What caught my attention from the $DAL Delta Q2-17 earnings call (from a frequent flyer’s perspective).

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Let me start as I always do when I blog about Delta Air Lines stock $DAL. I do not buy or sell any airline stock in any of my or my wife’s brokerage accounts. I do not care if Delta’s share price goes up or down. My interest is from a frequent flyer’s perspective of how the company choices impacts on me as a customer. With that, let’s dive in (you can read the full transcript here btw from seekingalpha.com).

I always enjoy listening to the top folks spin the negatives of the past few months and paint as rosy a picture as possible for the next few. Much of what is said we have to read between the lines and see what impact, long term, it will mean for us.

Most of the bits that will impact us came from the Delta president, Glen Hauenstein. Always remember this is the man who called passengers “Ham Sandwiches” and when your Global Upgrade does not clear even when a jet is empty – he is the one ultimately responsible.

But first a positive note that we are waiting for is more CRJ200s going to die in the Arizona dessert. He said:

“In 2017, we will continue to add more A321s and 737-900’s to replace older narrow bodies and take out additional 50 seat regional jets.”

And from Paul Jacobson

“… our upgauging initiatives will deliver benefits at a slightly faster pace as compared to first half of the year due to our aircraft delivery schedule and into service.”

While not a fan of the 737-900ER Delta has and will have for years a mega fleet of them, but less CRJ200s can not happen soon enough. But the next bit is disconcerting:

“We’re adding more flexibility for customers to upgrade to Comfort+ and first class with both cash and mild options post purchase. We remain in the early stages of marking the value of segmentation…”

Last month I blogged ‘Delta now gives “Even More Ways For SkyMiles Members To [FLUSH] Use Their [Sky]Miles” down the drain‘ and the impact of those who follow this course. The key bits from Glen to know is they are “in the early stages” of pushing segmentation and pushing us to burn our points in foolish ways. Good for Delta does NOT mean good for you and me! Later on in Q & A he expanded on this and said:

“…when you think about that these are new and innovative programs that require a lot of programming, because you have to distribute them through a lot of different means and our ability to continue to focus on bringing the products and services that we have in the market to a broader and broader audience is going to drive our ability to monetize our Premium products more in the next year.”

So expect more and more sales at every point of interaction with Delta to get folks to burn cash or SkyMiles to pay for what we got “free” as a loyal medallion in the past. There are only so many premium seats on any jet and those who will suffer the most are those buying last minute when the jets are either full or nearly full. As I said before, as strange as it seems, leisure travelers may benefit the most going forward as an elite medallion flyer!

The final jaw dropping part came from an outstanding question from reporter Joseph DeNardi

“…the co-brand card market is getting quite a bit more competitive and it feels like over the past few years the strategy at airlines is to effectively devalue the currency. So it require — you need more miles to buy a ticket, that’s obviously beneficial to the economies of the program for the airline, but it doesn’t make the currency demanded more by consumer. So how do you balance that conflict, Ed, between trying to structure the program to really maximize demand for that currency relative to what it means for the airline?” – BOLD MINE

Earlier in the session the strong Amex / Delta relationship was praised and how much money that is bringing to Delta (in the billions over years). So SkyMiles matters to Delta but we all know that the value of SkyMiles keeps dropping – and everyone sees it clearly. Well everyone but Delta. Glen said:

“And I think there’s been a lot of talk at other carriers who have announced fare increases, but we have been in a dynamic pricing environment now for multiple years. And I think that’s one of the successes of our card in the marketplace is that there are incredible value propositions for customers out there who acquire and use our cards, and we have no intention to degrade the total value proposition.”

THAT is an interesting statement. Yes, Glen, by hiding the award charts (that you can find LIVE and up to date here on the blog) you do have “dynamic pricing” of awards. Again, good for Delta but bad for SkyMiles members. As to value, well, yes from getting the new Delta AMEX cards for the bonus is good but as to spending and earning ~1 cent each in value I think Mr. DeNardi hit the nail on the head as the continued devaluation of SkyMiles is not good for us. Glen does say they don’t intend to degrade the value of SkyMiles more but considering they recently added a surcharge for partner awards that statement is laughable and disingenuous to me. I expect more “no-notice” pain as we have seen for years now from Delta.

Lastly, the one other really interesting bit, was the news that the 1st C Series jet will be coming to New Your City area. All the speculation so far had been the west coast but it seems Delta’s NYC hub will be where it begins flying. I can not wait to fly this jet as IMO it will be a game changer in the regional space.

Did you listen in or read the full transcript from seekingalpha.com? Were there other bits that will impact you as a frequent Delta flyer? Let us know in the comments below. – René

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  1. @Rene
    Laughed at your comment about CRJ200s as I had my first (and hopefully) last experience getting “upgraded” to “1st class” on that jet from JFK -> MSY. Two consolations: at least I didn’t have my knees under my chin back in coach; and Cuba Gooding Jr was sitting in front of me, and he was getting the “star” treatment. Haha.

  2. Rene
    The arrival of the C series is great news, if they are going to be as comfortable as their Russian competitors, Sukhoi Superjets. I was a passenger on a Brussels Air, operated by City Jet, flight PRG to BRU on Wednesday, and while it wasn’t FC on a DL regional jet, it was a very comfortable flight in coach.

  3. Interesting to note the comment from an airline analyst about Delta during the conference call on CNBC was that 50% – 60% of Delta’s earnings come from credit card miles.

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