According to an article from CNN, Delta is making a radical change to its frequent-flier program. The article also states that “Delta Air Lines wants to win more business from its biggest-spending customers, including corporate travelers. These “elite” fliers account for just 2% of Delta’s customers but generate over 20% of the revenues, numbers typical of the industry.”
“Delta’s gambit, announced at midnight, marks an historic shift: It’s the first of the so-called network carriers—large, hub-oriented airlines with international service—in the U.S. to base frequent-flier rewards on the fares its customers pay instead of the miles they travel.
Here’s how the new program will work. Today, Delta fliers fall into four major “elite” categories depending on how many miles a year they fly, and what they spend. A customer in the lowest rung, Silver Medallion, must fly at least 25,000 miles a year and spend a minimum of $2500; reaching Diamond status requires covering 125,000 miles and purchasing $12,500 in tickets.
Those categories and the ones in between––Gold and Platinum––will remain in place. The new program goes into effect on Jan. 1, 2015, and all flights after that date, even if the tickets are purchased this year, will qualify. The customers in each category will receive a rising level of rewards for every dollar spent, depending on their elite status. If you sign up for Delta SkyMiles, but don’t fly or spend enough to rate as elite, you’ll receive five times the dollars you spend in miles. That’s right, the rewards will still be expressed in miles. “It’s the currency accustomed to for many years,” says Jeff Robertson, vice president for SkyMiles. But the number of miles you receive will be based entirely on what you pay, not how far you fly.
For that customer who flies twice a year from New York to Los Angeles on a $650 fare, reserved months in advance, it’s a downer. Today, he or she would book 5,000 miles. Under the new program, the credit is just 3,250 miles, or the $650 fare multiplied by five.
By contrast, the top elites will reap a big windfall. Say you’re a Delta Platinum member, and on Monday your mercurial boss suddenly orders, “Get to that conference in London on Thursday.” So you book a flight from JFK to Heathrow in business class for $5,000. Today, you’d get a credit of over 20,000 miles, the round-trip distance across the Atlantic (plus a bonus for being a Platinum member). In the new SkyMiles regime, you’d receive nine times your fare in miles. That’s 45,000 miles, more than double what you’d receive today on Delta or any other U.S. major.”
So what’s happening?
Delta is going to be a full revenue only frequent flier program in 2015. You can safely assume that mileage running on Delta Air Lines is going to be dead in 2015. Right now, mileage runners can get away with fewer than 5cpm fares and get the Medallion Qualifying Dollars waived by spending $25,000 a year on an Amex Skymiles credit card. In 2015, there will be no point in booking under 5cpm fares since you will only be earning 5x the purchasing price. If you buy a round-trip flight from LAX-JFK for $200, you’ll only get 1,000 miles under the new program. In the old program, you would’ve earned 5,000 miles + applicable Medallion bonus miles.
This is the nail in the coffin for mileage runners on Delta Air Lines.