Are Delta FCM up-sells enough to offset the declining number of elites? Is the psychology working?

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brain thinking about delta

Inside a Delta FF’s brain

I really wish I could see the numbers. I so want to know if the bean counters running the Delta mothership have consulted psychologists and have counted the cost of up-sells vs. those who will give up on loyalty to determine if it will result in a net gain for the company. And not just for now, but for the future. If folks today are just willing to buy 1st on other airlines, since loyalty no longer matters, maybe they like the other airline more once they try them?

So what am I talking about today? First off I can promise you many Delta flyers are shamelessly compromising their principles and buying Delta up-sells. We have seen that in the February earnings number where year over year Delta was down 5.5%, while they made money up-selling and volume. But why are loyal flyers committing this act? First off they must have no backbone, conscience or character and deserve to fly the rest of the year back row middle seat for their heinous acts (ok maybe that is just my extreme view and how I feel and what I think about this topic, but just hang on and go with it for a minute). 😉

My point is that a normally respectable and upstanding Delta elite has been slowly brainwashed by Delta and cajoled by our mothership to accept, for either some cheap price, or more importantly due to the slowly declining upgrade percentages year after year, that extreme measures have to be taken to secure an upgrade that would have been, in years past, reasonably assured due to loyalty choices in always picking Delta even if it cost a little more than the competition.

Now some may say this really is just a simple equation. Delta is providing a superior product, reliability and service. Delta can simply sell, either via retail, or via FCM every single 1st class seat as it is just worth paying any price. Delta is clearly a great domestic airline and does provide a reliable product and very good service. Now at any price? That, I think, is up for debate.

To me the biggest issue is how many elites have just had it and have given up. I get comments just about every day where top elites are saying that Delta, for all it has to offer, is just not worth it anymore. If they can get a better direct flight and similar service, or even better, on another carrier just paying for business or 1st class tickets then so be it. That, to me, is what could really cost Delta both this year as well as years from now.

For the longest time I have preached that Delta, with SkyMiles and the Medallion program, had something unique. They instilled a fierce, almost irrational, dedication to only choosing Delta. This was driven not solely by operational excellence but the entire Delta experience. This includes things like upgrades but also all those little intangible things that come with loyalty to Delta as well as the rewards program. I get that this has been dying for a long time so this is just the end of a long road. But I am so sad to see this happening.

black popup box about delta comfort plus changes 16may16

Is this enough of a warning?

I am also, as mentioned in the title for this post, concerned about Delta’s focus on short term gains vs. long terms goals. Trust me when I tell you, most loyal elites just have no clue what is on the way 16MAY16. They really don’t. This is true about all the Delta changes until it affects them personally. They just don’t care, until they do all of a sudden. How is Delta warning us? Notice the little black box when you go to book a ticket now on Delta.com.

black popup box about delta comfort plus changes 16may16 expanded box

If you even notice it, and click more, then you get much more info but I doubt very many do click it for more information. They are focused on the task at hand, that is, the booking and trying to find the best price ticket as Delta, most times when you search, does not display the “best price” but what they think is the “best route”. My point is, even when Delta attempts to alert folks about changes they do a poor job of it (most times they just don’t tell us about changes btw and we have to find out for ourselves).

May 16th is going to be interesting. Then June 1st will be the next interesting date when super cheap fare classes are open for point upgrades to 1st class. My guess is Delta will push these and medallion upgrades percentages, as bad as they are already, will tank even further. I bet, by year end, I get Gold and Platinums telling me they got only a few upgrades all year long where as years in the past they were in the 50-75% range. When they then go to spend their SkyMiles and see insane award costs for the trip they have been saving up for, that will be the end of their loyalty to Delta. They will go “free agent” if you will (like so many have already done). Have the bean counters thought about that I wonder? – René

 

Thank you for ALWAYS starting here!


 

24 comments

  1. I dropped my Delta diamond status this year, despite being 99% for upgrades in 2015. Instead, I’m flying whatever airline has the cheapest domestic first-class or international business-class ticket.

    I get airlines have to make money. I don’t have a problem with them selling unsold first-class or business-class seats. My problem is questionable methods used to make those sales. We’ve all heard that Delta targets non-top-level elites with low prices for an upgrade as most elites know it isn’t worth paying hundreds more for first-class on short flights.

  2. Rene, Delta’s line of thinking for FCM, skymile value destruction,Comfort+ crap etc will likely cost them little business in their hubs like ATL, MSP. But this has been the straw to break the camel’s back for those of us with equal or better options in other cities. I just paid less for first class on AA to CUN than coach on Delta. I recently saved $300 by flying United to ASE. $400 by flying AA to SAN. In the past I would have never even visited the AA website to check their prices. The Delta loyalty machine was incredibly effective. However, when they tell me over and over again that my regional upgrade certificate can’t be used, that my AMEX BOGO can’t be used, my Gold partner can’t sit by me in comfort+, 1 upgrade in the last year…my first thoughts were those of anger. Then I just felt really stupid for being fooled all these years. The con artist got me. I will not be fooled again.

  3. I.am. a college student. I only travel a few times a year. For spring break I bought a 80ish up sell to first from Jfk to pbi. I don’t have status.

  4. I have a flight two weeks from now where 23 of the 24 1st class seats are sold. Been that way for a month. Before FCM this was the biggest SLAM DUNK upgrade for DM/PM’s and I know MANY GM/SM who got many upgrades as well.

  5. Rene- Earnings did NOT drop 5.5%. It was PRASM (Passenger Revenue per Available Seat Mile) that dropped that amount. In a period of declining fares, that should be expected. Of course, CASM (Cost per Available Seat Mile) has likely also declined with the decline in fuel prices. Earnings will reflect the difference.

    While Delta may have consulted psychologists, they certainly have consulted their quants – they’ll know what people ACTUALLY do, rather than what they say they’ll do. I strongly suspect that they’re finding that FCM is more than compensating for any declining loyalty. Whether that trend can survive a downturn in demand is testable, but purely speculative at this point.

  6. @JEM – It is the long term I am asking and talking about. Once you destroy trust and loyalty it is very hard to get that back. If even possible ever again.

  7. Rene – As a loyal Diamond, I am often in seats that are $500+ for flights 1-2 weeks out. I have noticed the shift in first from “regular” business elites to more people going FCM. Also, the “Prem” board line is often 25+ people and you see more and more DM brag tags in the back of the plane. From a business perspective, I completely understand the FCM model. The frustrating part is that it appears this is targeting to some and not others. If I could confirm an UG within a 1-2 day window (if I didn’t clear) and knew there were only a few seats up front, I would buy too…Often that extra cost would be on me, since my company pays for the original ticket. Of my 25 segments this year, I have only had FCM offers on 2 of the segments. Truth be told, we are buying an economy seat and if you have to be in back, the product is very good (in EC, of course!). For those dedicated business transcon flyers, forget about an UG. Anything over 3 hours seems to have very little upgrade space up front. There are a huge amount of UG certificates in the market now. I would love to see the data as well. I give credit to the strategists at Delta. If you are a DM buying cheap seats and flying popular and/or long routes, this FCM has to be maddening! As the trend continues, I agree that more changes will be coming this year.

  8. I am a diamond and being a hub captive at DTW a lot of times I have no choice but to use Delta unless I want to deal with a connection and no lounge access. While I hate doing it, if it’s a long flight and my upgrade chances look slim sometimes I will buy up with PWM at booking if there isn’t much price difference but a lot of the reason I do that is for the SDC availability. I know there are others that will buy FCM just to SDC since Delta really screwed us over on that benefit a couple years ago.

    But Delta has also lost some business as well due to FCM. I fly to Miami a few times a year and if my upgrade chances don’t look good when I book and American’s first class is a similar price as Delta’s I fly American. American has a better FC product and a better schedule for my MIA trips. If Delta wants to use the reasoning WFBF then I’m going to buy First on the Airline that better serves me for that trip.

    I’m also giving JetBlue a lot of my business for my DTW/BOS and DTW/FLL trips. Since I have no assurances I can SDC and if a C+ seat isn’t available I may as well take JetBlue since it’s a more comfortable seat than a C- Delta seat and I get free wifi.

  9. @Gary – Thank you so much for your comment and input. You make my point.
    @MattBfive – Yep. BTW, have you noticed, sometimes when you shop for a ticket in 1st it is one price. Then after you buy coach, and see the UG price, the two total are less than the buy 1st class price. Sneaky right! 😉

  10. I am earning and burning Skypesos. I booked 4 award tickets MSP-FCO-MSP for the summer. I could have bought those but Delta would charge me more to get my party of four in Delta Comfort. It used to be free for PM. Thus, as I mentioned in other posts I will still fly Delta for the convenience when they are the only non-stop option from MSP. If I have to connect anyway, Delta will be my last option. Enough is enough!!!

  11. Rene- understand, but I’m not sure that loyalty is a viable concept when there’s nowhere else to go. UA is a worse mess, and AA’s FF program is on the slope heading down as well. If the big 3 just trade out dissatisfied elites every couple of years, there’s no net value to their forgoing revenue. I don’t fly DL out of loyalty – their routes work for me, and I get value out of their superior operations, combined with the perks that Diamond status gets me. I buy those perks every year with slightly higher fares on some routes (along with the recognition that flying a less reliable airline actually COSTS me money when they can’t get me to my client meeting on time – a single lost customer outweighs a year’s fare differences). There’s also a substantial value in familiarity with the systems and infrastructure and the disincentive of the learning curve of a new carrier. For instance, the Diamond Desk has saved my bacon more times than I can count. I could probably get that service as another program’s elite, but not as a ‘whichever airline is cheaper’ flyer. Ultimately, though, all of those are calculations about spending my travel budget – they have little or nothing to do with the emotional concept of ‘loyalty’.

  12. @JEM – I do not disagree with anything you said and share much of it myself! If every flyer felt and acted like you Delta would be in fine shape. I don’t believe that is the case and many more will fly other airlines when it is cheaper or better. I think folks, in the past, would go out of their way to pick Delta always. No more.

  13. @Gary: One thing that I mentioned before is that for many business travelers like myself we cannot just buy the upgrade. It is against most corporate policies for flights under 5 hours. Thus, even if it is cheap I cannot do it. Those are the customers that Delta will end up losing and I can assure you they bring lots of revenues to the company.

  14. May 16th (#DommsdayMay16) I call it is the last straw for me. Delta has lost me on the trust issue on two fronts;

    1) The Comfort+ seats not available at booking (FOR ANYONE) unless bought at booking, and the fact that a travel companion drags down the Elite status shows they don’t care about my 130+ segments annually and punishes my spouse who flies maybe 12

    2) The fact that Delta is changing Award ticket prices at a whim! I wrote yesterday after discovering yet another Business Class Award Ticket prices increase (the second such increase this year) with NO NOTICE, not before nor AFTER the fact! Who would buy from any retailer who continues to changes prices without marking the shelves?

    My approach has been to use Delta for my Mileage Runs internationally, where I do not face the same issues and Alaska Airlines domestically, where…by the way, I am earning 2.25 redeemable miles for every mile flown (with a 1125 miles per segment MINIMUM guarantee!) For me, in the Pacific Northwest, that can add up pretty darn fast when we have a lot of segments less than 350 miles apart.

    Overall, Delta has lost touch! They create their own awards show rewarding their efforts, created their own blog, pump out their own news channel spin, and the list goes on…and on…ad nauseum.

    Delta is a narcissistic, out of touch corporation which is manned by phenomenal front-line service providers!

  15. As a DTW hubby, I am buying a new set of tires and with cheap gas, am driving to destinations such as PIT, IND, MKE, ORD this year. Delta wanted $1100 for DTW-IND-DTW three weeks out!

  16. As most people know, F used to be just a marketing/loyalty vehicle. Relatively few F seats were ever sold, but they were used as rewards for loyal customers. Now that there is so little competition (some would argue no competition in some markets, and at a certain level of service), there is little incentive for an airline to care about loyalty. They are getting it anyway. And, it turns out that, if you price it more reasonably, people are more than happy to BUY F.

    I think it’s unfair for you to blame elites for buying up to F. When your upgrade is unlikely to clear, as is increasingly true, why not spend an extra $100-200 to sit up front? (Yes, I understand that the elites paying for those seats are part of the reason there are fewer seats available for upgrades, but a lot of non-elites and lower level elites are buying those seats, too–right out from under the DM and PMs.) I do agree that it is unfair and irritating that the pricing seems targeted. But, that’s where it helps to be willing to just say, “bye bye Delta. AA has a better price.”

  17. I’m guilty as charged but not brainwashed.

    To me, the formula is simple: I have moved A TON of revenue away from Delta to competitors. I now only fly Delta by choice, mostly when it is cheaper or on par with competitor fares but better service. This approach landed me MCO-LGA-MCO at peak times with a 737-900ER in both ways (until recently, Delta ALWAYS flew MD-88 on that route) for under $300. That fare is not mileage-run CPM but quite good considering that I needed that specific route at those specific times and preferred non-stop service.

    For the competitor purchases, the same rule applies. I need the same service or better at lower fares. For instance, later this month, I needed MCO-DCA-MCO. I was willing to connect and tolerate inconvenient times in order to fly Delta. The best fare I could find (either leaving before dawn or arriving at Midnight) was $650. I moved the purchase to American, with very convenient non-stop departures and a total fare of $300.

    I come out ahead in this case and, when I fly Delta and know that my odds of an upgrade will be low, am happy to buy the up-sell if it’s a reasonable sum because I am, by far, happier.

  18. I’ve gone ‘free agent’ for exactly these reasons. 2 trips recently booked, one from TUS -MIA with American and another, BOS – LIS with United. Long time Gold who has given up, sort of sad.

  19. @Corbett – Thanks for your, as always, insightful comment and again you SO make my point. Yes you are paying (cough) for FCM but you are also looking at other airlines and buying other flights. If Delta were not destroying loyalty and making you as an elite feel appreciated and when you went to spend your points worth while would you look at other airlines as much?

  20. I’ll take cheap FCM offers, mainly because it allows me to SDC, and therefore pick otherwise expensive routings that get me more miles. It also of course allows me to be more flexible with my schedule.

    If I have time, a DCA-CVG nonstop can turn into DCA-MSP-CVG, which nets 2200 MQM in FC, vs 750.

  21. I think that we are overlooking what I think is the primary driver of upgrades. It is my perception that the main reason I get upgraded, particularly 5 days out, is; Does Delta want to sell my coach seat? It is not about how much supply Delta has in 1st class, but how much supply they have in coach and Comfort+. That is why we don’t get upgraded 5 days out even if 1st class is empty, because if there is still plenty of supply in coach, Delta will try to make money anyway they can. When you book and see that there is plenty of seats in 1st class and you buy one of the last seats available in coach, you will be upgraded immediately if you are DM.

  22. What irritates me is that my economy fares are often more expensive than the FCM prices. For example, as a DM, I have always upgraded between MSP-LAS because it is not a heavy business route. However, on my most recent flight, I did not receive an upgrade despite paying over $1200 for a B fare, and booking well before the first upgrade window. I highly doubt that all 20 seats up front had passengers who paid in excess of $1200. Delta already had my $1200 so it was in their best interest to sell a $200 upgrade to a $500 fare passenger.

  23. Here’s the thing – for every Delta elite having this conversation with themselves, there’s an American and United elite having the same conversation and moving a flight or two to Delta. It’s the natural outcome of everything that has taken place in the industry in the last 10 years. I catch a lot of flak for having the opinions I have, and I’m OK with that. So far, I am comfortable with the percentage of my predictions of what would happen in the airline industry, and SkyMiles in particular, that have come true.

    The airlines have figured out how much each one of us is really worth to them. They have also figured out that they don’t need to give away what they can sell. Does it impact loyalty in the historical sense of the word? Sure. But are you really going to just not fly the airline that offers you the best choice of schedule and price for the majority of your travel needs out of some sense of spite for changing the mileage program? Some diehards will, but most, including myself, won’t go that far….and the airlines know it.

    The thing no one wants to talk about (admit) is that we are in a new paradigm for airlines and loyalty. The old order is no longer valid. And I’m not convinced that “economic downturn” that a handful of us talk about leading to a real change in direction in the loyalty space is going to make that much difference when it finally gets here. YMMV.

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