,800 roundtrip) and a 4 pm ATL to LAX flight tomorrow that has 15 seats left for sale (at $1,000 roundtrip), we couldn’t just keep the customer feeling indifferent. For the airline, we are not indifferent, and to the tune of about $800 per redemption. We believed putting the customer on the 4 pm flight instead of the 5 pm, would allow us to retain the $1,600 in incremental revenue on the 5 pm flight and generally still satisfy the redeemer. On top of this, since the vast majority of all award seats are redeemed in these higher frequency markets, we didn’t believe putting a customer on the 4 pm and protecting the 5 pm flight for the two - $1,800 paying passengers likely to buy, was unreasonable. I understand that some of you think so, but holistically, we didn’t see this as a significant issue. Also, when you looked at those who would likely be disappointed most, since we offer greater availability for award seats to Medallions, it’s actually less likely to be a Medallion than you all might think.

I’m confident many of you will disagree with the above and think what we did was a mistake. Since this airline’s overall survival and technically my job, depends on keeping our loyal flyers and SkyMiles members happy, I wouldn’t have done something or supported doing something that would significantly jeopardize the reputation of this program. Since launching the change on December 4th, like you, we have monitored award bookings and have found some flights with no seats available. The following are stats around the number of seats we have booked in award travel since launching, and a few flights that had/have no availability.

- From December 4th through yesterday, we have actually increased the number of award bookings we have made systemwide on Delta by 2.5% year over year (which actually amounts to thousands of customers). The number of SkySaver seats booked is up 3.4% year over year, and the number of SkyChoice seats booked is down slightly by 0.2%. In total numbers, its thousands more award seats given away in SkySaver year over year, and about ~100 SkyChoice redemptions. When we looked at award demand even closer, we see that the SkyChoice demand is down slightly driven more by the fact that SkySaver redemptions are up and not because of the SkyChoice changes.

- Some of the flights with no availability include a few markets that have booked up tremendously in the last few weeks, including a few Caribbean markets for the holidays, and some bowl markets (e.g. New Orleans to Atlanta after the first of the year). We examine our award calendar often and are monitoring these flights closely, and in every case where SkyChoice is sold out, the flights are completely closed for sale, oversold above 100% of capacity, and in a few instances, sold at 90%+ but are way out from departure. In fact, last I looked in one of the markets that was discussed in this forum, over half the flights out of New Orleans on the 2nd and 3rd of January to Atlanta, were completely sold out for purchase.

Based on the above, and I realize I’ll get heat for this, I don’t think this change that we have made is having a significant impact on award demand, on award tickets booked, and will have a significant demand on the perception of our program. Should that change, and you can guarantee I’ll be monitoring closely, we would consider re-adjusting the program.

We’ve come along way this year and our customers were a driving force behind this. I don’t think I’ve ever been more proud of my team’s accomplishments, and of the effort put forth by my colleagues and peers. Also, I don’t think I’ve ever been more appreciative of the loyalty that our customers have shown in the last couple years. Looking back to 2005, we were near the bottom of the industry in on-time performance, bottom in operational reliability, near bottom in customer service, and with all of that, not surprisingly, pretty bad off financially. Now, although our industry has some significant issues still to face, including offsetting ever increasing fuel prices, Delta is top tier in on-time performance, second in customer satisfaction and chasing CO closely, and tops in operational reliability. Furthermore, customer complaint volume is down dramatically, positive customer comments are up, and overall, there is a general feeling that financially we are looking good in the industry. More on how this takes shape next year ....

In the meantime, thanks for your support of our airline, for your comments (and I do want them to keep coming – bad and good), and for supporting our efforts in helping turn Delta around.

Happy Holidays to all!

Jeff

mtparadis

Thanks as always, Jeff. Very informative, but you're still going to have a lot of people disagreeing with you based on the restrictive buckets chosen for mapping availability.

El Boocho

I think you are missing half the point. As far as I am concerned the most troubling is that there are some flights with 0 award seats ever allocated to them. It is not just the close to sold out flights. I can rationalize your scenario, however, it doesn't appear to be the real issue or what is happening in several of the markets discussed here. MSY for the bowl game and NCE for the Cannes are easier to swallow.

DiverDave

Thanks for the update.

I'm left wondering about the following from your November post http://www.flyertalk.com/forum/showp...92&postcount=1, as I don't see any "giveback" in your update here. :

I wish somebody at Delta could put on their customer hat and see how this all looks. Especially given the well documented (and SERIOUS IMO) issues with the delta.com award availability search functions.

Happy Holidays,
David H.

AndyTLe

Thank you for the post, but you haven't told us anything new. You mentioned the GIVEBACK to customers last month and you failed to address that issue. The problem with the "I’ll be monitoring closely, we would consider re-adjusting the program" approach is that it is PASSIVE. You've yet to address your most loyal customers. As you "sit and watch", you WILL see changes as many of us have the ability and WILL switch to other airlines. What is being said and what is being observed/happening is DIFFERENT and troubling.

SIMPLE BUSINESS SCHOOL PRINCIPLE: It is MUCH easier to retain a current customer than it is to gain a new one.

Again, thank you for you input but I respectfully disagree. Have a Merry Christmas.

rothsteg

I appreciate your explaining Delta's rationale, but for those of us who don't live in ATL, SLC or CVG, we have a choice of primary carriers and SkyMiles was not a fully competitive program before these changes and is now even less competitive. I happen to be New York based. If I want to fly biz to Paris, I can, on any flight with seats, use 180,000 American miles or, on any flight that Delta is willing to let me take, use 250,000 miles. I concede that Delta's business product is superior to the AA product, but, in fact, I can fly first on AA to Paris, a truly superior product, for the same 250,000 miles that Delta charges for its maybe yes, maybe no Skychoice awards on any AA flight that has seats. The same applies to a host of destinations and to UA as well.

Delta has the right to craft its program as it wishes, but flyers will choose to emphasize travel on the airline/airlines that offer them the best return on their miles.

IrieDame

Well Jeff as you stated many are still going to challenge Delta on the Skychoice changes...in any event, I am off to the Cayman Islands on a skysaver BE award ticket on Sunday and spent Thanksgiving week in Paris on another skysaver BE ticket so from my perspective I am unaffected.

Happy Holidays and I look forward to your 2008 updates.

Hawk Circle

The promised 'giveback,' conveniently overlooked by Jeff this month though much discussed in the main SkyChoice debate thread, seems to be a nice little pat on the back.

starflyer

SkySaver availability of the flights I wanted was previously extremely poor. With your changes, availability of such award seats has improved by a miniscule 3%, so my perception is that SkySaver availability will still be extremely poor. Plus, you've taken away the ability to claim any available seat with a SkyChoice award. I'm not seeing anything here that will bring me back to Delta.

motormadness

Thanks for your reply Jeff. However, you completely missed and avoided what many of us talked about this week on this forum. In case you missed it by some chance, many of us are unhappy about where the SkyChoice restrictions have been set (based on our tests) at the Q fare for Y travel. In case you didn't know, a Q fare is a fare in the Delta system that is more or less at the bottom of the middle range of Y fares. Seeing how you and your group like to devalue this program, and you cannot deny that you have, why didn't you guys just create a third redemption level? Label SkyImpossible at 25K, SkyChoice at 50k and maybe SkyGouge at 65k. If bookings are up for awards, then I'd think you'd want to try and get those miles out of the system, not piss your most loyal customers off so Delta won't be getting anymore of their business. Very very disappointed here

Back to the redemption fare classes, all of us here at FlyerTalk would like a CONFIRMATION on what the benchmark is for SkyChoice redemption. Is it Q for Y, A for first, and D for BE?

Thank You

Delta3MM

Hey Jeff,

As a 20+ year 100K mile or greater on DL, 3MM and over 6MM total points, I'm so glad I moved on to United.

None of this nonsense over there.

Oh, yea, this year I'm canceling my Amex as well - who wants more DL points - points you can't redeem on flights you want for any points! No more revenue from Amex from me.

I'll take my confirmed upgrades and great treatment over at United.

Good luck with the greyhound bus crowd! Certainly either uninformed, uniterested or unlucky is all you have left.

Billy

Global_Hi_Flyer

Jeff,

Thank you for your insight.

The problem, from my standpoint, is that this was sold as "only a few flights at high demand times", where the actuality is "any flight, any time". That is a significant change, and severely degrades SkyMiles. This is particularly true where there may only be *one* seat, but *two* travelers (husband/wife).

The other rub is defining "demand". Someone who is unable to book and goes elsewhere is never really counted under the demand equation. You never know when I book with AA as a result of DL pricing/policies/skymiles degradation.

SkyChoice has become like SkySaver: we never really know when we will be able to use the miles. Under the old scheme, we did know. Defining blackout events, we would know. Under a dynamic yield-management program and subject to the whim of revenue management, we'll never know. Perhaps that is the goal. And as you start to get load factors approaching or exceeding 90%, it starts to become impossible for SkyChoice.... which was not the "deal".

As I have moved to a new market with higher demand for seats (DCA vs SAT), this is significant. It ought to be significant to any market with major DL presence. And it's enough that I am rethinking my options and finding the grass to be a lighter shade of green elsewhere. Were I still living in Cincy and flying out of CVG, I'd be much more p*ssed off because there are really no good options.

tonypct

Oh yeah, UA is soooo much better.

Jeff, thanks for your post and keep them coming.

DLfan

Jeff, thanks for addressing this issue and in (what I believe to be) a very timely manner. However, I'm still left trying to connect the dots between what you said was done, and the actual application of the changes. Why was the Q fare bucket selected as the cut-off to protect YBM fares (why not M, for example)? Unless I'm missing something in the way this manifests, tying a SkyChoice award redemption to a Q fare being available for sale has set the bar too high. Q fares routinely sell out on many flights system-wide throughout all periods of the year. It is not just high yield markets or special event driven demand flights that are affected by this change.

Hope you will expand a bit on the rationale behind tying the restrictions to the Q bucket and why this will not affect many more flights than you claim.

TJtv

Here's how to lie using statistics:

So Jeff says for the period 12/4/07-12/19/07 that award bookings are up 2.5% year-over-year.

Well, what are the year-over-year increases for the time-period directly before this change? Let's take 11/20/07-12/3/07 and see what the yea over year numbers look like. I'm willing to bet that this number is damn close to 2.5%. It should come from the fact that: 1)there are more people wanting to fly than last year, 2)there are more schedule flights, and 3)people have become uncomfortable with the skymiles currency and are redeeming more miles than they would in years past.

Giving year-over-year numbers for one specific time period is meaningless, and is an attempt to mislead all of us on this board.