According to one Delta Air Lines executive, members of the airline’s SkyMiles® frequent flier program are quickly accepting and coming to understand the changes to the program announced by the airline earlier this year.
Speaking with TheTravelPro
at the 26th Annual Freddie Awards at the Museum of Flight April 24
about the coming changes and members’ reaction to them, the airline official
said the carrier had anticipated some negative reaction by its customers.
“The first response was, ‘We
don’t like this,’ and ‘Why are you changing?’ so we anticipated some negative
feedback, but I think we were actually very surprised about how little we got
and [that] it didn’t really last as long as we expected,” Karen Zachary, Managing
Director of Global Programs with Delta Air Lines, said. “We’ve gotten a lot of
good feedback as well because people appreciate … that we’re recognizing how
much they’re spending.”
In February, Atlanta-based Delta (NYSE:DAL)
announced that, starting in 2015, SkyMiles members would accrue miles that
could be redeemed for flights based on dollars spent rather than miles flown.
The miles or segments flown will count toward Medallion levels – Silver, Gold,
Platinum, or Diamond – which will carry benefits including discounted or
complimentary Economy Comfort seating, access to Delta’s Sky Clubs, bonus miles
and other benefits. Full details are available on Delta’s website.
Program changes were not
decided upon unilaterally, nor in a vacuum. According to Zachary, they were the
result of an exhaustive process that took more than four years.
“It’s been expensive, it’s been
time-consuming, and we’ve done a lot of focus groups,” she said. “We’ve done
over 250 customer focus groups to help design what we wanted at the end.”
The changes include several
that have not received the same level of media attention as the shift from a
mileage-based program to a revenue-based program. Changes include the
elimination of blackout dates for award seats as well as the ability to book
award travel using a combination of miles and cash. Those and other changes represent a significant investment by the airline in its frequent flier program.
“We’re investing in one-way
[awards], we’re investing in more seats, we’re investing in more tiers so more
opportunity” to book award seats, Zachary said.
Making more seats available is
an important change because Delta has not
historically been regarded as particularly generous in terms of the saver seats
it makes available, although an independent annual survey of award seat
availability shows the carrier is improving in that area.
The survey, performed by
technology company Switchfly, queried the frequent flier programs of 25
carriers worldwide and attempted to book seats using saver-style awards for
parties of two travelers on carriers’ top routes. In its 2012 survey, the company was able to book seats on just over 27% of Delta
flights, the lowest of the major U.S. carriers. However, that number improved
to 36.4% in the 2013 survey. The 2014 survey is due to be released May 8.
More categories, different pricing
Delta’s program changes
include a new award pricing structure with five categories replacing the
current three levels. On the program’s 2015 award travel chart, the airline
points out that miles needed to purchase award seats at Level 1 – formerly
called the “Saver” level – will not change from the current level. Further,
although prices will change in 44 award categories, 95% of those changes are
price reductions, requiring from 5,000 to 35,000 fewer miles to book an award
seat, depending on the level of service and the destination.
Although Delta is the first
major U.S. carrier to change from a mileage model to a revenue model, the
change is not unprecedented. In the U.S. airline industry, JetBlue (NYSE:JBLU),
Southwest (NYSE:LUV), and Virgin America already use revenue-based models. And,
as previously reported, Virgin Australia’s revenue-based Velocity program
swept the Freddie Awards for the Middle East and Asia/Oceania region, an
indication that the approach has been well accepted by Virgin Australia’s
customers, according to one of the airline's executives.
“I think that’s the trend:
rewarding customers based on what their spend is on the airline rather than
using fare classes as a proxy for spend,” Tom Alberts, airline partnership
manager for Velocity, told TheTravelPro. “I think that’s the model that
airlines eventually will go to across the board.”
It is also a model that has
been employed by the hotel industry for a number of years. The Hilton HHonors program, for example, credits guests for every dollar they spend on room
nights, food, and incidentals but grants status levels – Blue, Silver, Gold,
and Diamond – based on the number of nights spent in its hotels.
In fact, Zachary said, the
hotel industry model was studied and considered when designing their program
Contrary to early criticism
that Delta's move from distance to dollars would benefit the airline’s elite
customers at the expense of its other customers - particularly those who fly
long-haul flights on bargain fares - the redesigned program will provide
benefits to both types of passengers. The establishment of status levels based
on miles flown will benefit customers who fly long distances, while the awarding of redeemable miles based on dollars spent
will benefit customers who pay higher fares.
I’d call that a “win-win.”
Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.
Photo provided by Delta Air Lines
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