A rumor originated this past weekend on Airliners.net about potential major changes in Delta Skymiles: moving from a mileage-based program to a revenue-based program.
The Southwests and JetBlues of the world offer fixed earning based on revenue, with points spent as money to redeem for flights. They’re less generous than the mileage programs, and aspirational awards to the extent they’re offered under these sorts of schemes — premium cabin international offerings — become exorbitantly expensive.
(Of course in many cases Skymiles awards are indeed exorbitantly expensive, although there are strategies to successfully make Delta’s Skypesos work for you.)
Not a single person seems to like the idea in the discussion over at Milepoint.
Goodness knows such a change would make my upcoming debate with The Points Guy on the value of Delta’s miles a slam dunk.
He quotes extensively from what’s purportedly an internal document describing a rollout plan for the changes:
The Loyalty Program is comprised of two projects that seek to increase revenue and customer loyalty along with decreasing liability related to unused award miles. Coordinated communication to the general public regarding the intentions of these changes is paramount to acceptance.
Revenue Based Mileage Accrual (RBMA) project shifts the basis for awarding miles to a revenue based accrual approach Release 0: Support the communication/announcement of upcoming SkyMiles program changes (targeted 1Q12).
Will no longer display distance flown miles for departures after new miles accrual effective date (targeted for 3Q12)
Release 0.5: Provide Mileage Calculator to calculate approximate revenue based mileage accrual based on travel
after launch ((targeted 2Q12)
Release 1: Convert SkyMiles System from flown miles to revenue based mileage accrual (3Q12)
Release 2: Reward SkyMiles members with miles for all non-air purchases (i.e. SkyClub, Seats) (currently On Hold)
Fare Based Award Ticket Redemption (FBATR) project
Fast Track Release – Provides limited base functionality to align with the Polaris Chicago release timing
Phase I at Launch introduces Fare Based Award Redemption Model, Single Shopping Experience for Customer, New Award Inventory Controls, Cash + Miles Award Redemption Product, Award Redemption for OA, Modifications to the automated Award Refund, Redeposit, and Reissue and Exchange Process
Phase II – After Launch includes Bid for Price Award Redemption Product, Buy It Now Award Redemption Product, Volume Discount Award Redemption Product, Modifications to SkyMiles Branded Mileage Upgrade Products, and Modifications to SkyMiles System-Wide Upgrade Certificates.
The memo has not been authenticated. And even if it’s real, we don’t have context for its purpose — is it an actual rollout of changes that have been decided upon, or part of an overall strategy discussion for a plan that was considered or rejected? Delta certainly hasn’t commented.
When Air New Zealand came out with changes to its frequent flyer program from points to dollars in 2004, I worried about what it would mean for the future of frequent flyer program value, although they kept both a points as money idea and a traditional award chart (with saver awards also continuing to be made available to partner airlines).
When United and Chase introduced “Choices” in 2006 that extended the miles as money concept. Here it was likely a reaction of Chase to the perception that miles weren’t useful, the Capital One commercials hammering on how you couldn’t use your miles but that points were worth more when they could pay for any ticket. But I worried that this would be a direction more programs could go, to the exclusion of traditional award charts.
That’s where the real value comes in from frequent flyer programs — not as a rebate system to be spent as cash, but as a rebate that is then spent on a value basis, airlines unloading excess capacity at a deep discount to buyers who participate in their points programs. It’s a rebate and a deep discount, and that combination allows members to leverage their loyalty for aspirational awards they couldn’t otherwise afford or achieve without those programs. It’s Hawaii, Europe, and Australia that motivate members.
When you reduce the program to a rebate, points based on spend, you demystify it and remove the romance. You get Greyhound Road Rewards, every 10 bus trips buys you a bus trip. There’s little emotional connection.
And while it’s tempting to say that you’re tying rewards to revenue, that’s misguided:
- Because it isn’t revenue you want to reward, there’s no reason to reward revenue you’ll get anyway, you want to incentivize marginal dollars, influencing spend of any kind you wouldn’t otherwise get (and even low spend is hugely valuable because it fills seats that would have otherwise gone empty rather than taking up a seat that would otherwise have been sold for almost as much).
- Because the mileage programs themselves are hugely valuable and profitable, they’re collectively the most successful marketing endeavor in history, and this is largely due to the romance, these sorts of changes risk undermining the entire value proposition and profitability of the programs
So while these sorts of ideas are often lauded as common sense moves for profitability they have the opposite effect.
I have no idea how likely such a move would be for Delta. I have no special knowledge. But it’s an active rumor. Certainly it’s something that’s been considered, on the table at one time or another, by most programs. So far the idea has been rejected by all but the Southwests and JetBlues. Thank goodness.
Here’s hoping it’s rejected by Delta as well!