Cranky Flier has a post out this morning suggesting that American Airlines really isn’t so weak in Asia. There are some interesting numbers in the post, and he does a good job of explaining how he got to those numbers. I’m a fan of that in many ways. Except for the part where I think he’s completely messing up where it really matters. He only considers flights between the US mainland and anywhere in Asia. That makes sense because that’s mostly where the business matters. But where he screws up, to me, is this assumption:
Lastly, I’m including joint venture flights operated by ANA under United and by JAL under American, because since it’s a joint venture, those flights should be considered their own. Sure, there is work to be done before the experience is seamless, but the path is there.
It is a nice theory, but it just doesn’t work. None of the three alliances have figured out the right way to run these JVs as though they are integrated operations. Mileage earning rules are mostly standardized now and fares are generally fixed. But operationally there are still differences. Ditto for things like frequent flyer benefits and recognition. Upgrades, for example, happen very differently (if at all) on partners.
The other thing overlooked is that coverage isn’t only about frequencies. Including JV partners American has service to Tokyo (NRT & HND), Seoul, Beijing and Shanghai. Both United Airlines and Delta have additional Japan destinations and United also has Hong Kong. And if the JV flights are excluded the number of gateways on the US side are notably higher for Delta and United.
American has some service in Asia. But they are nowhere close to the other two major players, especially on their own metal.
This past week saw perhaps one of the most significant announcements in the evolution of loyalty programs in recent years: Crossover Rewards from Delta and Starwood. The two have teamed up to change the way hotels and airlines work together to reward their most loyal customers, and the implications could be quite far-reaching across the industry. Airline and hotel programs have partnered before, but none to this depth of integration.
Crossover Rewards is focused on the elite members in each program, the type of customers which the programs work hard to attract. From time to time hotels have offered trial elite status promos to airline elites. That can build a short-term bump in customer base but it doesn’t seem to have the long-term effects that the hotels are looking for. The new Crossover Rewards program is built to be a long-term solution, not a flash-in-the-pan change to the numbers.
For elite members in either program the main bonus is getting to earn both hotel and airline points for activity on either of the partners. The only thing close to this historically was Hilton‘s Double Dip program and that meant earning airline points in lieu of extra hotel points, though it is also available to everyone rather than just to elites. Crossover Rewards allow for elites to earn points in both programs without sacrificing earning on either side; that’s a pretty significant step forward.
For top elites in both programs – Platinum elite on the SPG side and Platinum and Diamond Medallion on the Delta side – the benefits are even more significant. Rather than a one-time status gift which the customer must maintain through "natural" qualification activity the Crossover Reward program will be granting an elite-light level of benefits. For Delta Platinum and Diamond Medallion members Starwood will offer many of the same benefits as the SPG gold tier, including priority check-in, complimentary room upgrades (no suites) and free internet. For SPG Platinum members Delta will offer many of the same benefits available to Silver Medallions, including one free checked bag, priority check-in and priority boarding. It is not a full elite status – no bonus elite points or priority service other than on the day of travel – but it is definitely more than what everyone else gets. And, more significantly, the benefits are valid so long as the partnership survives, not just for a trial period.
Finally, it is worth noting that the earning rates for points on the Crossover Rewards partner are based on spend. While this is normal in the hotel loyalty world it is decidedly not in the legacy airline loyalty programs. For SPG elites the earning will be one Starpoint per dollar spend on the base fare, excluding taxes, fees and surcharges. It is not much of a surprise that Delta has the ability to track this data; they recently announced intentions to put similar metrics on elite qualification in coming years. For Delta Medallions the earning will be based on room rate only at Starwood hotels; ancillary spend will not earn SkyMiles. While not groundbreaking overall, this approach is definitely another move in the direction of tying elite benefits to revenue. No surprise that Delta is on board with that given their recent announcements regarding similar plans for 2015 Medallion qualification.
Perhaps the most impressive thing to come from this change is that there doesn’t actually appear to be anyone who will lose with the changes. Starwood has committed to prioritizing their own elites over the Delta Medallions for room upgrades and there will be no competition for Delta upgrades as that isn’t one of the benefits. Earning crossover points doesn’t cost customers earning opportunities in the main program; it is purely additive. And the other benefits – waived fees for various services and priority access – doesn’t really cost anyone else anything.
The two companies would seem to have almost nothing but upside from the changes, too. Yes, they will forgo some revenue on the ancillary fees side of the ledger. And there will be some costs to handle the points earning. But the partnership opens up a strong marketing avenue to top travelers without significantly diluting the benefits for their existing elite customer base.
This may prove to be an enhancement which is actually beneficial to both customers and companies. There are far too few of those happening these days.
Partnerships between hotel and airline loyalty programs are not particularly rare, but they are mostly focused on earning airline points for stays at hotels, and then generally in lieu of earning with the hotel directly. Starwood and Delta have launched a new Crossover Rewards program, allowing SPG elites to earn points towards their Starpoints balance for flights taken on Delta. The SPG elite status will also translate into elite benefits on the day of travel, including free bags and priority boarding.
On the points earning front, SPG members with linked accounts will earn one Starpoint for each dollar spent on Delta base fares. This correlates with the recently announced idea of MQDs and Delta’s ability to track spending on a per ticket basis. It seems that they are quite happy to leverage that new technology both for internal bits and for partnerships.
On the day of travel front, the benefits are limited only to SPG Platinum members; gold elites are excluded. The benefits include one free checked bag (up to four passengers on the reservation), Zone 1 boarding (up to nine passengers on the reservation) and SkyPriority access
and day of departure upgrades on routes where complimentary upgrades are offered (Platinum elite only).
The benefits for SPG Platinum elites rest somewhere between Delta AmEx cardholders and Silver Medallion status. That’s not to shabby at all, especially for basically no additional effort on the part of the SPG member. The only real drawback I can see is that it requires crediting the points to Delta rather than Alaska Airlines, which is how I normally roll with my Delta flights. Then again, I’m not SPG Platinum so the extra point/dollar isn’t really all that valuable to me anyways.
It seems that Aerolineas Argentinas is looking to grow their international route map significantly. The carrier is looking to add five new destinations around the globe, including three in the United States. The carrier is apparently in the process of negotiating access to these markets through bilateral treaties. Given that Aerolineas Argentinas only has five destinations currently outside of South America this would be an enormous upgrade to their route map. The proposed destinations are Atlanta, Las Vegas, Detroit, Guangzhou and Tel Aviv.
As best as I can tell there is no way that the Guangzhou flight can be served non-stop. Detroit and Atlanta are both hubs for SkyTeam partner Delta so if they can negotiate the treaties picking up traffic in one of those to carry on to China sortof makes sense, but it seems unlikely that such access will be easily forthcoming. Tagging it on to Tel Aviv might make sense, but I have no idea what the traffic demand is on that local hop or if they could secure traffic rights.
Or I suppose it is possible that my French is bad enough that I’m completely misunderstanding the story I’m reading and getting some of these details from. But I’m pretty sure that’s not the case.
That Delta is going to be offering outdoor space at their new lounge facilities in JFK and ATL is not particularly new news. Still, the renderings of the space are new, and they are pretty darn sexy.
The Sky Deck lounges are going to offer al fresco snack/dining options and unencumbered runway views. For the aviation geek that’s an awesome upgrade. Weather can obviously be a problem for both locations, but the idea is still very cool, and the fact that they want to emphasize the runway views is a nice nod to the fact that customers aren’t necessarily looking to be isolated from travel. Some really do enjoy it.
Tim Mapes, Delta’s senior vice president – Marketing offered up this take on the new offering:
Sky Deck represents our continuing effort to offer Delta customers exclusive experiences and amenities they value. The new outdoor terraces will do just that – provide distinctive spaces with unprecedented outdoor runway views at two of the most globally significant airports in the world.
I’m very much looking forward to getting out to JFK when the new Sky Deck opens. Definitely some awesome opportunities there.
The shift towards revenue as the defining characteristic for loyalty value is picking up speed. Several smaller carriers have made the shift over the past couple years and now a major US airline is joining the efforts. Delta has announced that stating with their 2015 Medallion program year the carrier will require a minimum spend in addition to flight thresholds for passengers to acquire elite status.
The good news is that the details of the requirement – essentially 10 cents per mile – are being published well in advance of the requirements kicking in. The spend will be a factor for earning status in 2014 towards the 2015 program year. Members of the SkyMiles program have plenty of time to figure out if it still works for them and, if not, to figure out their next move. And I’m guessing not so many will be making a move.
For most passengers, the spend requirements probably aren’t all that bad. The price point is actually below the overall average fare price for tickets across Delta’s system. In other worlds, passengers who have Medallion status for less spend than that are below average in revenue to the company. It isn’t hard to understand why Delta would not want to reward those customers as much as the above average spenders. And the whole point of the loyalty programs is to reward your best customers, right?
The 10 cents per mile requirement will have many up in arms, particularly in the points & miles community. The discussions online have been rather exciting since the rumors of this change started swirling and they haven’t calmed down since the official announcement today. For customers focused on getting as much value as possible for the minimum amount invested this move is pretty much the end of the road.
It is also worth noting that customers spending at least $25k on a co-branded American Express credit card will have the spend requirement waived. Not necessarily because Delta realizes the same revenue from the CC spend but the cost of servicing that is rather lower, meaning the margins are in favor of the CC customers.
There are plenty of problems with the accounting scheme. Most of them come from not counting spend on partner travel (I don’t see only counting base fare as a problem) and setting themselves up for some very strange rollover miles situations. But the big picture of the new plan is reasonably well structured. That doesn’t mean it is great for all customers, but it is great for the ones the company wants to reward.
In reading around the webs on the change I was quite surprised to see Gary over at View From the Wing say, “I like marrying a minimum spend level with miles flown.” That’s a big change in stance and one I hadn’t expected. Personally I’ve always wondered why the airlines didn’t go this route. I know it isn’t good for me personally as a customer given my spend patterns, but I also know that I’m not the right customer for the airlines. Yet somehow they keep rewarding me.
It is simply a matter of time now before the other major carriers make their moves in response to Delta’s. It will certainly be interesting to watch this play out.
When Delta suspended their service between New York City‘s JFK airport and Athens for this winter it marked the first time in 70 years that direct service was not available between Greece and the USA. Two airlines have recently indicated that they are going to try to fill that gap. Doha-based Qatar Airways intends to serve Doha-Athens-JFK on their 787 starting in 2013. And upstart carrier SkyGreece intends to serve several North America destinations from a hub in Athens.
The company’s website doesn’t offer much in the way of details so it would be easy to dismiss them as a flash in the pan. Their Facebook page, however, seems to have a bit more substance to it. The page has only been alive a month at this point but they’ve started posting details about the management team they’re hiring and they seem to have real employees lined up. The plan is to fly with only Greek in-flight crews on an Airbus A340-300. The schedule is expected to be released in a few weeks; initial indications are that New York will see service three times weekly while Toronto and Montreal will have one flight each. One source suggests that South Africa will also join the route map at some point.
It is hard to believe that there is so much demand for service between the markets that multiple carriers will be able to make a go of it successfully. Especially considering the state of the Greek economy.
After several weeks of speculation Delta, Singapore Airlines and Virgin Atlantic have come to an agreement which will see Delta acquire a 49% ownership stake in Virgin Atlantic for $360mm. Delta’s stake will come from Singapore Airlines; Virgin Group, headed by Sir Richard Branson, will retain their current 51% share and control of the company. The Virgin brand and operating certificate will remain intact. The deal is still dependent on approval from regulators on both sides of the Atlantic. The airlines expect the deal to close by the end of 2013.
Delta and Virgin Atlantic also intend to establish a joint venture operation for trans-Atlantic operations. The joint venture will not, at least for now, include other SkyTeam partners. It will, however include:
- A fully integrated joint venture that will operate on a "metal neutral" basis with both airlines sharing the costs and revenues from all joint venture flights.
- A combined trans-Atlantic network between the United Kingdom and North America with 31 peak-day round-trip flights.
- Enhanced benefits for customers including cooperation on services between New York and London, with a combined total of nine daily round-trip flights from London-Heathrow to John F. Kennedy International Airport and Newark Liberty International Airport.
- Reciprocal frequent flyer benefits.
- Shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges for elite passengers.
The joint venture will definitely give the combined carriers a leg up in the ultra-competitive London market. That said, the combined lift between London and New York City and Newark still doesn’t begin to reach the frequencies at British Airways/American Airlines offer. The 23 total flights daily between the USA and Heathrow will place Delta/Virgin in a solid second place, ahead of United’s 16 but well behind BA/AA’s nearly 40 daily operations.
From a passenger perspective the overall product should be very competitive in both economy and business class. Both Delta and Virgin Atlantic currently offer flat beds for all passengers in their business class cabins. For economy class the AVOD systems on both carriers should provide sufficient entertainment to distract the passengers from their tighter seating quarters. Virgin Atlantic has a proper premium economy cabin which Delta does not offer; there may be some work to reconcile that difference at some point. On the ground the Virgin Clubhouse lounges are some of the nicest business class operations, particularly in New York and London. Delta’s SkyClubs are not at the same level but in shared markets customers will have the benefit of access to both.
Delta has been looking for a way to get at more slots into Heathrow. They picked up a couple when British Airways was forced to divest them following their acquisition of bmi but that wasn’t enough to significantly change their operations. The partnership with Virgin Atlantic will open up access to many more slots eventually. And the price point was quite reasonable. Of course, Virgin Atlantic has been losing money in recent quarters so it might become a more expensive investment over time, but at least initially it looks like a positive opportunity for both carriers.
United Airlines has joined the ranks of companies trying to limit their customers ability to track loyalty program data through third party aggregation sites. They are the 4th major carrier in the USA to pursue such a policy, joining Southwest, Delta and American Airlines in blocking such access. While United has not yet issued a public statement TripIt, the travel plans and points aggregation site has sent a notice to their members indicating that access to the data will be cut off as of 11 December 2012.
Dear TripIt Pro member,
We are writing because our records show that you are tracking your United MileagePlus account with TripIt Pro’s point-tracker feature.
United no longer allows third-party services to access MileagePlus accounts. Starting tomorrow, TripIt Pro can no longer track your United MileagePlus miles, but we’ll continue to store your account number for you.
Why is this happening?
There are differing opinions in the travel industry about whether your reward-program accounts should be accessible to third parties to whom you’ve given permission. Some travel providers have decided not to allow this access.
A member of the United Public Relations group responded to my request for more information with the following:
United issued cease and desist letters to certain mileage management companies that market to MileagePlus members. We encourage each of these organizations seeking to extract data from united.com on behalf of our customers to enter into a formal agreement with United in order to ensure compliance with the Terms, Conditions, and Legal Notices contained on united.com. United is happy to explore these formal partnerships. In fact, we already have a relationship with one such organization – UsingMiles.
For the airlines it is partly a matter of controlling the data and the customer interaction. It is also a matter of controlling the access to their systems. They have no motivation to build an interface that these companies can integrate with if the companies aren’t licensing the data and the other option is paying for the increased loads on their systems from the repeated queries. Neither seems particularly enticing for the airlines, though that doesn’t necessarily justify cutting off the access. American Airlines eventually came out and admitted that they would reconsider if the websites agreed to a licensing deal for the data but they aren’t interested in providing it for free.
This isn’t the first time United has taken such actions in the face of 3rd party harvesting sites using their data. Remember when "expert mode" went away? Data scraping was one of the justifications used then, too. That said, the option is back and all the same sites/tools which were scraping the data are still doing so; apparently it didn’t matter all that much.
At the end of the day, the airlines may be within their rights to cut access to these tools. Their website terms of service are quite broad and seem to cover the actions of TripIt and other, similar companies:
This Web site is for the User’s personal, noncommercial use only. User agrees not to modify, copy, alter, distribute, transmit, display, perform, reproduce, publish, license, create derivative works from, transfer, or sell any information, software, products or services obtained from this Web site without United Airlines’ prior written permission. User agrees not to use any robot, spider, other automatic device, or manual process to monitor or copy this Web site or the content contained therein or for any other unauthorized purpose without United Airlines’ prior written permission.
But just because they can do something doesn’t mean they should. There are many situations where the airlines behave in a manner which may have a cost associated with it based on the ability to attract and retain customers. That’s what marketing is all about, after all. And this is a pretty terrible marketing move.
Nine months after activating a satellite-based internet service on their A380 fleet flying between Australia and the United States Qantas shut down the service this past weekend. Apparently usage was not sufficient to justify the costs of operating the systems. In a statement the airline indicated that the usage rate was less than 5 percent over the trial period. The company believes that this limited adoption is mostly attributed to the timing of the flights; passengers were more inclined to sleep on the overnights than pay for the internet connection.
Satellite coverage is limited over the Pacific Ocean and the systems are not cheap to install nor to operate on an ongoing basis. The kit weighs in at several hundred pounds. That means less cargo capacity and more fuel costs. If users aren’t buying the service then it is hard to justify the costs. Similar reports were heard in the early days of the gogo service rollouts. The US carriers soldiered on, however, continuing the deployments. Clearly Qantas feels the customer demand just isn’t there. With both United Airlines and Delta committed to adding comparable service on their aircraft flying to Australia it will be interesting to see if the competitive aspect of the market sees the service returning in the future.
And at the same time as Qantas is cutting the service Etihad has announced that by the end of 2014 they expect their entire fleet to have global connectivity. The announcement came as the carrier launched their first aircraft with "Wi-Fly" service. The Wi-Fly product is based on Panasonic’s satellite connectivity solution and is in service now on one of the carrier’s A330-200 aircraft. Etihad already has some other aircraft configured with the OnAir product they trialed previously. Etihad will be configuring their fleet with voice/data connectivity on all aircraft and augmenting that on their long-haul fleet with the wifi service as well. The carrier expects 10 aircraft to be configured with the Wi-Fly service by the end of 2013. Oh, and for first class passengers the in-flight internet service will be free.
Perhaps there is a finite number of tubes available out there on the internet and the convenient timing of these two announcements is more than just coincidence. Or there are vastly different ideas about what consumers want – and are willing to pay for – in-flight.