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How Will Delta's 2015 Change To Its Skymiles Program Impact Consumers

Delta Airlines has announced that it will dramatically change its Skymiles frequent flyer program beginning in January of 2015. At that point flyers will accumulate miles/rewards based upon the amount of money they spend on flights instead of the distance flown. This is a big departure from the way current airline rewards work with almost all airlines awarding customers based on the distance flown with multipliers based on program status. Delta will join Virgin America, JetBlue and Southwest in adopting a revenue based approach to mileage awards.

The New Rewards Accrual System

The big headline change is the formula used for rewards accrual. In the new program Skymiles members will earn 5 Skymiles for every $1 spent on airfare. The rewards increase with every level of loyalty status attained maxing out at 11 miles per $1 as a Diamond Medallion member.

Miles Earned per USD Spent

General

5 miles per USD

Silver

7 miles per USD

Gold

8 miles per USD

Platinum

9 miles per USD

Diamond

11 miles per USD

The new system will have its biggest positive impact for business travellers. On shorter domestic flights the cost of business class is often only incrementally more expensive than an economy ticket. For longer flights however, especially international travel business and first class tickets can be as much as 10x that of a coach ticket for the same flight. Despite spending significantly more, under the current system business and first class passengers only earn an additional 50% of the miles flown. By adopting a revenue based approach Delta has chosen to up the relative rewards rate for business and first class travel. The new program is clearly designed to cater towards Delta's highest spending clientele.

While it is clear that this program will be a boon to business class consumers how will this change affect the rewards rate for those flying economy? We examined a number of scenario using Delta's own comparison tool to see what the impact would be for Skymiles members flying economy. Delta's tool could only handle nonstop flights so we were constrained to those routes in our analysis.

JFK (New York) -> NRT (Tokyo) Round Trip: $1704

Current Skymiles2015 Skymiles

General

13,4908,520

Silver

16,86211,928

Gold

26,98013,632

Platinum

26,98015,336

Diamond

30,35218,744

JFK (New York) -> LAX (Los Angeles) Roundtrip: $458

Current Skymiles2015 Skymiles

General

4,9502,290

Silver

6,1873,206

Gold

9,9003,664

Platinum

9,9004,122

Diamond

11,1375,038

JFK (New York) -> BOS (Boston) Roundtrip: $258

Current Skymiles2015 Skymiles

General

1,0001,290

Silver

1,2501,806

Gold

2,0002,064

Platinum

2,0002,322

Diamond

2,2502,838

These examples are nowhere near comprehensive but should give you an idea of how the new program will change rewards rates. For shorter flights like the New York to Boston itinerary passengers will earn rewards at a similar if not better rate under the 2015 Skymiles program. Where the changes are more dramatic are on the long distance flights. For both the longer trips the passengers will earn a significantly greater awards under the current system than they will in 2015. When you consider the fact that our analysis was constrained to non stop flights only and that flights with layovers generally have a better miles to dollar ratio budget conscious consumers should be unhappy with the change. As a whole consumers flying economy should expect to earn less rewards with Delta beginning in 2015 with certain exceptions for short domestic trips or some of the more expensive international routes the airline flies.

Other Changes To the Program

While the accrual system is the major headline change, Delta is also making steps to improve the redemption options for miles earned to make it easier for consumers to actually use them. First the company is eliminating blackout dates, enabling consumers to redeem rewards on any Delta flight. This should serve to increase the flexibility of actually booking an awards flight. In addition the airline is also increasing seat availability for award flights, another step to improving redemption options. Lastly Delta is joining the other major airlines by allowing consumers to book One-Way Award tickets. Right now Skymiles members can only book round trip flights through the program.

Jonathan Wu

Jonathan is the CEO and Co-Founder of ValuePenguin. He reports on an array of topics, including the financial services industry, healthcare reform, and financial products for consumers. He previously worked in the financial services industry, including at such hedge funds as Avenue Capital Group.