500,000+ points to fly Delta business class to Europe – is this what is next?

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brian kelly the points guy on bloomberg tv talks about united and rev based travel

Yesterday on Bloomburg TV Brian Kelly, The Points Guy, said he expects what is next will be the “third leg of the triangle” that is the next step of the airlines moving to 100% REV based rewards. That means you would have to, for example, spend 500,000 points to pay for a $5,000 business class ticket to Europe.

Not just Brian, but Gary from View from the Wing here at BoardingArea talks about how bad a choice the airlines are making saying:

“It’s a move away from programs’ roots, rather than a return to them. MileagePlus and Skymiles are getting out of the airline business, even if they don’t admit it.”

I agree with both of these respected travel experts. I agree that the airlines are so focused on this course that over the next few – YEARS – we will see Delta, and others, make the jump to a simple program of a 1 cent per mile redemption model. Then, you will have to pay full retail price to fly business whatever that price happens to be. I also agree that the major airlines’ bean counters don’t fully understand what this choice will cost them (Southwest does not count – they are a Greyhound bus in the sky).

cnbc what is worse dmv or flying

Why will it cost them? For years people, I mean the masses not us points enthusiasts, have put EVERYTHING on their points cards – say a Delta AMEX card (any of the three “Airline Travel Cards“). They will not care that they can get an extra point or two from another card but will just buy buy buy to save up for that great business class seat to Europe. It may have taken them YEARS, but for that one trip it will be worth it. I mean when the coach flying experience is the same as a visit to the DMV, as CNBC suggests people think, why would ANYONE ever drive spending to their Delta AMEX cards EVER again. This move will be the last straw for the masses.

What will I do that day? My “loyalty” to Delta is over that day. If Delta makes me pay 500,000 points to fly to Sweden to see my mom in business I will NOT pay it. No way no how. I will be freelance at that point. I will still fly business class but I will shop for the cheapest business price ticket on any airline that has a decent seat and then pay with my Barclay’s Arrival card to pay myself back and earn on whatever program I happen to fly on that trip (crediting to the best alliance partner in that program).

I talked about loyalty before and it really is true. The airlines have marketed the dream of first class travel if you can just save enough points – not for much longer!- René
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19 comments

  1. I’m afraid they are right, Rene. And in fact, the transition is happening before our very eyes now. I have been tracking several trips to EU in BE on DL for the past two years. I know the routes, the days, the flight numbers, etc. What I have witnessed is a rapidly disappearing number of low level seats — everywhere in the system, escalating just this past month. IT’S UNBELIEVABLE. I don’t know how they can make the claim the SkyMiles 2015 will provide more low level seats — UNLESS they are purposefully cranking up the miles now in 2014, so that if they go back to the prior level of award seats, it will look like an increase in seats — to fulfill their promise. It’s sort of like a merchant cranking up the price of an item by 50%, then a few weeks later claiming there is a 33% off sale — which brings the price back to the original price.

  2. On the one hand, I’m completely done with Delta.
    I’m basically a 75% hub captive (JAX). Outside of some nominal AA/JB/SW/UA flights, DL runs JAX airport.
    I’ve proudly stopped using DL, burned all my miles, and pretty much avoid them.

    That being said, I’ve (oddly) been having a good amount of luck finding award tickets from ATL/JFK to FCO/MXP ALL summer (peak European travel times!).

    Finding awards anywhere from 125k – 225k in business.

    Before the deval, I couldn’t find an FCO award for under 375k!

    No idea what’s going on…all I know is I’m 100% done with DL, unless a client/friend asks me to book a trip using their miles.

  3. 1st leg of the iron triangle: elite status qualification requirement based on number of dollars spent on ticket

    2nd leg: miles earned based on the number of dollars spent on ticket

    3rd leg: spending miles on tickets is based on the number of dollars required to buy a regular paid ticket (e.g. 1 cent of value per mile.

    When that iron triangle is finished, customers will be locked out and find much better value with cash back programs/credit cards.

    Airlines will manage to injure or kill off their frequent flyer programs this way, but then again the industry is still led in the US by the same characters that led their own airlines into bankruptcy too.

  4. Rene, I’m as cynical as they come and I just can’t see this happening. Many many people use their co-branded cards like you said, to buy everything in hopes of miles and associated bonuses to fly BE.
    Even kettles will see the point price as hopelessly out of reach(I know I will) and simply give up and push spend elsewhere. Delta will kill the proverbial Golden Goose won’t they?
    Are there enough flyers out there to fill all of the new lay-flats to Europe/Asia at retail price?

  5. Can someone explain to me how DL makes more money by increasing the miles necessary for an award. Most miles have already been earned and paid for: 1. when I fly DL on a paid ticket and earn miles DL has already gotten the money; 2. when Amex gives SkyMiles they have already paid DL. So DL already has the $$$ from the miles in a person’s SkyMiles account. How do they make more money by charging 500,000 miles for a BE seat rather than 125,000? (Possibly the problem is that every seat on the plane can be bought with SkyMiles – so theoretically they could have no revenue seats left on a plane. If this is the case, I can see charging incrementally higher miles as the plane gets full — to keep this from happening, but why should the first two seats on the plane go from 125K to 200K or 250K or 500K? I don’t see how they make more money from this, and it only strikes me as DL being mean to its customers. Is someone from DL reading this???)

  6. If this happens, we would definitely be affected but the airline programs are going to be badly affected by this move (don’t know if they can see the axe falling on their own foot) as well. Seth had a post yesterday giving insight on frequent flyer programs. These programs want to push the sale of points to non-flying methods such as banks. As you said, (smart) folks are not going to put spend on their airline cards. So the banks will need to buy less points from the program.

    I see hotel programs (hyatt, spg) coming to the forefront when this change happens.

  7. I’m with Geoff on this one. No way they go to a revenue based redemption model. That will kill co-branded credit cards or cards that earn transferable points and that’s where the airlines think they are making money now. If they do, it would be some sort of tiered system where points wouldn’t be worth just 1c each. And that’s nothing different than what we have today so why not just keep what they have and raise the mileage requirement if needed (a la United)?

  8. I think once a program become devalued enough it will take away from the marketing advantage or becomes a disadvantage. It’s like grocery store membership cards. In most cities you gotta join otherwise you don’t get the sale price on many items. If they stop offering special prices to those members people will stop using the cards and will either become less apt to shop there OR they already don’t care because all the other stores offer the same sort of deal and they have 3, 4, 5 keyfobs for every store in town. To me personally it’s like the My Coke Rewards plan MCR’s. I plan and am active in that program because we drink a lot of Coke products like poweraid and such but the points are near worthless. Each cap is 3 points and it might take 1,200 points to get a $5 or $10 item. Is the program worth it. Not really. Why do many not mess with it, or buy more Coke over Pepsi when they have a choice. Because the program is not really much of a value anymore. I think Delta and United will see this soon. I just hope other airlines will hold off on following them.

  9. Unfortunately I think you are right. The programs are run by bean counters these days, and they want the programs to be profitable. What they value most is predictability and a fixed cost per mile. As it stands now, you can still “game the system” by accumulating miles cheaply (though maybe no longer by flying) and redeeming high by booking a saver multi-partner award in business or first. I suspect they still don’t currently make that much money on that transaction. The thing is when you take away the original intent of the program (to incentivize flying) and try to make them profitable in their own right, you can’t allow for this sort of thing.

  10. Now is the time for freedom from FF programs. If you want to spend $25k-50k on a credit card promgram for 1-2 more years go ahead. I’ll use my money to get the best value whether coach or 1st class. Freedom has saved me thousands this year and I’ve seen very little difference. SM and GM’s can hang it up. If you’re not a DM or maybe a PM you have no reason to be loyal to any airline that’s not loyal to you.
    @ Don in ATL right now it’s because they can. If the market turns they’ll come running back saying remember us. They make more money because less FF points out there are a positive on the spread sheet. As someone said bean counters are running DL and UA.
    @ Geoff many Amex 25-50k spenders admit they use MS to get to PM or DM. MS doesn’t make money for CC companies, they want people who truely charge 50k in spending not MS. That’s not the average person. Buying CC’s to get 5X spend isn’t profitable for CC companies and I don’t blame them.
    @ GUWonder you a probably right.
    @ Ben I’ve been doing the same while FF points are still worth something. You are right it does seem that it’s easier to use them for what ever reason

  11. The programs are already devalued. When the US airlines changed their businesses to get the $$$ from cards, they fundamentally changed their businesses. It’s like when GM was making more money financing cars than producing them. We all know how that turned out.
    I think the revenue based changes are an attemt to rein in the billions of outstanding miles. If someone is only a credit card user not a frequent flyer it probably doesn’t make that much difference in the long term. People may be using a specific card to accrue miles, but they are not just spending to get miles. The real damage done is to the airlines actual core business because when their “butt in seat” customer becomes further disenchanted and shops fare or convenience, it’s another race to bankruptcy court for the legacy carriers. The domestic economy service on all of them is deplorable and first is not much better so if you are treated like cattle by all of them schedule and price win.

  12. Rene,
    Excellent post. I had not considered this “third leg”, but now that you have pointed it out, I believe you are 100% correct. I’m fiercely loyal to delta (always gold/platinum medallion) and while I didn’t like the first two legs of the triangle, I have bit the bullet and stuck with Delta. The 1 cent/mile for an international business ticket will be my final straw, though. I am the customer of who you speak that only saves miles for intl business. I have enough other options from MEM now to make the break from Delta.
    The other option: Will Delta finally introduce a real intl premium economy product that I would gladly pay for. Those airlines who do will be the winner of my business if the third leg comes to pass.

  13. Should they end up going to a revenue based redemption program, I seriously doubt it is going to be at a 1 cent per mile valuation. If they want to remain competitive with credit card programs (and other airlines like JetBlue and Southwest), they will have to keep it within the 1.25 – 1.5 cent value. The main reason would be that you can book with your Chase points and get 1.25 cents per mile AND earn miles on the ticket -can’t do that with a pay with miles strategy in coach. The legacy airlines would have to give a strong incentive to use their miles at all and there is no way they could do that with a 1 cent per mile valuation.
    BTW, Southwest has some pretty great seats and a great system – don’t be hard on them! 🙂

  14. Last week when I flew Cle- jfk-cph on Thursday and returned on sunday cph – ams- dtw-cle, I handed my boarding pass to the girl at the gate in Ams and she says “Oh you have a seat change”! It was to 5A in business elite. I don’t get it My ticket was non upgradeable. I am diamond with a delta reserve card but it all struck me weird. But it was nice as I was dreading that 8 hours of misery. So this whole program looks bad to me but I guess some weird stuff happens now and then.

  15. @Randall – it is called an “OP-UP” or a an operational upgrade. happens often when coach is oversold as then then move medallions up front.

  16. I hope they don’t go that high, just checking on flights for next year to Europe and i’m finding a lot of BE seats at 125,000, I’ll book a trip in the next few months for our anniversary next year.

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