I always listen in on the Delta DAL quarterly earnings calls. This is not because I care at all about the Delta stock price because I am not foolish enough to ever “invest” my money into any airline – Delta included. No, I listen in, very closely, to see if there are any tiny nuggets that will impact me as a frequent flyer who is focused on extracting value from my SkyMiles and, in a normal year, what changes could impact my medallion status.
So what can we glean from the latest call? Let’s peek at some points extracted from SeekingAlphas post of the call:
“Our partners at American Express are also seeing encouraging signs, whether it’s cardholders holding on to their points in anticipation of redeeming them for air travel, for a recent survey that suggested approximately 70% of respondents expect to take a trip in 2021 after not traveling in 2020. Although it will take time, customers want to travel again when they feel it’s safe.” – Ed Bastian, Delta CEO
“American Express has shared its spending on our co-branded card portfolio has performed in line to slightly better in their overall card portfolio spend in 2020.” – Glen Hauenstein Delta President (bold mine)
Oh boy. So very few folks are flying and, as a result, that should have shocked absolutely no one, folks are saving or holding their SkyMiles. The disturbing thing to me is, according to the Delta President a.k.a. Mr. Ham Sandwich himself, that “we” are still just spending away on our Delta Amex cards comparted to a good cash back card (what I did during 2020).
I don’t get this!
Unless there has been a promotion that has paid me back more than the cost of the spend I have not put a single dollar on ANY of my Delta Amex cards and even took the unimaginable step during a normal year of downgrading my Delta Reserve card to a Blue card. Why in the world would Tom, Dick and Harry* (*names have been changed to protect their reputations) keep spending on Delta cards?
And that brings us to the next part, later on in the call, which made me a bit queasy. Let’s read on:
“You mentioned that there was a lot of pent-up demand and also the hoarding of points from the [Skymiles] Program. What happens if a lot of people try to redeem it once? Is that something that you’re expecting based on search data and other things?” – Leslie Josephs (reporter)
“We’re happy and really are indifferent whether or not people who are booking are using points or whether or not they’re using actual dollars, or whether they’re using the E-credits, what we’re anticipating is that all of those will increase. And we have plenty of capacity to meet that demand as we head to the second half of ’21. So we’re hoping that all of the above happens.” – Ed Bastian Delta CEO (bold mine)
“From talking to American Express, good partners there, it’s clear that people place great value on their loyalty points with Delta and like to see the values grow over time. And so while they’ve been in the pandemic, we’ve seen redemption’s down four points, because flying levels are down. But they haven’t stopped spending on the card, our Co-brand card is as good if not better than almost any other product card, AmEx has. So it has great appeal. And we expect it’s not going to be, not to be run on the bank type situation that you’re referring to.” – Gary Chase Delta (bold mine)
There is so much going on here that my head may explode (yours may have already done so and then you don’t get to read the rest of my post – sorry) and this is why I am so fearful for the future once COVID is gone.
First up that anyone would EVER use the comparison of a “run on the bank” when it comes to SkyMiles. One only does something like this because they have lost all confidence in a bank and it seems, confusingly, folks have not lost all confidence in the value of holding Skymiles. This is really stupid when we have seen during COVID that Delta has:
- Decimated partner redemption levels (unannounced as always)
- Is charging an absurd amount of points for Summer 2021 Delta One travel
- Has not removed the nasty Delta “DieMiles” during COVID
- Has not moved to restore value by adding back stopovers on awards
I have lost so much confidence in SkyMiles that I took last year the once-unimaginable step of redeeming 20,000 Skymiles, in a roundabout way, for a Lowe’s gift card vs. keeping the points. I have reached the point that I no longer have much trust at all in SkyMiles and will do my best to no longer “horde” them. Let’s move on.
I was really hoping Delta would use this opportunity to reverse course on the drive to fully embrace revenue-based redemption but clearly, as we can see from the CEO’s comments, they view Skymiles redemptions the same as cash! Not good.
This means we can expect more and more SkyMiles price increases and higher redemption levels for Delta One awards moving forward. Delta feels they are so good they are worth a “premium” price and that means we can fully expect the same premium redemption levels for our SkyMiles (making them worth MUCH LESS than almost any other points – even cash). The point is if a SkyMile is worth only a penny – or less – we might as well give up and go for a cashback card and then, when we follow this to the conclusion, consider other airlines who may have a better product or service than Delta!
Let’s boil all of this down to a simple conclusion of what we can expect once we all get back to safe and normal travel either late this year or into 2022. I think Delta is going to continue to dilute and devalue the value of SkyMiles. Everything will cost us more and more. Delta has Amex telling them they can keep doing all the horrid things they have done for years with no fear of loss of fools who will keep spending on Delta Amex cards for less in return.
…and you thought COVID19 was bad? You ain’t seen nothing yet! – René
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