The Real Reason Delta Keeps Devaluing SkyMiles

Filed Under: Delta

A few days ago we saw Delta SkyMiles devalue partner airline business class award pricing massively for the second time in a few months. Yes, in the middle of a pandemic, and we’re talking about simply huge price increases.

For example, across two devaluations in just a few months:

  • One-way partner business class awards between the US and Europe increased in cost from 75,000 miles, to 95,000 miles, to 120,000 miles
  • One-way partner business awards between the US and North Asia increased in cost from 85,000 miles, to 102,500 miles, to 120,000 miles

I figured it might be worth stepping back for a moment and talking about why Delta is making these devaluations, because it’s not for the reason that many may assume.

The economics of partner award redemptions

How exactly does it work when you redeem Delta miles on Korean Air (or American miles on Cathay Pacific, or United miles on All Nippon Airways)? While the exact arrangements differ, I’ve written in the past about how airlines reimburse one another for partner award tickets.

Generally speaking:

  • Airlines reimburse one another at a fixed cost on a per-segment basis for saver level award seats; often there’s surprisingly little variance in reimbursement costs based on length of flight, etc.
  • These fixed costs can vary based on specific bilateral agreements between airlines; in other words, Avianca LifeMiles and United MileagePlus may pay different amounts for the same Lufthansa business class award seat
  • It doesn’t matter whether you book that award seat a day out or 11 months out, and it doesn’t matter if you’re traveling on a peak date/time, or an off-peak date/time

Airlines are getting excellent deals on these tickets, and it’s a reason that the business of selling miles for the purposes of partner redemptions is so robust, and why Alaska Mileage Plan, Avianca LifeMiles, etc., can make money doing this.

Partner airline award redemptions are typically inexpensive

To paint with a very broad brush, I’d say airlines with attractive award costs are paying about a cent per mile redeemed on partner airlines:

  • To be clear, the loyalty program with which you redeem miles sets mileage costs based on how much award tickets cost that program; mileage costs are not set by the airline you’re flying with
  • However, I’d say roughly one cent per redeemed mile is a fair average when you add up all the miles redeemed on partners and how much programs are paying for those seats
  • American charges 60,000 miles for business class between the US and Asia, and I’d expect a JAL business class award seat costs American AAdvantage somewhere around $600 (again, I’m really generalizing here)

For airlines, partner redemptions are often much less costly than redemptions on that carrier’s own metal, given that they don’t have to worry about whether that seat could have otherwise been sold, and how much revenue would be lost.

Loyalty programs and revenue management are constantly at odds with one another when it comes to redemptions with the program’s own airline. Different airlines have different working relationships between departments, but you can expect conversations like this happening at a lot of airlines:

Loyalty program: “When it becomes clear that premium cabin seats won’t be sold close to departure, maybe we could make them available for awards?”
Revenue management: “But tickets are only more expensive close to departure and XYZ ticket would cost $7,000, why would we give that away?”
Loyalty program: “Yeah, but you’re not going to sell the seats, so can’t we at least let people redeem some miles?”
Revenue management: “But miles are just a currency, and we’ll potentially be cannibalizing sales. What if people redeem miles in lieu of booking a revenue ticket?”
Loyalty programs: “But the loyalty program is supposed to reward loyal members…”

Let me acknowledge that I’m totally generalizing here, but I’m trying to strike a balance between being accurate and explaining something complex in a few hundred words.

Arguably redemptions on Delta are more costly for the airline

So, what’s Delta SkyMiles’ motivation?

Delta SkyMiles is absolutely determined to make each mile worth one cent towards virtually any Delta purchase, whether we’re talking about flights, upgrades, alcohol in SkyClubs, or whatever else. Delta isn’t quite there yet, but it’s clear that’s the goal.

There’s not another major, global network that has tried to turn its mileage program into a cash equivalent currency quite in the way SkyMiles has. The way I view it:

  • This is probably good for your average consumer, since it makes SkyMiles easy to redeem
  • At the same time, it eliminates virtually any ability to get outsized value

Nonetheless at Delta it’s clear that the loyalty program and revenue management are on the same page about SkyMiles’ position.

I would speculate with a high level of confidence that Delta SkyMiles was coming out ahead with partner redemptions even pre-devaluation. In other words, when you redeemed 75,000 miles for partner business class to Europe, I’d be willing to bet that would cost Delta less than $750.

If that’s the case, what’s Delta’s motivation for increasing partner award costs, then? I don’t even think it’s about increasing margins on these redemptions, but rather I think it’s part of Delta’s continued effort to condition SkyMiles members to believe that each mile is worth a cent:

  • Most one-way international business class awards on Delta cost 300,000+ SkyMiles, because even for international premium cabin redemptions, Delta is trying to peg each mile at one cent of value
  • It hurts Delta’s claims and confuses consumers when the airline is charging 300,000+ miles for one-way business class awards on its own flights, but a quarter as much for business class awards on partner airlines

Not exactly great one-way redemption rates, eh?

Even before these latest devaluations it was evident that this was all about changing consumer perception of things:

  • Delta SkyMiles had long charged more miles for last minute international redemptions on its own flights, to reflect that international tickets are typically more expensive last minute
  • A couple of years back we saw Delta SkyMiles start to charge more miles for last minute redemptions on partner flights, even though I can say with near certainty that Delta SkyMiles wasn’t paying more for those redemptions

Delta SkyMiles has continued to devalue partner redemptions

It’s all about conditioning consumers. How is a consumer suppose to make sense of last minute redemptions being pricier on Delta flights, but not on partner flights?

I truly believe the Delta SkyMiles devaluations have nothing to do with costs, but have to do with consistency for SkyMiles members. Delta will continue to devalue SkyMiles until the program is consistent.

To give Delta SkyMiles some credit, there are a few exceptions where you can get outsized value. For example, Delta does occasionally have flash sales on award redemptions, both domestically and internationally, intended to keep members engaged and offer extra value.

Bottom line

Delta SkyMiles has devalued partner redemptions twice in just a few months in the middle of a pandemic. I believe this has nothing to do with Delta’s costs for these redemptions, or with supply & demand.

Rather Delta’s partner devaluations come down to the airline continuing to try to make consumers believe that each mile in the program is worth a penny. That’s a hard narrative when the airline charges 650,000 miles for a roundtrip business class award to Europe on its own flights, while it charges less than a quarter as much on partner airlines.

The pandemic probably seemed to Delta like the perfect time to do this — not many people are looking at long haul partner flights, so this is as good of a time as any to “align” costs. I suspect we’ll continue to see partner awards devalued until they match Delta’s pricing.

And in closing let me say that I think Delta SkyMiles has the wrong strategy. Delta is great in spite of SkyMiles, and not because of it. With SkyMiles increasingly being worth about a cent each, there’s not as much incentive to use SkyMiles credit cards for spending, and it really disengages a not-insignificant portion of the customer base.

Do you agree with my take, or what do you think Delta’s motivation is for SkyMiles partner devaluations?

Comments
  1. The Real reason why Delta keeps jacking up the price????
    GREED.
    That’s why I dumped all of my Delta cards.

  2. Do you predict this will happen to the currently offered 50k Skymiles for economy round trip on LATAM to places in South America like Buenos Aires and Santiago? Currently lots of availability all the way through 2021 at this price, but the flights run around $1100 each with cash. Much better value than 1 cent per mile right now. I’m worried we need to take advantage of this deal soon.

  3. Don’t know and don’t care. The other programs including Korean offer more than enough deals for almost all except the seriously addicted

  4. 1) While your post does make some sense, you continually ignore the main way to get “outsize value” from SkyMiles – sales. My last international premium redemption using SkyMiles was 98,000 miles round trip, JFK to BCN. via flash sales. Flash sales can also make sense domestically

    2) You (and others) continually choose the highest prices when highlighting this issue. While obviously not great, I am seeing round trip to Europe at 210,000 miles in the fall and winter. With American Airlines, United and others regularly charging 75K to 100K one way to Europe, Delta at 105,000 miles each way seems about right

  5. It’s a good explanation, but overall the article comes off as a defense of Delta’s practices.

    At this point, who does this program appeal to? Your once a year flyer can maybe redeem for a 5K mile flight from JFK-FLL, but the program is essentially worthless for anyone who banks serious mileage/spending on Delta tickets.

    As long as fares are low, pay with miles represents a “good” value, but as soon as fares skyrocket again, Delta will find itself with an essentially worthless program that encourages zero loyalty and spending on their co-brand cards.

    I’m a PM based at a competitor hub, and the devaluations over the last 6 months along with the refusal to provide cabin service have pushed me over to AA.

    I can’t be the only one.

  6. Lucky, FWIW, I am pretty consistently seeing round trip prices at 200,000 or 210,000 from JFK to all of Delta’s European destinations several months out (obviously who knows if people will be able to take these flights). Flights seem to be about $3,000 round trip, so 1.5 cents per point. But the main point is that Delta doesn’t only charge 300,000 miles one way for International premium cabins; prices are highly variable, and you can get much better value for SkyMiles than the 300,000 one way prices that are often talked about

  7. Possible. One would imagine that there are consequences. How many AMEX DL CC holders are there today vs 3-5 years ago?

  8. @Anthony, 105k miles each way is a lot too if thats the absolute lowest redemption possible for Skymiles to Europe. Saver awards on AA/UA/Avianca, and other programs seem to be at somewhere around 60k miles each way for business class to Europe. 105k is already 75% higher than that.

  9. “Delta will continue to devalue Skymiles until the program is consistent.”

    No, Delta will continue to devalue miles until the program is irrelevant. Comparing cash prices, the latest award levels means each Skymile saves less than 1.2 cents in ticket cost. That’s ignoring all the intangibles-time to accumulate, time to stay current, bad itineraries (long layovers, lousy aircraft, extra legs), lack of availability, orphaned miles, etc. on award itins.

    Sign-up bonuses work at any level. But with 2.5% cash back readily available (including from DL’s own partner Amex), it seems to me you have to be either really addicted or just plain stupid to play along with the rest of this.

  10. Hmm, if they plan to go to a consistent redemption value, maybe they should just follow Southwest and JetBlue‘s model. Having a low mile value and limited award availability seems like they’re trying to have the best of both program types which is really lame for the customer. If we could use the miles whenever we wanted to, that would be some consolation to the subpar return.

  11. For you theory to hold true, Delta has to believe that they will keep benefitting from CC spend. Otherwise wise the program has no method of revenue except for portals and paid fares. I don’t know which source of miles revenue is more lucrative, but the only benefit to using delta cards for spend is to achieve status. If status is not the goal, then cash back is king.

  12. What you say makes sense but what Delta misses is the majority of business class seats are paid for by companies whereas majority of award tickets are redeemed by regular people. Thus, those 320k award seats are a crazy price for us regular folks.
    Then again, I actually don’t mind award ticket prices increasing as long as it’s easier for me to earn that award currency. Yes, it is easier to earn Delta miles through credit card signup bonuses and portals etc. but 320k is still pricey.

  13. Air New Zealand’s loyalty program beat Delta to the punch years ago when their points were worth exactly NZ$1. The simplicity is nice, but the earning rates are atrocious.

  14. If the airlines are making the points = the price then why bother? Drop the airline credit cards and get 4% or more off everyday purchases instead.

    You can’t “save up” points for an airline ticket unless you’re charging an exorbitant amount on your monthly credit card. And if even if you do that they’ll continue to devalue.

  15. Fair point Luke – I am not saying 105,000 is cheap or a “good value.” But it is not 305,000 one way as Lucky is claiming.

    On the cards/point value, a few things
    1) Remember that Amex did increase the earnings on its Gold/Platinum cards (while few people on the blog use these cards, they are very popular)
    2) SkyMiles are best earned as a byproduct of activity on Delta – like flying Delta for business or spending on a Delta card for status

    As a NYer I can choose American, Delta or United. After a year with American I went back to primarily Delta because the operations were so much better. If American and JetBlue can make their alliance work, and if American beefs back up at LGA/JFK, maybe I will switch back as the mileage program is better. But operations come first.

  16. My only other thought was I wonder if this has to do with the uncertainty of travel right now and possible costs when partner flights are canceled especially on mixed awards??
    However generally I believe your article logic and feel that Skymiles are only worth 1 cent, it’s the bloggers out there that keep pegging Skymiles at the 1.3-1.5 cents.

    Sadly I can find a sub $2000 business class fare to Europe easier than a 200k miles reward .

    Perhaps this is also a time to seek out cash back rewards credit cards as many off a much better than 1 cent return. Only problem with cash back rewards is that they are boring and not very exciting and take away the fun of finding reward seats available.

  17. I mean, you could also be missing a more obvious answer. Delta might have been making money on a 75,000-mile flight to Europe, but if so, they are making more money on a 120,000-mile flight, if their costs paid to the operating airline haven’t changed. If the market will bear it, why not? (Obviously there is some question of whether the market will bear it, but I assume they have reason to believe it will.)

  18. Presumably Delta’s partners are happy with the price Delta pays them for the reward seats. I wonder if Delta will have any push-back from those partners if this strategy reduces the number of reward seats they buy from partners.

    Disclaimer, I am not a Delta member. I am a member of Velocity, one of their partners, so I would be buying a Delta reward with my Velocity points, not the other way round. Assuming Velocity survives the Bain regime at Virgin Australia. (My main FF program is QF.)

  19. I agree with your points, 100%, with regards to their goals.

    But perhaps if they don’t want to completely alienate their more knowledgeable flyers, they could just go back to having to call for partner awards. Obviously a regression but perhaps a way to leave some outsized value on the table for those it matters to (and that provide significant revenue to DL).

  20. @ Alan — And funny enough I’d argue it’s not even greed, it’s just Delta being misguided with its strategy. I do firmly believe partner redemptions cost Delta less than redemptions on Delta metal, so it would be in Delta’s best interest to keep those rates low.

  21. I am with @Anthony on this one.

    The extent to which these posts ignore Delta flash sales is frustrating. Yes, through devaluations Delta is making it harder and harder to get outsized value by flying partner airlines in business, which is the preferred redemption for Ben and probably most OMAAT readers. But to generalize and say that there are no ways to get outsized value is just wrong.

    This blog ignored the flash sale Delta had this week, with domestic flights going for as little as 2000 miles one way. While fares are low right now, the searches I did this week were easily getting 2 or 3+ cents/mile. And like @Anthony, in 2019 and early 2020 I have flown a couple D1 flights for 98K (SEA-AMS and SEA-MAD). This is way better pricing than AA or UA. Instead of paying their partners a set amount for segments, Delta wants you use Skymiles on their own metal. And they will give you outsized value, if they know they are not going to sell out those flights.

    I agree that for Ben and most OMAAT readers, there are better mileage programs, and using Delta Amex cards is probably not the best option. But there are a lot of people where Skymiles still makes sense, especially for those with little to no international travel. No program is good for all situations or for all people. But there are still ways to get outsized value of Skymiles.

  22. @ Justin — I’m not sure it will happen on a micro level for now, especially for economy redemptions, but rather I think we’ll continue to see this over time. It seems the priority is devaluing business class redemptions over economy redemptions.

  23. @ Anthony — Regarding your second point, this is all about partner redemptions though. You’re absolutely right that American and oneworld aren’t great to Europe in terms of fuel surcharges, but look at virtually any other region. The partner award pricing simply isn’t competitive, and there’s no (actual) logic for Delta SkyMiles charging so much more than other programs.

  24. @ William — Totally fair, and I hope you know that I in no way support this practice of Delta’s. I’m just trying to provide the best explanation that I can of Delta’s (flawed, in my opinion) justification. There’s value in not letting posts get too long, though I could easily write a whole separate post about why Delta’s approach here is bad.

  25. @ Mark — Arguably there are some positives to Delta’s program over the programs of JetBlue and Southwest. For example, it’s much easier to redeem for virtually any incidental using SkyMiles vs. TrueBlue and Rapid Rewards.

  26. @ Jerry — I think Delta is also operating under the assumption that consumers aren’t savvy. There are some reasons to have Delta Amex cards, like if you’re trying to earn status or for the perks, but there’s little value to otherwise spending money on the cards.

  27. Great article. How should the traveling public respond? Hit them where it hurts; in the wallet. Cancel your delta branded cards today and don’t let them get another penny from us. The consumer has more power than we think if we can get enough individuals to say “No more”. Cancel the card today

  28. @William, I agree with you that this article still comes off pro Delta. Saying “Delta is great in spite of SkyMiles,”ummmm…..great from whom? Operationally, they are a good carrier but isn’t this site focused on optimizing use of miles? If so, how is Delta great? Clearly, they are moving towards the JetBlue/Southwest model. Of course, it is complicated when partner programs remained miles based. So the best way to achieve value parity with their own program is to raise partner redemption rates. But it most definitely is not consumer friendly for the typical reader of this column. Most of us are after the same thing—seeking out ways to redeem as few miles as possible for the most perceived value we can achieve . Putting the relative quality of their operations aside, Delta is mostly definitely NOT great for us.

  29. “part of Delta’s continued effort to condition SkyMiles members”

    Good point. Delta has successfully “conditioned” me to distrust their program and to look elsewhere for reasonable value.

    As for all their flash sales, I really don’t care, since they never provide a way to take me to where _I_ want to go, when I want to go.

  30. What a strange article! DL is devaluing partners awards because they want to send a “message” to customers? What they really trying to do is to squeeze the last pennies to curb their huge losses. Yes, they are likely paying real money to partners for the award seats and they are not selling many own seat to partners because DL international flying almost stopped. The solution is to increase cost of the partner awards so folks would stop booking those (and DL will not spend money on to fulfill such redemption).
    DL always has an option to change SkyMiles and make 1 Sky Peso=$0.01. One of the simplest programs of this kind is offered by a Russian discounter UtAir. In their system 1 mile=1 ruble you one can use ether miles or rubles in any proportions to pay for your tickets. So you can take just one flight and burn all your miles as portion of your next ticket. This looks like the ultimate earn and burn strategy! Right now 1 ruble=$0.013 so UtAir miles are valued 30% more than the DL “target” for Sky Peso. (I did not analyze earnings on UtAir as I see no opportunity flying their network).

  31. I especially agree with your conclusion: “there’s not as much incentive to use SkyMiles credit cards for spending”. So true.

  32. @Tom don’t cancel but instead stop the spend. I use my Delta Plat only once a year when redeeming the free companion ticket.

    @NK3 if dates and route of your need aligns with a flash sale then its great. In my case it hardly ever does. With redemption at least you can set a fixed value and hence Delta’s approach is misguided.

    I don’t go out of my way yo earn skypesos as they are worthless. I’d rather earn flexible points

  33. How often does delta airlines have flash sales and how do you hear about them? Do they have flash sales departing from Chicago Ohare?

  34. Great article. I don’t get all the comments from readers who think this article is pro-Delta. These comments demonstrate poor reading comprehension and are a symptom of a polarised news culture where much writing has no nuance.

  35. @Ole I don’t really understand your statement “With redemption at least you can set a fixed value and hence Delta’s approach is misguided.”

    Look, every program has sweet spots and poor redemptions. Not every program is going to have a good or great redemption for the way you tend to travel. Being SEA based, where Delta has been trying to increase traffic, I likely benefit from extra unfilled seats, which results in great flash sales for my preferred airport. Through playing the miles & credit card game, I have a pretty high balance in many programs. In the last 5 years, I have used Skymiles to book more than 2 dozen flights. I have used AA miles twice, UA once, and Alaska zero times. I am not doing this because I am not savvy with miles; I am doing this because Skymiles sweet spots align with my way of travel.

    People love to think AS miles are very valuable. I think that is true…if you travel to Asia in business class. But if your travel is mainly domestic, they are often worth less than a cent a piece. A good friend of mine is an Alaska elite, but has never used her miles, because every time she goes to book she is getting less than a cent a piece. This week I helped my parents book tickets PHX-SEA and back. On the way there, AS was charging $150 for a first class ticket or 50K miles (!). On the way back, Delta was charging $260 or 16k miles. There is a reason they keep their Delta cards–they get better value from their miles than other cards.

    With every program, there are good and bad redemptions. Partner award tickets with Delta have been a bad deal for a while, and have only gotten worse. But just as we focus on the Virgin/ANA redemptions, or great uses of Avianca miles, I think it would actually be helpful to highlight where Skymiles actually do provide outsized value.

  36. I wonder if Delta is hurting its own interest with one valuable segment–really the most valuable segment–of its market…..If you are a business traveler with choices (ie, not captive to a hub) one of the main incentives is “How can I use miles for something fun, like a trip for my long-suffering family….” If that’s the incentive, Delta isn’t that attractive if the calculation is, “I can take a family of four to Europe in business class for 1.2 million miles” or something like that. Or, “Hey I’ve got to be in London for business, why don’t you tag along and we’ll have a long weekend.”

    United gives its Global Services customers the ability to redeem miles for companions at saver rates…..I don’t believe Delta does that for its Diamonds or any higher tier.

    In short, as you said, it’s hard to see the program really being useful in driving behavior for the most valuable customers–those who pay lots of cash for the bulk of their travel, but want the rewards program to be truly rewarding.

  37. Funny how there was much more “outsized value,” relatively speaking to redemption and earn rates of today, before so many bloggers decided to tell us all about the tips and tricks to earning and redeeming miles and points ;)! Perhaps all these “devaluations” are a reaction by airlines to the growing number of folks using their programs? I remember early on when upgrades were all but guaranteed on most domestic routes when I was a lowly Gold Medallion…now, the list of Silvers and Golds on the upgrade list can be dozens and dozens long, with absolutely zero chance of an upgrade even to Comfort+. To me, the value of SkyMiles (I’ve been Platinum or Diamond the last several years) is not the miles and redemptions: its being treated like a human as compared to AA and UA; seeing how they take the safety and health of their passengers more seriously than their peers; their global partnerships (other than China Eastern…) and routes; the guaranteed seating in Comfort+ or an exit row if I’m flying domestic economy; their generous and understanding employees who have always done the right thing when I’ve needed them to; and their willingness to experiment and try new things with their soft product. For redemptions and earning, I’ve got my MileagePlan account; for the best customer experience domestically, it’s Delta.

  38. If you believe what you are saying, then the standard award price will come down when prices come down.

    I find that hard to believe.

    But it’s one of the best cards for miles, or so some say.

  39. @Tom, your comment is spot on! That’s what I was going to say. Solution: Cancel the DL branded credit cards. Don’t give them one more penny. Let their credit card partnership crash, and if you fly DL, just credit the flight miles to a partner. If you want use SkyCents because it works for you in the city you live in and your typical destinations, you can always earn points in a transferable currency and use them when needed. Yes, it may be a minor pain, but it’s worth it. Consumers do have the power to change things. If there’s a lesson learned from the GameStop debacle is that we can influence the outcome if we organized.

  40. I agree with your assessment, Ben. And for the comments stating that you are siding with them, I think his intent is simply to explain their logic.

    That said, their logic is 2019 and earlier. In a world of constantly-increasing demand, extracting value from a program like this makes sense.

    However, recreational travel is all that’s bound to recover in the next 2-3 years, and even if it happens, choice is now a real thing. Case in point: I will be traveling between LAX and SEA for work over the next 12-24 months. I can choose between Alaska (middling soft product, but outsized value program) or Delta (who has slightly superior soft products but nickel-and-dimes lounges, rewards, and other aspects.) I’m clearly going to choose Alaska based on that equation.

    If Delta is truly leading the future of loyalty programs and eventually every company does the same, they will have decimated their credit card business revenue. Why wouldn’t I want straight cash or Amazon reimbursements with better payouts instead? 1 cpp will not end well for them.

  41. You can easily get American, BA and Lufthansa First Class fares for 6.5 thousand return transatlantic, and that isn’t even with sale offers. Delta hard product is good for business class (although a big narrow for my liking) but they are massively overvaluing it here.

  42. Delta had a skymiles sale for flights to Japan in last year at redemptions less than domestic flights. We flew from our home airport to Haneda Economy comfort for about the usual redemption for a domestic flight. If you are patient they do pop up

  43. The next announcement will probably be an announcement that “Sky-Peso” saver rates will only be available on newest partner; Greyhound Bus Lines.

  44. Lucky – I’ve been a Delta loyalist for nearly 30 years (my dad got my started when I was around 5). As my work travel will be cut at least 50% post-pandemic, I’m not seeing much reason to stick around with these devaluations. I know you’ve written about the Delta experience being a bit better for US airline standard at least, but would you think twice exiting the COVID-era about switching to a new carrier? I’ll enter 2022 with Delta Platinum status most likely, but I’m especially rethinking my strategy as a majority of my personal travel is not domestic, but to the UK to see family.

  45. Trying to condition your loyal customers to realize that your loyalty program is crap seems a dubious strategy. I’m also wondering how American Express agrees with these mega-devaluations.

  46. Why is Amex willing to put with this behavior? Are they getting a discount when they buy Skymiles? Are DL Amex cards only marketed to ignorant consumers?

  47. The biggest reason for DL’s Skymiles is because it is already getting much higher revenue per seat mile (yield) than its US competitors and the spread has grown during covid. DL’s yield for the 4th quarter was more than 25% higher than UA; DL and UA will be the two primary US international carriers as AA continues to try yet another plan to try to maintain a competitive global presence.
    In addition, DL’s financial strength is far greater than AA and UA and stronger than many global carriers; the Asian and European carriers will be much weaker. DL is setting the standard for the industry.
    Whether it is popular to say on this site or not, awards programs exist to keep passengers that might be inclined to fly on other carriers. DL’s financial results say that passengers are choosing to fly Delta and they don’t need to bleed passengers to partner airlines with awards.

  48. @tim Dunn is probably right here. I don’t think Delta is going to change behavior when they have shown over the last 5 years that devaluing the frequent flyer program doesn’t negatively impact their financial performance.

    The bet they are making is that travelers don’t have choice and/or are locked into their existing travel patterns. Points enthusiasts like us may not like it, but that’s just how they see the world.

    If enough people switch from Delta to competitors, they will rethink this, but my sense is that it hasn’t happened so far, so the devaluations will continue.

  49. How can the airline possibly afford to pay the partner airline one cent per mile redeemed?

    Delta is selling its miles to Amex and others. Surely that’s where the major revenue is coming from, not from selling miles to members. Amex deal worth USD 4 billion per annum, was supposed to rise to USD 7 billion per annum.

    Surely that sell price is already close to one cent per mile?

    Let’s be generous and say it’s 1.5 cents.

    That income is basically split three ways – immediate (“marketing”) costs, and then deferred cost of reward (liability), and gross profit, per required accounting practice.

    At an income of 1.5 cents per mile wouldn’t you expect the reward cost to be about 0.5 cents per mile to deliver a gross profit margin in the ballpark of 0.5 cents or 33%, having already covered the program costs with the other third of the revenue?

    Leading the members to believe their miles are worth one cent is an entirely different matter to the cost price of the award seat to the airline. They can’t be the same thing if the FF program is to make a profit!

    So, why wouldn’t you expect Delta to be selling points at 1.5 cents, buying the rewards at 0.5 cents and demanding a buy back price from the member at one cent? Foolish members may be willing to accept such a valuation when they redeem their points!

    Airlines seem to accept miles for cash-equivalent reward payment in the ballpark of 0.35 cents per mile / point. Surely that gives you an indication of where the underlying economics sit?

  50. Now it’s time to do your homework. If you are based overseas or often are overseas it may be worth acquiring points on one of the other airlines in the alliance because depending for which types of flights and your earnings on partner rewards it may be a better deal.

  51. On the flip side (Korean Air Skypass member that finally earned enough miles for a biz class RT to Atlanta – not an easy feat since they barely give 1.5 miles here for 1$ish and there are no big bonuses)

    They delayed the launch of the new skypass rules for two years

    Surprised that wasn’t reported here yet but of course not many of us here haha and without chase not many care

  52. @Esquair: Really? For the record, my reading comprehension is just fine. I stand by my earlier statement. The last paragraph of the article contains the statement I quoted about Delta remaining great. That clearly softens the tone of the criticism. If this article were written from the perspective of an investor in Delta stock, then I get the balance. But I read this blog to enhance my ability to optimize use of miles for travel. And, given the repeated devaluation of the program, using great and Delta in the same sentence just don’t make sense.

  53. SkyMiles is indeed becoming interesting.
    I do value my Delta PM for the soft treatment and lounge access (and yes, a Woodford in Y+)
    I would never satisfy PM spending threshold without Amex – so that stays and gets at least 25k of my money.
    With that – redeeming is becoming more and more difficult. I usually travel for leisure with family – so for most international itins I will not have enough miles – and it is usually not possible to buy one award and then match with paid tickets for the rest of the family.
    So stuck with paying with miles on domestic trips mostly…

    I am still there. They must be doing something right…

  54. “With American Airlines, United and others regularly charging 75K to 100K one way to Europe, Delta at 105,000 miles each way seems about right”

    @Anthony. It is 120k miles one way, not 105k.

    Even then, 105k miles one way TATL in business does not make sense. Most other programs charge 55k-75k one way. American charges 57k one way for partner awards on this route. Until 3 months ago, Aeroplan charged 55k miles one way on partner airlines with no fuel surcharge on many airlines, and even now it has only increased a little.

    Don’t fall into the trap of thinking, “Delta are charging this much so must be how much the flight should cost”. 120k miles one way in TATL business for a standard award is crazy expensive by any measure. It is roughly double most other airlines.

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