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It has long been rumored that one or more of the legacy airlines were in the process of developing a replacement for their current loyalty programs. Like those of Southwest, JetBlue, and Virgin America, the new program was expected to reward travelers on the basis of their spend rather than according to the number of miles they flew. It was a prospect welcomed by some and dreaded by others.
Supporters and detractors of the revenue-based model can now debate the specifics of one such program-to-be, following Delta’s announcement earlier today that it will launch an all-new revenue-based version of its 33-year-old SkyMiles program on January 1, 2015.
The specifics are important, since Delta’s new program is almost as different from Southwest’s Rapid Rewards as it is from its own SkyMiles program. It is, in short, a hybrid, featuring spend-based earning but more traditional tier-based award pricing.
Beginning next year, SkyMiles members will earn miles according to the price of the tickets they purchase. The earning rate will vary from five miles per dollar for general members to 11 miles per dollar for top-tier Diamond elite members. Members who purchase their tickets with a Delta SkyMiles credit card will earn an extra two miles per dollar.
Miles for flights on Delta’s airline partners will be awarded as a percentage of miles flown, which will vary according to the ticket’s fare class.
Unlike the programs of Southwest and other low-cost carriers, Delta’s new program will retain a mileage-based award chart.
As it does currently, Delta will offer a capacity-controlled domestic coach round-trip award ticket for 25,000 miles. But instead of the current award pricing, which has three price levels for each region, the new award chart will feature five pricing levels for flights between each pair of regions (U.S. & Canada, the Caribbean, Europe, Northern Asia, Southern Asia, and so on).
Full details of the new award chart won’t be available for analysis until the 4th quarter of 2014. But it appears that Delta has neatly sidestepped the most-voiced criticism of wholly spend-based programs, namely that it’s impossible to get outsized value from your points when they have a preset value when redeemed for tickets at market prices. Under the new scheme, SkyMiles members will still be able to leverage the value of their miles by redeeming them for more expensive flights.
Other Program Changes
In addition to the earning and redemption changes, Delta announced the following:
There isn’t much that’s new or innovative here.
One-way awards have become an industry standard, so Delta is simply playing catch-up.
Allowing cash to be combined with miles is a commonplace among the hotel programs, and an option for JetBlue program members redeeming for vacation packages. It will add a modicum of extra convenience to the SkyMiles program, certainly. Whether it will be good value remains to be seen.
As with one-way awards, improvements to Delta’s website are long overdue.
The Winners & Losers
Since the new scheme is designed to “better reward the customers who spend the most with Delta,” it should come as no surprise that those who travel often on higher-priced tickets — frequent business travelers, for the most part — will fare best under the new rules. And conversely, those who fly infrequently, on cheaper advance-purchase tickets, will find themselves with fewer miles at the end of a year.
A thoroughgoing assessment of the new program’s value will have to be deferred until full details of the award chart are available, and, critically, until travelers have a chance to reality-check Delta’s claim that more low-priced awards will be available for booking.
But the premise of this and other spend-based programs is a compelling one: Customers should be rewarded on the basis of their contribution to a company’s profitability. That’s both fair and reasonable. And in fact, it’s always been the objective of loyalty programs. Miles were simply a handy proxy for spend, albeit an imperfect one. Hotels award points on the basis of spend, as do travel-rewards credit cards. And of course, spend-based programs have been the standard among low-cost carriers for several years now.
What Delta is doing is more inevitable than it is innovative. American and United will surely follow.
Reader Reality Check
Based on what we know so far, do you expect the new SkyMiles to be more or less lucrative for you, given your current travel patterns?
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