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Another day, another Delta devaluation

Here we go again
Here we go again

So I was foolishly up late watching Paul Rudd and Jimmy Fallon’s lip sync hilarity when the Wall Street Journal and Insideflyer broke the news that Delta was going to a fully revenue based system. I went to bed assuming the worst, but now that some details have emerged, I don’t think things are as dire as everyone makes them out to be…not yet at least. Here are some quick thoughts.

For starters, you can take a look at this Delta page for a list of the changes without commentary. For a list of changes WITH commentary, feel free to check out One Mile at a Time, The Points Guy, Milevalue, or just google “Delta sucks” (the general, and mostly deserved, sentiment).

To summarize, you now are going to earn redeemable miles based on how much money you spend and your status (from 5 to 13 points per dollar). So most people are going to end up earning less miles via flying than they used to (since right now you earn based on how far you fly).

Delta also is saying there will be more award seats available at the low level price; they are also introducing a 5 tier pricing system as opposed to their current 3 tier system.

Why this devaluation won’t hurt me as much as it might others 

So the major devaluation that is happening here is in regards to how many miles you EARN from paid fares. Well, I rarely fly paid fares, and when I do I just go for whatever’s cheapest since I’m not earning status anywhere. So, I’m already earning very few miles via paying Delta for tickets, so this is going to hurt me only when I decide to buy a Delta flight.

Since the majority of the miles are earned are via credit card sign up bonuses, I’ll still be able to theoretically bank a ton of miles (they haven’t announced any changes to credit card bonuses or anything). Relatively, the current credit card bonus offers are even more lucrative than they were before. And it’s easy to earn Delta miles through a myriad of card sign-ups.

What might hurt is if they increase redemption rates AGAIN (they just did this year, completely effective June 1st). But why would they do that? They’ve already angered people by lowering the redemption rate – but lowering the redemption rate is going to cut their costs (less miles in circulation = less miles redeemed). The only wildcard is this 5 tier system.

The 5 tier award redemption system wildcard

Insideflyer’s article has an excellent analysis of these program changes. Delta is making itself look more like a hotel rewards program. We take it for granted, but we all happily earn points at hotels based on how much we spend there, but the redemption rates are fixed – fancier hotels cost more. It’s worked perfectly fine for hotels and Insideflyer believes it will work perfectly fine for Delta, business wise at least.

How much will the tiered award system look like tiered hotel redemptions?
How much will the tiered award system look like tiered hotel redemptions?

That’s why the 5 tier award redemption is a bit of a wildcard for me. What if Delta decides some of their most traveled routes will be considered medium or high tier awards all the time? That would be a scary thing. I don’t really think it will happen, but that is the thing that scares me most about this devaluation.

Who does the devaluation hurt the most?

Loyal Delta flyers who don’t buy business class fares and above are probably going to be hurt the most. So it’ll probably be Silver Medallion type people who get hurt the most. The people who are paying full fare business and first class fares for work are either going to earn around the same number of redeemable miles for their flights or maybe even more. If you commute between say Boston and JFK regularly, you’ll probably end up earning even more miles since it’s such a short flight but it still costs so much money. But people who fly a lot for pleasure or family and live in Delta hubs like Atlanta are probably going to get screwed, they used to get status and a ton of redeemable miles via flying cheap coach fares, but now they won’t earn nearly as much. So even though the devaluation doesn’t hurt me personally, it IS a devaluation and I feel bad for the loyal Delta flyers who are going to be affected negatively.

Final Thoughts

Though this devaluation isn’t going to hurt people who focus on credit card sign up bonuses to earn miles too much, it still is sad that it is happening and I feel for the loyal consumers who are going to be hurt by this. Ultimately, though, Delta is a business and a good one at that – they are one of the most profitable legacy carriers so I have to think they know what they’re doing business wise. I assume other airlines are going to follow suit pretty soon – what we need to hope for is that award charts will remain region based. If that’s the case, we still will be able to fly in international premium cabins for way lower than the retail cost – that’s the dream.

Joe
Just an average joe trying to fly his family for less
http://www.asthejoeflies@gmail.com

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