Mileage Runs, RIP?

Delta to Frequent Flyers: Distance Mileage Is Over, Show Us the Money


Delta Air Lines (DAL) is revamping its frequent flyer program to tie mileage accrual to how much a ticket costs, a long-anticipated shift away from awards based on distance traveled that is likely to be matched by the two other network airlines.

The change, which will take effect on Jan. 1, is designed to reward Delta’s frequent business travelers and others who spend more for tickets. The losers in Delta’s new SkyMiles program will be leisure travelers who book their tickets far in advance to save money and those who snag weekend specials—flights that are discounted, based on last-minute seat inventory. Each dollar spent on a ticket will earn five to 11 miles, rather than a mile earned for each one that is flown. Delta will cap mileage awards at 75,000 per ticket, which appears to be priced at $15,000 for international flights, based on the airline’s calculator.

The new rules for 2015 follow a general trend in the global airline industry to make the achievement of elite status in a carrier’s loyalty program reflect customers’ revenue yield and not how many miles they fly. The top 4 percent of Delta customers account for 25 percent of the airline’s revenue, the Wall Street Journal reported today. Airlines such as Southwest (LUV), JetBlue Airways (JBLU) and Virgin America have already reworked their programs to emphasize ticket spending over miles, as have several large international airlines.

The dramatic changes for SkyMiles come 13 months after Delta added a minimum annual spending component of $2,500 to the 25,000 annual miles flown to qualify for the minimum status in its program, called Silver Medallion; the highest level, Diamond Medallion, required $12,500, plus 125,000 miles. United (UAL) matched those changes in June for its MileagePlus program.

Switching to a revenue-based mileage model will further cull the ranks of those considered elite in Delta’s program, which has 92 million members in total—and this is probably one of the chief aims of these changes. Delta and other large carriers have been collecting complaints from their top-spending customers about scant upgrades and the scarcity of other perks as the ranks of members considered elite swelled. That’s why American and United are likely to follow Delta’s lead: Ditching the ability to rack up elite status on cheap tickets will also reduce the number of elites in their programs. “Elite status was always intended to recognize and reward customers’ contribution to an airline’s bottom line,” Tim Winship, editor of FrequentFlier.com, wrote in June when United announced the new spending requirements.

Under the current program, a $400 round-trip flight from San Francisco to New York-JFK would earn 5,172 miles, according to a mileage comparison calculator Delta has posted. Next year, the same flight would earn 2,000 miles. Doubling the ticket cost to $800 doubles the miles earned. As part of the changes, Delta also announced  one-way award redemption options in place of requiring a round-trip flight. United and American have offered such awards for several years.

Bachman is an associate editor for Businessweek.com.

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Companies Mentioned

  • DAL
    (Delta Air Lines Inc)
    • $46.73 USD
    • 2.49
    • 5.33%
  • LUV
    (Southwest Airlines Co)
    • $42.0 USD
    • 2.72
    • 6.48%
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