#InsideDelta – A Look Behind the Scenes at Delta Air Lines (Part 1)

#InsideDelta – A Look Behind the Scenes at Delta Air Lines (Part 2)

#InsideDelta – Two Questions I Wish I’d Asked Delta CEO Richard Anderson (Part 3)

In my final piece on the #InsideDelta event I attended last week, I’m going to share some details of our chat with Delta’s CEO Richard Anderson. Our meeting with Richard was the last thing prior to dinner. We were slightly behind schedule, but he spent quite a bit of time with us. Frankly, he seemed to enjoy talking with us. He greeted each of us individually, then sat down to chat. We went through our day’s events, and I immediately caught on to something – he knew the names of the individuals we’d met with from the tower manager to the engine shop supervisor. What I write below is taken from my notes of the conversation. I may paraphrase a bit based on my handwriting, but these are the highlights as I recall them.

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On Seattle

  • Delta’s desire in Seattle is to build a hub.
  • Seattle has a bigger local traffic base than Minneapolis, and Minneapolis has great local traffic.

On SkyMiles 2015

  • Miles are no longer an effective measure.
  • Bank cards pioneered what they are doing.
  • SkyMiles is incredibly valuable to Delta and American Express.

Delta Culture

  • Delta’s culture is remarkable. “I hope you can feel it when you walk around here.”
  • Really about making this a place where people want to be.
  • He was personally involved in plans for the Delta Flight Museum.

On Operations in Atlanta

  • 80 percent improvement in baggage numbers since 2007.
  • Replaced bag system.

On Time Management

  • I’m pretty efficient. There are only 12 emails in my inbox right now.
  • Stay on top of homework.
  • Never touch paper twice. (MJ notes – I may have heard angels sing after that remark. Wish more managers lived that way)
  • Sometimes you have to say no to calendar events.

Advice for Our Youngest Group Member Looking for an Airline Career

  • Complete your studies with a focus on finance.
  • Take every internship opportunity you can get.

He was already late for an appointment, and probably stayed longer than intended, but I’m not exaggerating when I say he seemed to enjoy talking with us. That said, if I had the time back, I would have found a way to ask two more questions.

  1. What long-term structural business problem was Delta attempting to solve with a switch to a revenue-based SkyMiles program?
  2. If you had to pick the single most important aspect from legacy NWA and legacy DAL to preserve in a merged airline, what would they be?

Who knows? Maybe I’ll get an answer after the fact. :) What question would you have asked?

Parting Thoughts on #InsideDelta

I think Delta was pretty brave to host a bunch of aviation-enthusiasts with smart phones and Twitter accounts. On the other hand, even some of their staunchest critics would agree that Delta is running the best big U.S. airline from an operational and product perspective. This event showcased what it takes to deliver that kind of product to its customers. You know what? It takes a heck of a lot of work, and a lot of moving parts have to work together to make it happen. My thanks to Delta for letting me tag along.

-MJ, June 28, 2014

Travel Company Disclosures Updated June 28, 2014

 

It occurs to me that if you don’t read what I have to say regularly, you might conclude that I’m a little giddy over the idea of “revenue based” mileage programs. The truth is that I’m mostly indifferent to the idea, but happen to think that the way airlines market and price flights now make spend a better way to measure customer value than distance flown. That’s about it. My friend DeltaPoints and I were going “round and round” about this via Google Chat last night, and about halfway through the conversation it occurred to me that he thinks that I believe that no one is going to leave Delta because of SkyMiles 2015. In fact, nothing could be further from the truth. I expect that Delta has already lost some customers, and they’ll probably lose some more next year. However, when some customers walk, usually, a few more line up behind them.

I don’t know what I thought United would ultimately do, but I suppose it isn’t that surprising that they basically rolled with Delta’s idea of a revenue based MileagePlus. Honestly, I feel a little sorry for United sometimes. From this ex-airline guy’s perspective, with some pruning and hedging, they should have the finest route network in the industry, and should be the most profitable. Instead, they are what they are. In the end, they copied Delta, and now we have two of the big three with basically the same loyalty structure come next year.

The outlier in this is, of course, American AAdvantage. I’ve posted on this enough for most to know that I think AAdvantage could follow a different path towards better rewarding spend, but just because they could, does not mean they will. My sense is that US Airways had a revenue based program ready to go, and then they were presented with an opportunity in the Chapter 11 filing of American Airlines. Having bigger fish to fry, like putting together two large airlines, could prove to be a feather in American’s cap when it comes to rewarding loyalty. In other words, they have time to see what happens with Delta and United. While I think change is coming to AAdvantage, it could be different than a carbon copy of the Delta and United programs. Focusing on other things while monitoring what happens in 2015 might allow them them opportunity to do something better. Or it may prove that Delta was right all along.

But the what ifs taunt me a little. What if AAdvantage doesn’t change much at all. Perhaps a revenue requirement for elite status here, an award chart adjustment there. In a system with 85 percent load factors, meaning your most popular flights are actually close to full, is there room for that much market share shift anymore? Just pondering things on a Friday night.

-MJ, June 20, 2014

 

I’m frequently accused of a lot of things when it comes to Delta Air Lines. Words like apologist, misguided, and Kool Aid consumer are used. I suppose if a mileage program were the only reason I traveled, those words and perhaps a few others might be on target. A look at the top 3 reasons I fly Delta are in order.

# 1 – A reliable airline matters.

# 2 – I continue to be pleased with the level of care I receive as a SkyMiles Medallion.

# 3 – I’ve never walked off a Delta flight and said “wow, I can’t wait to fly someone else.”

There’s a bit of unrest surrounding SkyMiles 2015. For sure, it will be different and some customers will leave if they haven’t already. I’ve said this before, but it’s worth saying again. If you fly Delta, you need to have a backup frequent flier currency. Ultimate Rewards work nicely, and I enjoy a rather healthy balance of AA/US miles too. On the other hand, if a frequency program is the only reason someone is flying a particular airline, that needs a second look.

Airlines are for profit companies in the business of transporting people and cargo between points on a map. Yes, they sell miles too, and we are right to expect something in return for those miles we accrue. Will SkyMiles 2015 correct some of what has been wrong with SkyMiles? I hope so. Will it matter in the end, I don’t think so. In reality, most people pick an airline based on convenience and price, not on the quality of the frequent flier plan. Based on recent financial performance, I’d say that Delta has invested in providing a product that people are willing to pay for. As long as they keep doing that, SkyMiles 2015 will arrive and not that many people will notice. And I’ll keep drinking the Delta Kool Aid because they get me where I want to go comfortably and reliably.

-MJ, May 30, 2014

About a year ago, I wrote Santa and asked for just three things from SkyMiles. It wasn’t that I did not desire more, I just thought it best to pick three improvements that Delta could make to the program and hope for the best. For posterity’s sake lets review my wishes.

  • One-way Awards
  • A Working Award Calendar
  • Improved Systemwide Upgrades

In late 2013, Delta actually announced improved SWUs (Regional for Platinums, Global or Regional for Diamonds). Of course, they took away complimentary upgrade eligibility on their Business Elite transcons which really hurt some fliers. In announcing the 2015 SkyMiles program, Delta committed to one-way awards and an improved award calendar. Further there is at least some evidence that their award availability has already improved a bit. Would love to hear your thoughts on that.

While I’m disappointed that we have to wait until 2015 to get one-ways and an award calendar that works, there is a tiny bit of promise in SkyMiles 2015. Admittedly, I haven’t talked about redeemable earning yet. I am one who will be slightly better off under the new rules for earning so on the whole, assuming Delta executes, SkyMiles will be a better program for me. Delta seems to have the market cornered within the airline industry on executing things well. Am I wrong to be a tiny bit hopeful about the future?

-MJ, May 19, 2014

 

My friend, DeltaPoints, wrote a very interesting post this morning on the point of loyalty. I’ve opined on the topic from time to time, usually with a different take than my fellow BoardingArea bloggers. I am sure some of that is steeped in the fact that my formative working years were spent in the employ of a very large airline. As a manager, it wasn’t necessarily in my job description, but I made a point to get to know our top customers. Back when you could enter the secure area with just a confirmation of a flight, I made sure I printed the boarding passes of some of our top customers and personally handed it to them after they cleared security. These were the folks one knew would be there every Friday at 5PM, I had dealt with personally for years, and I as an airline manager wanted to ensure they knew that I and my employer appreciated them. In short, that was how I rolled, and that’s what I would do today if I were still there.

On the other hand, I think it is important to make peace with a few facts surrounding the airline industry in general, and their loyalty programs in particular. Airline loyalty programs were created in a day when 65 percent load factors were great years (or Christmas), and a mile was a relatively reliable indicator of value. In the years since AAdvantage first appeared, a lot has changed. I’m not sure there is a word to describe airline pricing, but the airline business in general is structurally different. Airlines have discovered profitability, even in the face of challenges like high oil prices, bad weather, and a hit or miss economy. That’s not to say that the next terrorist attack, bird flu, or whatever won’t create challenges…they surely can/will. But airline managers are better equipped and educated in experience to deal with the fallout.

In the end, I’ll just leave you with the comment I posted on DeltaPoints.

“As you and I have discussed before, the meaning of loyalty in airline parlance is changing. While I penned “Make Loyalty a One-way Street” on my own blog, it doesn’t mean I don’t appreciate the perspective of others. Many of us find ourselves wishing for days gone by. On the flip side, I have to wonder why a business relationship with an airline should be any different than your relationship with the corner gas station? Airlines provide a service – safe transportation between two points on a map. That is all. One thing I rarely see mentioned is the absolute fact that the mileage programs we have today were created in a time when 65 percent load factors were considered a banner year. The math no longer works.

I am of the opinion that if an individual is not being reimbursed for a significant portion of their travel, they should not care about elite status, or the fallacy of being loyal to anyone other than themselves. Fly what makes sense. That isn’t always the lowest price, but more often than not includes product, schedule (the amount of your time spent), and then price. For others, that order may very well be different, but that’s how I look at things. Living where I live and traveling the way I travel right now, it absolutely makes sense that I unapologetically fly Delta. The “romance” of all this is long gone. Do what’s good for you.”

Yes, do what’s good for you….and that may mean some change in your travel loyalty habits.

-MJ, May 2, 2014

 

Yesterday, I penned my “last word” on SkyMiles until we see the new award chart post. I might have provided a short opinion piece on the history of the domestic airline industry too. Sorry. :) Hey…it’s my name at the top, but on to our show. When I typed that on Tuesday night, I had no idea that I’d be writing on SkyMiles again so soon. As I wrote here earlier, Delta actually decided to go ahead and release its 2015 award charts. Now that I’ve had a little time to soak things in, I wanted to offer some additional commentary.

There is good news in that there was no bloodbath as a few had expected. Delta says that “of the 44 Award level pricing changes, more than 95 percent of the changes reflect a decrease in the miles needed for Award Travel redemption.” As far as I can tell, that’s the case. I rarely redeem for coach travel, so I focused my study on first class and Business Elite where the news is mostly OK.

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Your bread and butter domestic first redemptions remain unchanged, save two extra tier options (Level 2 and Level 4) at 65,000 and 90,000 roundtrip respectively. The former mid-tier price now known as Level 3 actually dropped to 75,000. Redemptions to Europe remain mostly unchanged as well, with reductions at the former mid- and top-tier prices. You can click on the image for an excerpt of the chart, or here for all of the new U.S. and Canada originating award charts.

Why Did They Wait?

I have my suspicions. While I’ve never agreed with the argument, I really do believe that someone at Delta convinced themselves that an early release of this information was tantamount to price signaling. In fact, they’ve said as much in the past. While no one resorted to violence that I am aware of, I believe the emotional reaction to the announced changes without inclusion of an award chart might have been loud enough to convince someone at Delta to take a second look at their conclusions. Believe me, I’m only speculating here. Nonetheless, I commend Delta for being willing to not just bury its head in the sand on this one. As I said yesterday, not releasing the award chart was the wrong decision. Correcting the mistake, the right thing to do.

What Does it Really Mean?

In my opinion, not that much. I think it’s great that Delta released the 2015 award chart so we can now make better informed decisions. In the end, a lot of SkyMiles members are going to be earning fewer miles than they have been so just because there’s no disaster on the redeemable miles side does not mean that you are not negatively impacted. Remember – you have to do what’s good for you.

The Real Test is Yet to Come

I’ve already written that these changes are not a bad thing for me. They are not a bad thing for many. In my mind, the real test will be in 2015. We have a promised award calendar repair on the way. We have promised better availability at the lower levels on the way. Color me hopeful that Delta will keep those promises.  Right now, I have a Delta flight to book.

-MJ, March 6, 2014

The 2015 SkyMiles award charts are now appearing on Delta.com. My first impression is that these aren’t bad, but I have not done a complete analysis. I am expecting some sort of announcement from Delta very soon. In the meantime, have a look at the new award charts for yourself.

Edited: Here is the complete text of Delta’s press release. I will have some thoughts on this development in a post later today.

DELTA PUBLISHES 2015 SKYMILES PROGRAM U.S. AWARD CHART

SKYMILES MEMBERS TO GAIN GREATER AWARD AVAILABILITY AT LOWEST MILEAGE LEVELS AND IMPROVED FLEXIBILITY IN REDEEMING MILES

NEW AWARD CHART KEEPS LOWEST PRICE POINTS THE SAME, OF THE 44 AWARD LEVEL PRICING CHANGES MORE THAN 95 PERCENT DECREASE

Mar 6, 2014

ATLANTA, March 6, 2014 /PRNewswire/ — Delta Air Lines (NYSE: DAL) released the 2015 SkyMiles U.S. Award redemption charts today as part of its commitment to inform members of upcoming SkyMiles program improvements. Of the 44 Award level pricing changes, more than 95 percent of the changes reflect a decrease in the miles needed for Award Travel redemption by SkyMiles members.

Delta recently introduced a new mileage earning structure and redemption options for SkyMiles members. Today, members can access U.S. Award chart online at delta.com/skymiles2015 which will be effective for new Award Tickets booked beginning Jan. 1, 2015. Customers will continue to have access to every seat on every Delta flight as an Award seat with no blackout dates.

“The most consistent feedback we received from our SkyMiles members was a desire to improve their ability to use miles and provide more access to Awards at the lowest levels,” said Jeff Robertson, vice president – SkyMiles. “The changes in our 2015 SkyMiles program will give our members more access to lower priced Award travel, the ability to select a seat on any Delta flight, with no blackout dates and new options such as One-Way Awards and Miles + Cash. All of these changes demonstrate our commitment to making mileage redemption better for every SkyMiles member.”

The new SkyMiles U.S. Award chart is available at delta.com/skymiles2015.

With the release of the U.S. Award chart, members can learn even more about Delta’s 2015 SkyMiles program including how the new five-tier Award structure will be implemented. The lowest level for SkyMiles Saver Awards will remain at 25,000 miles plus taxes and fees for an Economy Class Award ticket for travel within the U.S. andCanada excluding Hawaii. The introduction of two additional redemption tiers will offer members more price points for Awards and is designed to complement new features such as new One-Way Award tickets which will start as low as 12,500 miles plus taxes and fees within the U.S. and Canada excluding Hawaii and the ability to redeem Miles + Cash Award options. In addition, members will experience significant improvements to award-redemption functionality at delta.com and Delta reservations in 2015.

In 2013, frequent flyers redeemed more than 271 billion miles in the SkyMiles program for more than 11 million Award redemptions.

Delta and the SkyMiles Program

Now in its 33rd year, SkyMiles is one of the longest-running and most successful loyalty programs in the travel industry. Delta is the only major airline that offers elite perks such as unlimited complimentary upgrades, no mileage expiration, no Award fees, a published Diamond Medallion tier and rollover Medallion Qualification Miles. The SkyMiles program offers many ways to redeem frequent flyer miles, including airline tickets on Delta and 28 partner airlines, mileage upgrades, car rentals, hotel stays and Delta Sky Club memberships. For more information on the SkyMiles program, Medallion status and mileage-redemption options, visitdelta.com/skymiles.

Delta Air Lines serves nearly 165 million customers each year. This year, Delta was named the 2014 Airline of the Year by Air Transport World magazine and was named to FORTUNE magazine’s top 50 Most Admired Companies in addition to being named the most admired airline for the third time in four years. With an industry-leadingglobal network, Delta and the Delta Connection carriers offer service to 324 destinations in 59 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft. The airline is a founding member of the SkyTeam global alliance and participates in the industry’s leading trans-Atlantic joint venture with Air France-KLM and Alitalia as well as a newly formed joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights, with hubs in AmsterdamAtlantaCincinnatiDetroitMinneapolis-St. PaulNew York-JFKNew York-LaGuardiaParis-Charles de GaulleSalt Lake City and Tokyo-Narita. Delta has invested billions of dollars in airport facilities, global products, services and technology to enhance the customer experience in the air and on the ground. Additional information is available at delta.com, Twitter @Delta,Google.com/+DeltaFacebook.com/delta and Delta’s blog takingoff.delta.com.

Terms and conditions:

For full terms and conditions, please visit delta.com/skymiles2015. All SkyMiles program rules and membership guidelines apply. To review the rules, please visit delta.com/skymiles. Other restrictions may apply. Offers, prices, rules and benefits subject to change without notice.

2015 Award chart prices are compared to current Award chart prices for travel on or after Jun. 1, 2014.

I’ve been thinking about this since Delta first announced its transition to a new revenue based program last week. I really can’t fit all the words describing this post inside the space of a reasonable title. With that, let me try a full description – My Last Word on SkyMiles Until We See the New Award Chart and Three Reasons Why I Am Staying For Now Other Than I Live in Atlanta.” There, how’s that?

Let’s start with a few facts. First, SkyMiles is evolving and I don’t think there is a single thing all the noise in the world can do about it. Like it or not, Delta Air Lines has a different vision for their loyalty program. Many do not agree with that vision. Who is correct remains to be determined, but I do not think that any of the airline programs are immune from change in the long term. I’ve said this before, but the real contribution to the bottom line of an individual customer is going to figure heavily going forward, and a “mile” is no longer the measure of value it once was. I am under no illusion that I am all that valuable to Delta. That said, I’m a Platinum Medallion who spends more and costs less than other Platinum Medallions, and no doubt some Diamond Medallion members. Tell me I’m just doing things wrong if you want.

Second, whether I think Delta is right to consider spend as the primary (but not the only) factor in value or not (and for the record, I do think they are at least partially right), they haven’t done the best job of rolling out a change in the world of airline loyalty that is so different than things have been for so long. Introducing change so drastic without the complete picture, the award chart, was the wrong decision. I actually asked a Delta spokesperson about this, and the response was that “we’re looking at this feedback now.” Perhaps the yelling has been loud enough. We will see. Finally, Delta did not just make up something this huge overnight or on its own. Rumors and innuendo have been rolling around for years about concerns with ballooning amounts of outstanding miles, and I assure you that this is not just a Delta issue. I have no idea if the industry has been “over rewarding.” I’m pretty sure the balance of miles outstanding has grown beyond an ideal level, but that’s not entirely our fault, is it?

In the end, a lot of the drama surrounding this change will turn out to be nothing more than noise even if it could have been managed better. That’s not to say that I do not think Delta will lose any customers over this. I certainly think they will, and they will not all be “low value.” I just don’t know if the customers they lose will be missed all that much within a restructured Delta, and more importantly, a restructured industry. It is easy to say that this is just the result of too many mergers and a lack of competition. Surely, competition has been reduced in the airline industry, but has it been reduced that much? Right here in Atlanta, I can fly at least four carriers, and sometimes more to just about anywhere I want to go. Is that enough? I think so, even if I could once choose from 10. Given that I really do like my miles and elite status, all things being equal, I don’t look at making a connection as a deal breaker.

I can think of no other industry where so much wealth has been transferred from the pockets of shareholders, the companies they own, and the people they employ into the pockets of consumers than that of the U.S. airline industry in the last 30 years or so, especially since 9/11/01. What is happening now is merely one piece of the end game of a great balancing act, and if the pendulum ultimately swings too far I have a bit of faith that the market will correct things over time.

Now that you are good and exercised, I’ll share three reasons why I will continue to fly Delta. While a loyalty program can no doubt be leveraged to purchase customers, I have to wonder if the underlying service a company provides shouldn’t matter more?

# 1 – A reliable airline matters.

# 2 – I continue to be pleased with the level of care I receive as a SkyMiles Medallion.

# 3 – I’ve never walked off a Delta flight and said “wow, I can’t wait to fly someone else.”

In closing, do not call me a Delta “apologist” even if you want to. They absolutely can do enough to send me away. I’m just waiting for the mileage program end game to play out. In the end, I’ll do what’s best for me. As I’ve always said, that’s what you should do too.

-MJ, March 5, 2014

Well, what a week this has been. I think we all knew it was coming, but when the Delta hammer finally came down, it still took a lot of people by surprise. I’m not surprised by the reaction from most quarters. You know my thoughts on this specific action by Delta, and on mileage programs in general. I by no means think “the end is near,” but things are probably going to change for all of us eventually.

Other airlines will be watching the developments with great interest. I do not expect any drastic changes from American or United in the near term. We all know that American is at the beginning of its integration with US Airways. In short, they’ve got bigger fish to fry right now. That said, I expect the consumer reaction to Delta’s move to figure into planning for the new combined AAdvantage program. It’s generally known that there was some interest in moving to a revenue based program in Tempe. It’s hard for me to imagine that thinking has changed very much, bigger fish to fry or not. As for United, I doubt they are technologically capable of such a project at the moment. Further, they recently made some big changes with their program, and it might be a little soon to rush out with a brand new revenue based MileagePlus.

As for my unsolicited advice – Delta has changed the equation without giving us all the factors. I “get” the argument of releasing the award chart in advance being tantamount to signaling pricing, even if I do not agree with it. One wonders why Delta’s lawyers have reached a conclusion that no other airline has on this question. Rolling out such a big change with only half the picture was bound to be troubling for many. Conspiracy theories abound. My unsolicited advice for Delta would be to make darn sure the new award calendar really works, that availability really does improve, and that improved availability not all be at stratospheric levels. And give us the darn award chart already.

-MJ, March 1, 2014

 

Did time just stop? For some of us, perhaps. I’m speaking, of course, about yesterday’s announcement from Delta Air Lines about changes to its SkyMiles program coming in 2015. I can’t say I’m surprised. You might remember a couple of pieces from me revolving around the idea that the dog is finally starting to wag the tail, and not the other way around. Whenever I hear that airline frequent flyer programs are profitable on their own, a fact that is no doubt true to a point, I’m reminded of a saying we used to have during my airline manager days when we were under the hammer to cut costs – Think about how much money we could save if we just stopped flying airplanes.

It was easy to become addicted to an industry living “paycheck to paycheck” with a short term focus. In the end, we wound up with too many miles chasing too few seats. Capacity discipline and managing real businesses for real profit have brought us here. However, we didn’t create the system, the airlines did, and they own part of the blame for where we are. That said, things were bound to change, and now they have.

While I’m not surprised Delta moved forward with the inevitable, in truth, I have no idea if the program they introduced on Wednesday is exactly where things are headed. Will this spread to the remaining big airlines? Ultimately, I think the answer to that is yes though there is room for each airline to put its own stamp on things. Southwest, which carries more domestic passengers than any other airline by the way, made the move and last time I checked they still had customers. I think it’s not a matter of if, but when the others move forward with some level of change.

Without a doubt, this was a big move by Delta. Risky? Indeed. Only time will tell if it works. Here’s a question for you? With a move this big, how would you undo it if you wanted to? No matter what airline you fly, it is not likely that your loyalty program remains untouched forever by Delta’s latest move. Maybe that was the point.

-MJ, February 27, 2014

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