What If They Don’t Follow Delta’s Lead?

I have opined in this space from time to time that I think your average frequent flyer program is headed in a different direction. I continue to believe that. However, as they say, “nothing is certain except death and taxes” or something like that. I asked myself what happens if no one follows Delta? My buddy DeltaPoints thinks the new SkyMiles = new Coke. Gary says Delta is destroying the romance of miles. MJ on Travel says “it’s all about the Benjamin’s.” 😀

OK, I didn’t really say that, but it is all about the money. That said, there’s no gun to any loyalty program’s head. They don’t have to follow Delta. So what happens if the other programs don’t follow? My prediction – not much. First, I don’t think the other big programs are in a position to immediately follow Delta. American and US Airways are busy merging. United is…well….not all that United. I would question whether United could accomplish such a change rapidly with their well-documented IT woes. None of that is to say that the other airlines are not going to be watching very closely.

I think it is highly likely that the new AAdvantage program emerges with some kind of enhanced revenue requirement when Dividend Miles is brought into the fold. Rumors surrounding a switch to a revenue-based model for Dividend Miles were swirling prior to US Airways making a run for American. I think it was more than a rumor. Understandably, management’s attention was (and still is) diverted to other things. Now that new management has its hands on the financials for AAdvantage, I expect they will study the details and focus on a combined program that will hopefully keep most of the best parts of AAdvantage but enhance revenue requirements. I’ve stated here before that when it comes to incentivizing and rewarding spend I am a fan of the AAdvantage Elite Qualifying Point (EQP). Scott wrote an excellent piece on this topic a few weeks ago. The new AAdvantage mile earning scale may look a lot like this EQP chart.

It’s clean, it’s easy to understand, even if not as rewarding as the current mileage scale, and it rewards higher spend. What United does may very well rest with what ultimately happens with AAdvantage. They’ve already instituted a revenue requirement for elite status, which may be just enough for now while they monitor the Delta situation and lay the IT groundwork for future “enhancements.”

There is no requirement that every frequent flyer program function in exactly the same way. If one is vastly more rewarding than the other, then theoretically, it will incentivize customers to to move towards higher rewards. In a more concentrated industry, I’m not sure that is necessarily true. Truth told, I’m not sure it was ever true for more than a small percentage of flyers. Most of the big airline programs have been more rewarding than SkyMiles for….well… for as long as I can remember, yet Delta delivers better financial results than the other airlines.

We are at least 1 year away from knowing whether or not the new SkyMiles will turn out to be the next “new Coke.” Therefore, I think we are at least 1 year away, and likely a bit more before the next airline program makes a really big move. For the record, I predict the fallout from SkyMiles 2015 to be effectively zero for Delta, but will admit it here if I turn out to be wrong. Heck, if the award calendar actually gets fixed, and improved award availability  materializes, it may be a net positive. In the end, I believe predictions that SkyMiles 2015 will injure Delta are vastly overblown. The other programs will follow with changes that better reward spend, but those won’t necessarily mirror the new SkyMiles even if the goals are the same. 2015 is going to be an interesting year no matter what.

-MJ, March 14, 2014