What will Delta cut / enhance next with gas prices going up up up? Just what would be too much (for you)?

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Yep, I bet cuts are on the way!

This is shaping up to be a brutal year for $DAL, that is, the bottom line of Delta Air Lines the company on the cost side of the equation (disclaimer: I never buy or sell any airline stock). Delta is flat out terrified about their workers joining unions. The fine folks who drive the jets will soon be negotiating new contracts and there is an ever expanding shortage of pilots. Add to that the Delta CEO is stating that the prices for airline tickets must rise with gas prices going up due to oil north of $70 per barrel. The latter is simple to say but all the airline can not collude to raise prices and this year’s many attempts to increase the cost of a ticket has yielded mixed results.

But $DAL is not about to watch the share price “Keep Descending” as fast as the value of the SkyMiles program. So what can be done? United, being United, has attempted all kinds of stupid ideas to save a buck like removing tomato juice onboard (that did not go over well) as well as other equally idiotic ideas. As much as we laugh at United, Delta is not that far behind as they are at least considering charging for first class meals (#ProTip Delta, don’t even THINK about it)!

Bottom line is Delta, unless they can get mega ticket price increases to stick (unlikely, and if they do less will fly) then they have to cut something or many things to drive down costs. Let’s dive in and see what I think they may slash:

  • Sky Club access. We have seen this month American Express, at a number of their Centurion clubs, blocking access to passengers unless it was 2 hours before departure of their flight and denying entry at arrival destination. Both are really bad ideas but that does not block Delta from doing the same for club members or those with card access unless they pay a fee to enter outside these times.
  • Cutting back on meals and service (even more). We have already seen Delta discontinue drink service on short flights but I see even more on the way. Right now, for example, depending on the flight there is no first class meal service between 2 and 4PM. Would not be surprised at all to see this expand to 1 to 5PM or change the distance flown to offer meals.
  • Reduces drink choices onboard. Delta already serves horrendously bad and cheap wines on domestic flights and unless they are ready to offer “two buck Chuck” there is only so much lower they can go. But at least there is Woodford Reserve but I am sure that costs Delta a ton. I can see them, like with meals, limiting what flights get quality drink choices while others get an “enhanced” simplified drink options.
  • Gogo price increase. While the wifi on Delta is powered by Gogo it has recently (mostly) changed over to DeltaWifi for the SSID. Gogo, the company, is not really making the kind of money $DAL is. Even though on-board wifi is slow on non 2Ku jets, I can see Delta wanting more cash from Gogo and thus prices will have to go up.
  • More fees / cost for bags. I think every breathing person on the planet knows the airlines, Delta included, charges a ton for bags. Bumping up the prices for this part of the travel puzzle is one of the quickest ways to make millions more and folks will pay even if they gripe more than ever doing so. Do keep in mind Delta already changed the free bags allowance for first class passengers from 3 to 2. It would not be hard to drop that down to 1 unless you are an elite or hold a Delta co-branded Amex card.
  • Charging for on-board entertainment. When Delta Studio first went live you paid to watch some movies. That quickly changed over to all the entertainment being free. Clearly the tech is in place to flip the switch back and offer pay per view items again.
  • Adding fees to SkyMiles awards. Delta, thanks to hiding the SkyMiles award charts, can and does charge anything they want for award tickets and charges more miles for partner awards as just one example. But the one thing they do not do that other airlines do is charge a fee to redeem your award ticket. Adding say a $25 fee for any award would also add millions to the bottom line for $DAL (if this happens my guess is it is waived for medallions).

So there is my short list of what I see on the horizon. And before anyone comments below “don’t give them any idea’s René”, Mr. Ham Sandwich and his bean counting crew have already thought about implementing all of this (is my educated guess) and much worse. Just know something has to give and when I say give I mean we must give so Delta can keep the cash flowing in the right direction.

What do you think Delta will devaluate or cut next for 2018 or into 2019? – René

 

 

6 comments

  1. Well, they are already socking it to people trying to get award tickets. No extra fee yet to redeem an award, but the number of miles required for a one way Delta One ticket (at the lowest level) seems to be migrating from 70,000 to 86,000. Although there are a few 70K award seats left on select routes about once a month, the majority of what used to be 70K seats are now selling for 86K. It’s hard to know exactly what’s going on because of “no charts” but it does seem they are trying to get customers used to an 86K saver award instead of the 70K. Sneaky, but that’s Delta.

  2. I could see Delta doing any or all of the potential cutbacks you listed. Other cost savings could come from delaying delivery of new planes (A350-900s?) and postponing remodeling existing ones (777-200s?). Delta could also cut back on C+ service and charge more for all premium coach seats.

  3. I just discovered that DL has blocked rows 1-3 (12 seats) on all CRJ-200 flights, ostensibly for wheelchair passengers and those with support animals. Seats to be made available within 24-hours of travel. Nice opportunity for passengers to upgrade at the last minute. Is this the start of holding back Preferred seats and selling them at the last minute?

  4. @Ed – On CRJ200 1AB are for C+ sales. 1CD are held for service animals etc. Often row 2 is also blocked as preferred. Have not seen this expand to row 3.

  5. Now, however, all three rows are blocked off. DL reservations says that row 1 is an error (yet to be fixed) but new policy is to block off rows 2 and 3 (leaving only one row of “preferred” seating. Nice opportunity to sell these at boarding (although this is denied). I have checked hundreds of flights from now through next March – all show rows 1-3 blocked off. A much higher number than on some 757’s.

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