Two days ago we saw the next step in the relentless march to make it harder for you to use your miles to plan that dream vacation. Delta Air Lines was the first to roll out Basic Economy tickets. These were paid tickets in the economy class cabin that came with….less. American and United both have versions now and they vary. In some cases, you won’t be allowed to bring on a full-size carry-on bag or get an advance seat assignment. Up until now, Basic Economy has been confined to paid tickets.
Delta Rolls Out Basic Economy Award Tickets
One Mile at a Time brings us news that Delta is testing out Basic Economy award tickets on select routes. The first reports I saw indicated that there was as small as a 2,500 point difference between Basic Economy and Main Cabin award tickets. However, a quick search yesterday showed a wider range of pricing:
I assume someone booking the cheapest award ticket possible understands that they might not have first pick at the best seats. But, the penalty of losing all your miles if you can’t take your flight is a pretty significant departure from the status quo.
Is This The Right Business Decision?
As you can imagine, there’s been plenty of teeth gnashing with this announcement. Are customers justified in their anger? Is Delta making the right business decision here? In an odd way, I believe both are true to an extent. Hear me out before you fetch your pitchfork.
For years, Delta has focused their energy in other areas than the value of SkyMiles. They did away with award charts and raised the prices of awards, in some cases substantially. They put a SkyMiles price tag on just about everything they sell. In essence, they view SkyMiles as currency to which they control the value.
They already charge customers hundreds of dollars to change a paid airline ticket. And, in the case of Basic Economy, they require customers to forfeit the entire value of the ticket if they have to make a change to their travel plans. Yet, Delta is by far the most profitable of the Big 3, earning millions more than American and United. They’re also perceived by many to have a significantly better operation, with better in-flight service and amenities.
In a world where their customers are loyal and continue to pay them a premium for the Delta experience (and don’t seem to be impacted by the nebulous value of SkyMiles), why wouldn’t Delta try to roll out award tickets with more restrictions? If they believe this can result in increased profitability, I’m shocked it took them this long.
How About Those Customers?
Now, before you spear me with that pitchfork, I do have a bone to pick with Delta. It’s a pretty big one. One that revolves around the premise that Platinum and Diamond members will have the same cancellation penalty on Basic Economy award tickets as someone who flies Delta once a year.
Delta Air Lines told these customers just about a year ago that if they hit all the requirements for Platinum or Delta Medallion status in 2018, they would enjoy a host of benefits through the end of 2019. One of those benefits was free award ticket changes and cancellations. Now, with roughly 3 weeks left to go in 2018, Delta is saying that’s no longer the rule. If you’re a Platinum or Diamond Medallion member, you did your part. You fulfilled all the obligations Delta asked you to. And, at the end, Delta changed the rules. That’s just dirty pool.
The Final Two Pennies
From a business perspective, Delta seems to be betting that either:
- Top-tier elites won’t be impacted by the change, choosing to book Main Cabin award tickets at higher prices without getting annoyed.
- The lost revenue from elite members who decide this is a step too far is outweighed by the incremental benefit of clearing more miles off their balance sheet.
Ultimately, Delta’s strategy seems to be to continue providing a high level of service and to raise prices until customer’s behavior changes. That can be a winning strategy when planes are full of paying customers. I wonder what that strategy does to the loyalty of their customers when the economy sours?
If you’re a Delta Platinum or Diamond, how do you feel about this change to your elite benefits?
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