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Delta Moves Toward Revenue-Based Scheme with Elite Changes

Delta Moves Toward Revenue-Based Scheme with Elite Changes

It has long been speculated that at least some major airlines, principally Delta and US Airways, were preparing to follow the lead of Southwest and JetBlue in switching from traditional miles- or segment-based loyalty programs to a revenue-based program model that awards points according to the price of purchased tickets, and prices awards according to the market price of comparable paid tickets.

Delta today announced changes to its elite program that are consistent with such a move, although there’s still no official confirmation that a wholesale change is forthcoming.

Beginning on January 1, 2014, to earn Medallion elite status for 2015 will require a combination of Medallion-Qualifying Dollars (MQDs) and either Medallion-Qualifying Miles (MQMs) or Medallion-Qualifying Segments (MQSs), as follows:

  • Silver – $2,500 MQDs + 25,000 MQMs or 30 MQSs
  • Gold – $5,000 MQDs + 50,000 MQMs or 60 MQSs
  • Platinum – $7,500 MQDs + 75,000 MQMs or 100 MQSs
  • Diamond – $12,500 MQDs + 125,000 MQMs or 140 MQSs

What’s new here, of course, is the revenue component, those MQDs. Because of it, when the new policy takes effect, travelers who load up on cheap flights will have a much harder time reaching elite status. Mileage runs will no longer make economic sense.

The FAQ also states that only Delta flights, and partner flights ticketed “through a Delta channel,” will earn MQDs.

According to Delta’s news release, “The changes will ensure that customers who have earned Medallion status — through both flying and dollars spent — reap the rewards of the Delta SkyMiles Medallion program.” I’d put it slightly differently: The changes ensure that those who earn elite status have paid to do so.

That’s both fair and reasonable. Elite status was always intended as a reward for the airlines’ most profitable customers, with miles and segments used as rough proxies for travelers’ actual spend on airfare. Delta is simply putting into practice a more effective mechanism for measuring customers’ revenue contribution to the airline.

Fairness notwithstanding, the new rule will put elite perks out of reach for some of those who have earned them year in and year out on the strength of lower-priced flights. Sparks will fly. There will be grumbling and name-calling and threats to “take my business elsewhere.” (See this Flyertalk thread for a sampling of reactions from SkyMiles members.)

The flip side is that the ranks of Delta elites will be pared somewhat, resulting in more upgrade opportunities for those who still manage to qualify under the more stringent requirements.

If this is indeed the first move in the direction of a wholly new revenue-driven program, the din from those for and against the changes is just beginning.

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  • ChrisCooke

    As a Delta Million Miler and long-time Platinum Medallion SkyMiles member, I doubt I will qualify for Gold, let alone Platinum, under these rules if they take affect. I spend about $3,750 a year to earn 75,000. For me, these changes are a deal killer. I think I’ll relish Platinum Medallion status until it expires in 2014 and “retire” with Silver Medallion status for life. Then it will be time for me to explore new airlines. Over the last few years, getting upgrades has gotten significantly harder, particularly after Delta acquired Northwest. While I love flying Delta, and enjoying Platinum status, I can’t justify paying for a ticket just to earn Medallion Qualifying Dollars. Once again, first class will become a haven for business travelers and those who pay more to sit there.

    Chris Cooke
    San Diego

  • Redgie

    This move is disrespectful to the average traveler since Gold will become and almost impossible to reach goal for most non business funded travelers, let alone Platinum …. For instance flying 10 times cross country will insure you 50,000 miles but hardly ever the needed 5000 MQD’s unless you pay for the high prices fares. SO Delta is saying that they do not appreciate this business of this traveler?

    Sure Delta gives you roll over elite miles but those will be totally useless so why stay loyal? Other airlines have already a way better reward availability at the lowest mileage level, I challenge you to find a flight on Delta for the lowest miles segment .. good luck!! I have never found one in the last couple of years.

    So this latest move might just be the final drop that pushes me away for good, and make a me cheapest available cattle class flyer.

    This is nothing more then Greed, Greed and Greed!!! And I truly hope it well hurt Delta severely.
    It sure makes the worst of Delta’s CEO at the beginning of each on screen security briefing sound like one huge joke ….

  • http://www.facebook.com/katzistan Ari Katz

    Impact for me – I will actually need to fly Delta. Not living in a Delta hub, I’ve gotten Delta platinum the last few years by flying Air France, KLM, Korean. Maybe 1 or 2 Delta flights a year. Guess that gig is over, but with the alliances getting so big, no surprise they have to compete within Skyteam now.

  • cowboyinbrla

    I don’t think this is a bad thing at all.

    Yes, it will have a negative impact on some fliers, and a positive impact on others. Does anyone really think any change implemented is going to be good for everyone across the board?

  • cowboyinbrla

    It’s not that Delta doesn’t value the business of the person flying in a cheap seat 10 times cross-country. But let’s say fuel costs, etc. mean their actual cost to fly a person cross-country in economy is $350 (imaginary number, but whatever). A person paying $400 for a discounted economy fare will contribute $50×10 to the airline’s bottom line, or $500 on revenues of $4,000.

    By contrast, a person flying first class pays $2,600 for a round trip, but there’s maybe what, $25 extra in additional “cost”? So someone flying half as often would contribute a lot more to the bottom line – $2,225 x 5 or $11,125. Which customer would YOU rather reward, if it were your customer?

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