First off, as I always say as a disclaimer, I do not hold any DAL, that is, Delta stock nor do I have any plans to buy any in the foreseeable future. If you missed the conference call, the text from it can be viewed HERE from SeakingAlph’s web site. Now on to what matters and stood out to me, not as a shareholder, but as someone who already has flown well over 50+ segments with Delta this year.
After Delta’s CEO was done it was Ed Bastian, president of Delta’s turn to share some info. He said:
“We increased our paid first-class load factor to 57% out eight points year-over-year on a base of 7% more first-class seats. Our enhanced agreement with American Express produced an incremental $60 million in revenue this quarter. Our partnership with AmEx remained strong.”
So FCM is working. I personally do not buy first class up-sells. I have a strong aversion to paying for a perk that should be free as an elite flyer, but clearly many are buying them. Later in the call Richard Anderson said:
“…our customers are still very difficult to purchase from us and so 2016 is about arguably to bring us to the market in a much more user-friendly environment and continue to expand our products and services we have.”
Clearly they want to sell every 1st class seat they can with 70% sell the long term goal. I have stated again and again here on the blog I have no problem with them making as much money as they can but not if they start selling 1st class so cheap that it all but eliminates the perks of the medallion program. It will be interesting what changes Delta makes to make it more “user-friendly” to buy up with Delta.
Back to the comments from Ed Bastian. I find it interesting that the same week Delta again decimated the value of $kyRubes that he could calmly state that the partnership with AmEx remains strong. If I were AmEx I would be flying down and giving a stern talk to the VPs at Delta that if they do not stop destroying the value of SkyMiles they would be looking for a new airline partner for the brand. I still think that could happen but clearly not for a number of years after the deal Delta got with AmEx this year. Let’s move on.
The next bit came from Glen Hauenstein, EVP and Chief Revenue Officer for Delta who said about BASIC fares this:
“… we’ve seen is a very high up-sell rate from that. Once people see what that fare is and what it offers that they’re actually not purchasing that. So through Delta.com when you look at that fare and then you are presented with other option 65% of the customers opt out of that fare.”
“… when I say opt out of that fare that means they’re purchasing a higher fare on that flight.”
He also touched on the fact that they have contacts in place to block BASIC fares from some corporate accounts. This is wise as any medallion stuck with a BASIC fare will be in a world of hurt due to the punishing restrictions of this fare. I will never buy a BASIC fare and it seems most folks are smart enough to avoid them as well. What is NOT talked about is how many get stuck with them buying on 3rd party sites and not fully realize what they have until it is too late.
The last interesting bit was that the contract for the Embraer 190s and the extra 737-900s will be canceled, according to Richard Anderson, due to the Delta pilots choice not to accept the current company contract offer. I am sad about the E190s but less 737-900s is music to my ears. 100 of those is enough in the fleet and many flyers already actively book away from them.
So those were the bits that caught my attention yesterday. Were there any other nuggets that piqued your attention as well? – René
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