Don't Do it, Delta!

Don't Do It, Delta!

Just about every traveler belongs to several different frequent flier programs.

They have become ubiquitous both in terms of how to earn miles and how to spend them.

American Airlines introduced the first frequent flier program in 1981. Last year it is believed to have made more money from this than from its regular airline operations.

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Delta is changing the rules in their frequent flier program. Of course they tell us that very few people will suffer, and that it will provide fairer benefits to those who most deserve them.

But is this really an accurate description of what is happening? And are they changing the program rules simply to make it fairer for us? Oh, and would you like to buy the Brooklyn Bridge at the same time? :)

The Evolution of Frequent Flier Programs

American Airlines released the first ever frequent flier program, Aadvantage, in May 1981, offering it first to a core group of 150,000 regular passengers that it managed to identify by matching phone numbers in its computer reservation system records. That 150,000 has subsequently grown to something over 40 million members today, and their initial clumsy attempt at finding and tracking frequent fliers has now become incredibly sophisticated.

Literally within mere days of American's program launch, United followed with its Mileage Plus program (was this a 'cosmic coincidence' or did American's plans leak, I wonder!). Later that year, Delta and TWA introduced programs and the concept soon became a necessary element in all airlines' marketing activities.

A few airlines were slow to embrace Frequent Flier Programs, most notably Southwest. Eventually it too found itself forced to create a program, because, as then CEO and Founder Herb Kelleher said, 'We didn't want an FFP. But it came to my attention that FFPs were siphoning business travel away from us. We did it defensively, and I think if we had not done that we would have been terribly disadvantaged'.

Not All Frequent Fliers are Equal

With all airlines offering frequent flier programs, people would simply sign up for them all. This negated the loyalty effect of the programs, and so the airlines quickly responded with a clever twist. They offer additional benefits to their 'best' customers. A 'best' customer is a customer that flies very frequently with the airline each year.

Airline programs now typically have three levels of increasingly 'elite' membership, with the first level of enhanced benefits usually being offered to people that fly about 25,000 miles a year. Highest level benefits are typically offered to people that fly 100,000 or more miles a year.

These extra benefits include such bonuses as getting 150% or even 200% of flown miles credited to one's account, discounts on membership of airline clubs, free official upgrades, priority access to upgrades, 'waivers and favors' with airfare restrictions, special checkin areas and priority boarding, and unofficial 'free' upgrades in addition to the official upgrades.

Offering these substantial extra benefits worked brilliantly for the carriers - they motivated fliers to concentrate their flying on only one airline so as to build up their elite status, and, once having secured their elite status, they'd of course continue to preferentially fly only on that carrier both to re-qualify for an elite level the next year and to enjoy all the benefits of their elite status.

At last the airlines had programs that truly did 'capture' clients and gave them virtual locks on large chunks of their most valuable customers. The dual strangleholds of elite level qualifications and 'fortress hubs' made it extremely difficult for new carriers to take frequent fliers away from the major airlines.

Frequent Flier Programs Become Profit Centers

Initially, frequent flier programs cost the airlines money to operate. Managing their programs were expensive; however the returns on this promotional investment were universally believed to make the costs very worthwhile.

The FFPs continued to grow, adding more and more partners, and giving their members increasing opportunities to earn miles from other types of travel related activities - eg car rentals and hotel stays. The FFPs evolved even further so that members could earn still more miles by using an affinity credit card, and then they continued to grow so that members could also earn miles in completely non-travel related ways, such as by signing up for long distance service, buying flowers, or subscribing to magazines. At the same time, members had increasing opportunities to redeem their miles for non-travel related products.

The final extension of this concept was marked when the airlines started to actually sell miles directly to their members, saving them the need to actually fly at all. During the evolution of the programs, the airlines realized that by selling miles (typically for between 1-2.5 cents a mile) for ten or even perhaps one hundred times what it costs them to redeem the miles, they were making massive profits from these sales.

Most industry watchers now believe that more frequent flier miles are awarded through non-flight activities than through direct flying. The hugely profitable sale of these miles by the airlines have made the programs major profit centers, in some cases surpassing the profits the airlines make (or don't make!) from actual flight operations.

Getting Greedy

Which brings us to the present day. With a unique type of negative mentality, Delta decided that they need to 'punish' frequent fliers who don't buy ridiculously expensive tickets. Of course, they express this concept differently - they say they want to better reward 'their most valuable' frequent fliers.

And so Delta has changed the rules for the 'Holy Grail' of frequent flier membership - the elite status levels. A Delta frequent flier's miles no longer all count equally towards earning elite status. For example, the most expensive fares cause each flown mile to count for twice as many 'qualifying miles' as do other fares, and some discounted fares count for only half as many as 'normal' while their most discounted fares no longer earn any 'qualifying miles' at all. Theoretically a person could fly tens of thousands of miles but now no longer qualify for any type of elite status with Delta!

Are Delta saying they don't want the business from people who sensibly buy the lowest airfares that Delta sells?

American and United have not changed their qualification rules. Continental and US Airways offer an extra bonus for full fare travel, but - unlike Delta - do not have a penalty for discounted ticket travel.

On the face of it, it is perhaps fair that Delta progressively reward its higher paying customers. But at the same time it is rewarding the highest fair paying passengers, it is now penalizing its prudent customers who choose to buy the lowest possible, rather than the highest possible fares. No-one can object to extra bonuses being selectively offered, but when penalties are introduced, that is a totally different ballgame, and many of Delta's frequent fliers are crying 'foul' over this.

And there is also a very subtle but massive issue that now arises that Delta probably hopes we'll overlook.

The Awful Temptation

In the past, a frequent flier would choose to fly on one preferred carrier whenever reasonably possible, but would still responsibly choose to purchase the lowest possible fares (on his preferred carrier) for his flights.

The ugly reality that all frequent fliers choose to ignore is that by selectively flying on a preferred airline, at that airline's best fare, rather than by flying on any airline at all, with the lowest fare in the marketplace, there were definitely some cost penalties associated with this strategy. To date, everyone seemed willing to overlook this and to pretend that these extra costs were very minimal, and in any case the travelers felt that they were fairly compensated by the extra care that they would get on their elite-status preferred carrier.

But now Delta is upping the ante. They're telling their hopefully elite frequent fliers that they not only have to fly lots of flights, but that they also have to buy the more expensive tickets on those many flights as well in order to retain their elite status. What Delta is trying to do now is to increase the yield - the average fare paid by their frequent fliers.

We have all of us, as frequent fliers, at some time or another in our travels found ourselves pretending that there wasn't a cheaper fare on a cheaper airline, and we have all of us, as frequent fliers, occasionally chosen to make an extra flight or two that perhaps weren't essential, but which would help us then to get over the next elite level qualification point for the following year.

But now Delta is hoping we'll not only continue to make these types of morally dubious decisions, but that we'll also choose to pay over the odds for many of the tickets we buy.

Resist the Temptation!

If you are presently a Delta elite level frequent flier, switch your loyalty to any other carrier that offers convenient and suitable services. Almost certainly, if you contact the new carrier's frequent flier service desk and explain that you're a current Delta Medallion member, and you're willing to switch all your business to this other carrier, they'll immediately give you a matching elite level in their program based on your Delta status. You'll probably have to show a statement to prove this, of course.

This means you won't lose any benefits or privileges by switching.

Then - after having switched, please do one more thing. Cut up your Delta Medallion card, and mail it back to Delta and tell them why you're no longer going to be an active member.

And if you're responsible for managing corporate travel policies, make Delta a non-preferred carrier. Remove the Delta temptation from your staff and use airlines with fairer elite qualification policies.

Such actions have influenced airlines to change their policies before and will do so again if there is a sufficient groundswell of negative response.

Don't let Delta's new rules become the industry standard.