Reactions to the Possible Delta Revenue-Based Program

Update 10am: Delta Air Lines officially confirmed these rumors and released a press release detailing the changes that will come in January 2014.

The prospect of a legacy carrier switching to a revenue-based program has been looming over us for quite some time, and many have looked towards Delta to make the first move. Yesterday, Flyertalk user DLroads found a page on the Delta website that suggests these changes will occur next year.

The page on the Delta website has since been taken down, but DLroad‘s post has a summary. There are some immediate changes, such as the decrease in earnings for M fares bought after March 1 from 150% to 100% MQMs (which is the minimum fare class needed to upgrade internationally on Delta) as well as an increase for full-fare First and Business class fares from 150% to 200%.

But perhaps the biggest change is likely to come in January 2014, with the introduction of “Medallion Qualification Dollars (MQDs).” In addition to qualifying on miles or segments, elites will have to qualify based on the amount of money they spend on Delta and its partners. The skeletal structure of the MQD requirements seems to follow a “10 cents per mile” guideline, where Silver status (awarded at 25,000 MQMs) requires $2500 of spending; Gold at 50,000 requires $5000 spending, and so on, up to $12500 spending for the 125,000-MQM Diamond level.

At first glance, I was pretty devastated about a Delta revenue-based program. While mileage runs hover in the 4-6 cents per mile range, even my necessary trips rarely surpass 10 cents per mile. There would be no way for me to keep my Delta elite status, and this would signal my exit from the Skymiles program (since I see Delta’s program as better for elites than for just having miles in).

Then I saw the last sentence in DLroad‘s post …

Alternatively, Delta SkyMiles Credit Cardmembers can be waived from the new Medallion Qualification Dollars (MQDs) requirement if they make at least $25,000 in Eligible Purchases within the calendar year.

Well, then … looks like I’m good to go, since I already utilize American Express cards to earn additional MQMs. If anything, this shows how much credit card companies really make for the airline in terms of loyalty and revenue.

The page has been pulled down from the Delta website, and there is reason to believe that these changes may not be implemented. Last year, there were rumors that United was moving to stricter spending requirements for the new elite program for the new post-merger airline, and that met lots of resistance. The only requirement from those rumors that lives on today is the requirement for 4 segments on United or Copa metal, hardly a tough feat for someone chasing United status.

What other changes are possible in a revenue-based program?

Let’s be clear, though – revenue-based program changes, particularly for lucrative elite tiers, will occur. If airlines were initiating programs today, we wouldn’t have the usual “mile” system that we have now — we’d have programs like the ones Virgin America, jetBlue, and the new Southwest have, which are largely revenue-based programs on the elite status, earning, and redemption sides. The Delta page yesterday only spoke for elite status and didn’t discuss the redemption side of the program, which affects more people.

However, I’m optimistic that these redemption-side changes won’t happen. My argument against a change towards a revenue-based redemption chart is two-fold. One, Delta already has a revenue-based chart called “Pay With Miles.” For example, those who hold Delta-branded American Express cards can choose to use 10,000 miles for the equivalent of $100 off of airfare on any ticket, though the ticket won’t earn any new miles. It’s the reason why I’ve argued that while Skymiles are Skypesos, they have a minimum floor of 1¢ in their value for award tickets.

The second part of my argument is that the current miles system attracts me to stay with the legacy airlines rather than fly with Virgin America and their newer planes … I’m attracted to the fact that I can fly 60,000 miles as a mid-tier elite on Delta and earn 120,000 miles, that I can then use for a business class trip to Asia. Same thing with earning United miles – I want those aspirational experiences of being able to fly to another hemisphere in a premium cabin seat that wasn’t going to be sold anyway. The ability to redeem for aspirational awards is a competitive advantage to the legacies, and taking that away will reduce my loyalty to them.

For myself, I’m actually breathing a little sigh of relief seeing this. If Delta “accidentally” published this, this seems like the furthest they will go, at least on the elite status front. While the MQD requirement may not jive with everyone, it doesn’t affect my elite standing since I argued that spending for elite status through credit cards is a great way for Delta flyers to rack up MQMs, and doing so would be waived in the possibly future program. Who knows, it might even thin out elite herds.

The Last United Dreamliner
Staying Three Beeps ahead of TSA PreCheck

Amol (@PointsToPointB) joined HMT in 2012. An ardent manufactured spender, he's an American Executive Platinum, Delta Platinum, and United Platinum.
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  • Jake

    Basically this would drop the M.R.-ers one tier down – Plats become Gold, and Golds become Silver – while essentially keeping all the regular folks.

    On downside I see is that people who live on the coasts in large cities tend to get regular (non-MR) fares that’s below 10cpm. This would punish them even when they’re not attempting to game the system.

  • vlp

    Here is a letter I just wrote to delta after they announced the new program:

    Dear Sir or Madame,

    I am writing regarding the new skymiles program
    requirements. I am sure that you are receiving many complaints from the
    ungrateful customers of your airline such as myself that are quite appalled
    with your revisions to the skymiles program that you plan to implement in 2014.
    Hence, I’ll try to keep this short. Loyalty programs are not for times like now
    when your business is good, it is for times when business is bad. It is not
    just for having people fly your airline, it is for getting them to support or at
    least not oppose your airline when there is bad press, such as scandals or when
    you are in labor negotiations. Today, many of your customers understand more
    fully when your employees comment “on the side” about how “corporate” poorly treats
    them. In one brilliant, greedy move, you have alienated thousands of your most
    loyal customers. Way to go, Delta.

    Some background. I am a Diamond medallion, skyclub for life
    person. I have been a Diamond medallion person as long as you have had the program
    and platinum before that and a gold before there was platinum. I am about at 2
    million miles (gold for life, whatever that is worth). I have seen the
    consistent increase in requirements for the top tier (50,000 miles for gold
    years ago to get essentially the same benefits as last year 125,000 for diamond
    and next year 125,000 (weighted miles no less)+ credit card money) with
    consistently diminishing benefits for the lower tier (they may say they are the
    same, but upgrades for someone Gold, c’mon as a Diamond I often do not get
    upgraded). At the rate I have been
    going, I might even have hit the 4 million mile mark before or soon after I
    retire. After today, I doubt that I will be flying enough with Delta to do
    that, primarily on principle.

    So, if I understand the new rules, for me to maintain the
    Diamond status I now have, and although AmEx has not posted yet my last 10,000
    mile bonus which until today had qualified me for continuation in that status until
    Feb 2015, I will either need to by $12,500 worth of Delta tickets (if I read
    correctly excluding tax and other fees) or spend $25,000 on my AmEx card this
    year. Thus, the benefit I was led to believe I had up until today for doing a
    helluva lot of flying on your airline just disappeared. A pretty loyal
    passenger is left feeling as if he just got “you know what” in an “unpleasant
    place”. Your brilliant MBA or vice president or whomever, has made a very loyal
    customer royally upset because I feel something of some value has been taken
    away. Now you say, “Well, all you have
    to do is spend $25,000 on AmEx and we will remove the MQD requirement”. This is
    true and I do spend twice that each year on AmEx, so what is the problem as I
    will again qualify for the Diamond I had qualified for previously. The problem
    is the principle of this whole thing. You want me to make a wage concession so
    that I can keep flying on your airline. Next, you are threatening, I say this
    as when I looked on-line you have not posted your new miles for class of
    service chart, to give me fewer miles based on the ticket I bought. This is the
    same crap Air France has been pulling. Why is Air France having business
    problems? Because all of my good friends that live in Paris (meaning also a lot
    of others probably as well) now fly British Airways instead since they good fed
    up receiving little or no mileage credit on Air France flights. If the miles I
    receive each time I fly are diminished, making 125K gets a lot harder. Now, I
    am used to my Diamond “benefits” (the main benefit being an upgrade
    occasionally). If because of this change, I drop to platinum in say 2015 or
    2016, I will not say “Gee, I will fly more with Delta to become Diamond.”
    Instead, I will say, I will fly the cheapest I can since I am Gold for life and
    use that little perk for what little it is worth using my 800,000 miles for
    free flights. If that’s Delta, that is fine, if it is USAirways, that’s fine
    too. More important, I have booked for this year already 3 premium voyageur and
    1 business class flight to Europe (not counting two to South America). I could
    have flown with Icelandic Air all of these flights to Europe in Business Class
    with them for the same or less money. Let’s see, who should I choose?
    Especially if I feel that one airline just cut my paycheck?

    You say that you are doing this to serve your top tier
    clients better. Well, apparently, my nearly 2 million miles with your airline
    doesn’t seem to qualify as being top tier. OK, fair enough. But you spent the
    last years since the Northwest merger trying to convince me that I am a top
    tier customer and now you have told me that I am not. But you say, “We love
    you, you’re over reacting, this will allow us to serve YOU better, now all the
    riff-raff that just fly with us, but you will only be with those wealthy folks
    that spend all this money. YOU are special.” My response, BS. If you are going
    to serve me better, then tell me specifically how. What I have read is to get
    the same treatment, I have to spend a lot more money and maybe fly a lot more.
    With your pay with miles program, you estimate that 10,000 miles is worth
    $100US. So, your new requirement of spending $12,500 MQDs corresponds to an
    equivalent of 1.25 million miles! Even if you value your MQD as if it is $1/10
    it means you have added a spend requirement equivalent to the actual flown mile
    requirement! Do you think we are stupid and don’t see this? OK, so you have
    minimally doubled our qualification requirement.

    Let me now list all the new benefits that I will receive for
    qualifying at these more rigorous standards: . Well, that was a short paragraph
    wasn’t it?

    So you’re a business, I get it and you want to squeeze
    profits. You can’t get anymore from your employees so now it is time to come
    after the customers (actually the doubling of fares since the NW merger already
    started squeezing us, but will neglect that point). So let me be a businessman
    in return. You have renegotiated the contract to your benefit and have the gall
    to tell me that it was to serve me better. OK, serve me better. What better
    benefits am I going to get as a Diamond Medallion member? Are you going to
    remove all blocks of upgradable seats in M class for international upgrades for
    Diamond members and their companions (you know what I mean, that is offering M
    class on the internet but not making the upgradable seats available for that
    class which effectively makes these certificates worthless)? And don’t pull the
    ponzi scheme that you make fewer M class seats available on flights now. While
    we’re at it we could let those less important Pt people maybe do the M class
    thing as well (even if they are riff-raff)? Are you going to allow Diamond
    members to buy a regular coach seat and at THE TIME OF BOOKING put themselves
    through the internet into first class for all North American, South American and
    Carribean flights? Are you going to let Diamond members pay with miles but
    still accrue MQMs for actually flying those miles? Are you going to force Air
    France to release upgrades with certificates on their flights to US
    destinations? I doubt we’ll see any of
    these benefits for your new “higher tier” customers. Oh, yeah, did I mention my
    wife has about the same total miles and the same Diamond status as me? And you
    think I’m upset. As William Congreve wrote “Heaven has no rage
    like love to hatred turned, Nor hell a fury like a woman scorned”. You
    probably cannot imagine the power of her reaction…

    I believe your CEO Richard Anderson tells us in the new safety video that Delta “has your back”. He’s correct and he just stuck a very sharp knife square in the middle of it. Way to go, Delta.

    • Dave

      VLP,
      Nice article, same feelings as me. Has Delta bothered to contact you back with anything other than a ‘we appreciate your concerns and really value you as a customer’ line of BS, maybe giving you 5,000 – 10,000 minimally valuable SkyMiles in the process?

      Dave

  • Madflyer

    This is not a rumor. It is true. I got the letter from Delta yesterday, with a link to all of the new regulations. Delta is doing what it can to weed out Medallion members. How grateful for loyalty. Oh, and one other thing: the MQD (dollars) are based on Base Fare, excluding taxes. So if you pay $500 for a ticket but there are $150 of taxes included in that, only $350 qualifies for MQDs. Nice.