A Delta executive shared an interesting statistic about the percent of first class seats that the airline is selling, and I think that’s interesting to reflect on in light of the recently announced changes to the SkyMiles program…
Delta selling a vast majority of domestic first class seats
View from the Wing notes how during the Morgan Stanley 11th Annual Laguna Conference today, Delta President Glen Hauenstein shared an interesting statistic about how well the carrier is doing with selling first class seats on domestic flights.
In August 2023, Delta had a domestic paid first class load factor of 74%. That means on average, 74% of first class seats were sold, and not offered as upgrades to elite members. Presumably those seats being sold includes mileage tickets, since SkyMiles is basically a revenue based program nowadays.
Honestly, that number isn’t really surprising, and I suspect that last month wasn’t even the month with the highest paid premium demand. Just under a year ago, American executives claimed that the airline was selling close to 80% of first class seats on domestic flights.
The bigger thing to take note of here is the trend. Going back to 2011, Delta only sold 14% of its first class seats. So in 12 years, we’ve seen a more than five-fold increase in the percentage of first class seats sold. It’s clear in which direction things are headed, as complimentary first class upgrades are increasingly becoming a thing of the past.
Are airlines at risk of killing the golden goose?
In the United States, airlines make a large percentage of their profits from their loyalty programs, and in particular from their co-brand credit card agreements. Airlines want their loyalty program members to not just be loyal when they book a flight, but also when they pull out their credit card, book a hotel, etc. Airlines only seem to see upside in this area, and Delta hopes to increase its revenue from Amex by around 50% in the coming years.
I don’t think anyone faults airlines for trying to sell as many first class seats as possible. Delta in particular does a great job with pricing first class fairly, where many people may just splurge to book a first class ticket. That’s a smarter system than charging outrageous first class fares, and then giving over 85% of seats to upgraders (as we saw just over a decade ago).
The issue arises from airlines increasingly demanding more from loyalty program members to qualify for status, while offering them less. With the new SkyMiles program, you can earn Delta Diamond Medallion status by spending $350-700K annually on a premium co-branded credit card. That’s a big ask.
Is there a certain point at which consumers will stop showing more loyalty to companies while receiving less? Will people vote with their wallet, and look at the overall value proposition of what they’re receiving? Call me a cynic, but I actually fear the answer is probably “no.” The reality is that most consumers aren’t particularly savvy, and aren’t doing much to maximize their rewards.
They spend on a credit card that’s connected to an airline or hotel group that they travel with a lot or like, without crunching the numbers and considering if they’re actually getting the best value. When it comes to ongoing spending, a vast majority of people would be better off just using a 2% cash back card or transferable points card and then booking the travel that they wanted, rather than investing in a program to earn status, only to be disappointed when they don’t get upgraded. But that doesn’t seem to be how most consumers approach things.
Delta is selling 74% of its first class seats on domestic flights. That’s not surprising, and is roughly what I would have expected. Airlines have gotten much better at monetizing premium cabins, so we’re a long ways off from just over a decade ago, when a vast majority of first class seats went to upgraders.
There’s nothing wrong with Delta (or any other airline) selling most of its first class seats. The issue is only that airlines keep expecting more loyalty from program members, while offering them less and less. Yet for whatever reason, consumers seem to be fine with that, so…
What’s your take on the number of first class seats Delta is selling, and what it means for SkyMiles?