Let me begin by saying I am not a Delta shareholder nor do I plan to become one any time soon. I do not hold any Delta shares in my or my wife’s investment accounts. Plus, the move up or down of DAL shares is not something that concerns me one tiny bit. My review is not from an investor’s standpoint because I have other priorities. Like what?
What matters to me is what has mattered to me all year long, that is, what impacts Deltas changes are making to you, me and to medallion flyers. Also the effect these changes will have on the ability to earn and burn SkyMiles for award seats. That is what is important in all of this, not Delta’s stock price (DAL).
I warned everyone to be very afraid a year ago. I again warn you to be even MORE afraid for 2016 as things are going to get MUCH worse than this year. If you think 2015 was brutal “you ain’t seen nothin’ yet“! Please keep in mind we have not yet received the crushing news of just what kind of “enhancements” are about to befall the frequent flyer program but you can bet your bottom $kyRuble that they are going to hurt. There is nothing in the current investors report to motivate anything but pain for us.
Let’s dive in and look at some of the high-lights and low-lights and what I took away from the Delta Investor Day call and sideshow.
The first thing is what I have been “preaching” about all year, that is, the impact of FCM. Delta said on some flights, some days, they are seeing 80-90% 1st class seats sold. This does not surprise me one bit when even loyal Delta points enthusiasts are spending money and points to upgrade to a first class seat rather than enjoy complementary Medallion upgrades. Oh and come 1JUNE16 expect FCM to get even worse when the dirt cheapest fares are open to 1st class upgrades (at beyond bat crazy prices, but everyone thinks $kyRubles are worthless anyway so they will burn with hopeless abandon – know this)!
While all flights are clearly not 80-90% full they have a goal of 70%. Think about that for a bit. On a 737-900er you are talking 6 open seats for Medallion upgrade for the 160 passengers in the back. Those are not good odds folks. When you add in regional and global upgrades to the mix, even more will be out of reach for complimentary medallion upgrades.
Before we leave the topic of upgrade we have some the of the most disturbing information that came at the very end of the day when the topic of the SkyMiles program was at long last brought up. The Delta executive who was speaking was very plain and just shocked the living daylights out of me. This is not quoting word for word but the gist of the statement was that:
Delta does not want people saving their miles long term for award tickets. They definitely don’t want us saving them for retirement travel. They want the miles to be a “Live Currency”, that is, they want us spending them at high levels each year. They plainly stated that when we redeem for awards those are some of the lowest margin profits for Delta. The executive stated that he wants flyers spending the miles on things like “Dom Pérignon champagne” in the Sky Clubs and for upgrading themselves, and all those with you, flying home from a business meeting in 1st class. Talk was about wanting to push these kinds of FCM upsells to 50-60%. These are high margin items for Delta.
In other words, Delta wants folks to act like complete uneducated and misguided fools to burn any residual value of SkyMiles for nice award trips on things that make Delta more money and flush value down the drain. Oh, joy, oh, joy! They want flyers to be dumb and stupid and not have access to info like award charts right?
We have already seen the OFCMB marketing spin tank in full operation this year and this is before they can break out and sell C+ as it’s own fare class. What a total joke this is. If you have flown C+ you know this seat is just a coach seat. The Delta “experience” is nothing like 1st class. I have been warning Delta flight attendants to expect that folks will want “1st class-lite” service in this “cabin” of service and have been scoffed at. Yeah, well, they had better step it up and get used to “coach” type passengers expecting 1st class treatment in the “upgraded” fare of travel. Delta is selling this as something special in the air and since the seat is nothing special AT ALL it is up to Delta flight attendants to make the experience special. Have fun with that, it will not be me!
The next slide data I think is just wrong as I know better and listening to the executives try to sell us on the fact that new “high density” jets are more appreciated by flyers is a total joke. I think the only reason folks are liking the “mods” or modifications is because the old crummy seats with nonstandard power and over head VHS players were so bad that anything is better than 90’s technology and comfort. With the order once again on for more and more 737-900ERs (not that it was ever really off) it will be very hard to avoid uncomfortable coach “high density” jets plus the older 757’s that remain in service will also get this special mod treatment as soon as possible.
Speaking of pain and discomfort, expect nothing but narrow body jets for your domestic travel. If you are new to this topic a narrow body is a single aisle jet while a wide body is dual aisle and what you tend to find on international routes. The wide body tends to have Delta One or full flat nice seats compared to domestic 1st class narrow body seats that are just a bigger seat than coach. Delta made it very clear there is no business incentive to fly anything but narrow body jets inside the USA. So even if you do score a complimentary medallion upgrade don’t expect the seat to be all “that” amazing.
Then we have the AMEX situation. Delta has locked AMEX into a long term contract. Good for Delta but my guess is not so great for AMEX. They stated that last year Delta added 3/4 of a million co-branded Delta / AMEX cards and wants to add 1 million in 2016. That is a tall order considering how much less value a SkyMile has today compared to the year before let alone going forward after 1JUNE16 when we could see a single business round trip award cost over 1 million miles.
Now for me personally I can still get value from my AMEX cards (all of them, not just co-branded) but that is much a feature from AMEX not from Delta. As long as AMEX controls much of the value I receive I am happy but I greatly fear what Delta will impose on the co-branded cards in 2016. Scary times indeed.
Other interesting bits and crumbs to take away from the presentation and tone from the Delta people. The attitude of Delta is off the charts arrogant. They are the 500 lbs gorilla in the room without question. They are happy with Virgin, AeroMexico & GOL who want Delta telling them what to do. They are not so happy with AF/KLM & Alitalia who do not want Delta telling them what to do. I expect an even more frosty relationship with Skyteam partners in 2016 (if that is even possible) and as a frequent flyer and someone who wants to spend my points with these partners I am not looking forward the fight to get value from my SkyMiles. I have a strong feeling my friend ADAM and his team are going to be VERY busy next year when “loyal” Delta flyers attempt to redeem their points.
Lastly we have the bits that just continue to amaze me and I think one day will come back and bite Delta and all the airlines, that is, the topic of capacity control. Now I get that it is a smart business move to fly jets full and to park jets in the dessert so you can keep control over how many seats are open for sale so you can keep charging super high prices with oil at near record low prices rather than pass any saving on to consumers, but you know at some point the “guberment” may decide enough is enough when Delta has a virtual lock on many routes. The airlines all hate regulation but pushing this so hard on consumers that already feel over the top gouged every way they turn in fees will not be sustainable forever.
I can tell you, my dear reader, many folks I have known for years who have been fiercely loyal to Delta have given up. They were once Diamonds and are dropping way down the elite list. Some that were Platinums are dropping to Silver or even giving up on chasing status at all as the rewards are just not worth it anymore. Delta values “loyalty” ONLY as spending a ton of money with the airline each year and burning your hard earned SkyMiles in all but worthless ways. That is not what I signed up for as an elite flyer – did you?
So what to take away from all of this? 2016 will be the year of “game on”. Delta is going to try to “up-gage” us. Let them try. I intend to use every tool at my disposal to game what there is to my, and your, advantage. I intend to spend as little of my money as I can on Delta next year (my spend was down for 2015 and will be again for 2016). I pledge to only burn my SkyMiles when I get value, that is, LEVEL 1 & 2 award where I am the one getting high margin value for my points – not Delta. I will continue to educate flyers to not reward the company and DAL stock with my “loyalty dollars” when they are clearly not showing loyalty back to me. – René
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