This is rather telling to me. There is a new thread on FlyerTalk about Delta starting to, without request from a flyer, just “giving” status to folks who have flown Delta in the past but now no longer are. This, and other such status type gifts by Delta, are interesting on a whole bunch of levels and here is why.
First off, this tells me that Delta is losing elite flyers to other airlines. And why do you think that is (I think we all know why)? Other than United, that has, if possible, an even worse frequent flyer program than Delta, just about every other airline has a better award program than Delta has right now. Delta seems to be trying to compete with Southwest on the penny value scale but the issue here is Delta is not an all coach airline and does not offer free bags or free ticket changes and more! They will not win it this way.
Next point of note is why giveaway status to begin with. Well, now that SkyMiles are worth so much less than they were before (not really worthless but just not what they were before) then you have to give away what is truly valuable, that is, status. Thus my Midwest farm reference, that is, when the milk is drying up (a.k.a. SkyMiles) you just have to give away the cow because that is all you have left (that is status with Delta) .
Then we have they further point that is why, if jets are so full, bother with gifting status. This one is simple too when you think about it. Capacity is growing and prices are dropping (just slowly but still I think we will see more of this). One big factor is those who have any level of status tend to pay more, in general, compared to a leisure traveler. Plus, lower ranked Silver and Gold Medallion elites are often more willing to pay for up-sells to 1st class (since they get so few free upgrades) compared to Platinums and Diamonds Medallions.
Lastly we have the really big issue that is the cost to win back a lost customer. This can be really expensive for any business. It is much cheaper to retain a customer than to have to acquire a new one or especially to win back a disgruntled one. Again, when you have to win back you have to do something BIG and that is give them the cow as sour milk may be the reason they left in the fist place and just offering them a bonus of what they do not want will not work.
Really the most fascinating part of all of this is to look at what is next. Personally I think the glory days of insane profits for the airlines will end in the near future. Competition will impact prices especially internationally. I think some airlines may be smart enough not to destroy their award programs. As things start to change on the profit side for the airlines, and banks keep stepping up their pressure to flyers to use their award currency, something has to give somewhere. An award program is, after all, a loyalty program and as Delta has told us so many times in the past that it really does go both ways! – René