As we noted in the Skift Trends Report published yesterday, we're in a great time of transition for loyalty programs right now. Not everyone is going to like how it all shakes out.
In a major change to its frequent flier program, Delta Air Lines will soon begin awarding free flights based on dollars spent, rather than miles flown.
The move by Atlanta-based Delta is aimed at rewarding its higher-spending customers, an acknowledgement of how valuable those deep-pocketed travelers are to the company. It’s also a competitive move to attract lucrative business travelers as Delta jockeys against other carriers, including United and American, for those customers.
“We’d like to provide more benefits to our premium customers,” said Jeff Robertson, vice president of the Delta SkyMiles program. “A lot of our customers fly us 10, 20 times a year, and we should reward them for that.”
Meanwhile, those most likely to not benefit from the new program, which takes effect Jan. 1, 2015, are bargain-hunting travelers who earn thousands of miles by flying long distances across the country on cheap fares.
It’s a historic change for frequent fliers who for decades have earned flights based on miles flown.
Starting next year, the average Delta frequent flier will earn five miles for every dollar spent on a Delta flight. That means for a $300 fare, travelers will earn 1,500 miles.
But some other frequent fliers will earn more miles per dollar spent.
Those who use the Delta SkyMiles American Express credit card will earn seven miles for every dollar spent. And elite-level frequent flier members can earn anywhere from seven to 13 miles per dollar spent, depending on whether they are at silver, gold, platinum or diamond levels and if they have the Delta credit card.
“There will be some people who will be unhappy. … The folks who travel infrequently and buy the least expensive fares will not earn as many SkyMiles credits as they used to,” said Hudson Crossing travel industry analyst Henry Harteveldt. “Those who travel on higher fares, in particular business travelers, and those who travel more frequently will benefit.
There will be no change for miles already earned in customers’ frequent flier accounts, and the way travelers redeem miles for flights will remain much the same.
Delta’s move comes after Southwest Airlines made a similar shift to awarding points based on dollars spent, and after Delta this year started requiring a minimum level of spending annually to reach elite levels in its frequent flier program. Hotel loyalty programs and others have also already added a spending component, Robertson said.
But Delta is the first U.S. legacy carrier to make the change, and other airlines are likely to closely watch the move.
Delta’s change, being announced Wednesday, is likely to cause some concern and confusion for some its frequent fliers.
“With any change comes challenges,” Robertson said, adding that it is difficult to predict how many customers the airline may lose or gain through the change.
Delta’s frequent flier program has long been a point of frustration for many customers, with some complaining that it’s hard to schedule free trips even after they’ve earned the mileage.
Delta acknowledges the complaints and says it plans to make it easier for people to redeem miles for flights through changes next year.
One key change is that Delta will add options to redeem a combination of miles and cash for flights — which means you won’t have to wait until you have at least 25,000 miles to get a free flight.
The airline will also allow its customers to get one-way flights for half the miles of a round-trip. And, it will add tiers in between the 25,000, 40,000 and 60,000 levels to make more flights available at different levels.
Ultimately, Delta expects the change to improve its financial results, primarily by reducing the number of miles customers earn while increasing the number of miles they redeem for flights. That would result in fewer miles accrued in accounts waiting to be redeemed, which reduces the liability from those stored miles for the company.
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Photo Credit: A Delta SkyMiles membership card. bradjward / Flickr
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