Delta Air Lines Giving a New Year's Gift to American Express

Delta's new requirement for its SkyMiles program could mean more profits for AmEx this year.

Jan 12, 2014 at 10:00AM
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A lot of companies change various policies when a new year begins. A great example is the change to the Delta Air Lines (NYSE:DAL) SkyMiles program and how it impacts one of their best partners, American Express (NYSE:AXP).

Delta has a new spending requirement in order for a frequent flyer to maintain his or her status, but there's a way around it.

Up until now, in order to achieve an elite status with Delta, a flyer simply had to earn a certain amount of Medallion Qualification Miles, or MQMs, in a calendar year, or fly a certain number of segments. The mileage requirement ranges from 25,000 for Silver Medallion status to 125,000 for Diamond Medallion status. 

While the mileage (and segment) requirements have not changed, there is an additional qualification that now must be met.

The new "MQD" requirement
In order to increase the exclusivity of its elite status programs, Delta has invented a new requirement called Medallion Qualification Dollars, or MQDs, which essentially require a certain amount of spending by frequent flyers in order to maintain their status.

The catch is that only a portion of your ticket price counts. So, for example, to maintain Silver status, $2,500 MQDs are required in addition to the mileage requirements.

However, some of the cheapest Delta fares are mostly made up of taxes and fees, which don't count. A recently booked ticket for $290 on Delta only fetched $160 as MQDs. You can see how it is certainly possible to fly well over 25,000 miles while ending up far below the MQD requirement.

It's also worth noting that the new requirement only pertains to U.S. customers, and not internationally based travelers.

If you're currently a Medallion member and are starting to get worried about meeting the new requirements, there is one way around it. Delta has created an exemption for holders of its American Express-branded cards, whereby if you charge a total of $25,000 to your card, you are exempt from the new MQD requirements. 

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Source: American Express.

How it could affect American Express
If you value your Delta status, and like many U.S. consumers, have several active credit accounts, this could be the encouragement you need to begin using your American Express card more than you currently do. American Express currently offers three levels of Delta credit cards: gold, platinum, and reserve. Each card has different benefits, with more of the flyers with elite status choosing either platinum or reserve because of the inclusion of MQMs. 

Additionally, Delta American Express Platinum cardholders who spend more than $25,000 also earn 10,000 bonus MQMs, giving those with higher status an added incentive to reach the spending threshold. 

American Express currently derives more than half of its revenue from its U.S. card services segment, so any incentive to increase in spending would benefit the company. 

Foolish bottom line
Now, I realize not every cardholder will care enough to drastically increase their spending, but some will. Many frequent flyers enjoy their free checked bags, first-class upgrades, and various other perks far too much to lose them.

Even if you're not a frequent flyer, but merely an interested investor, this adds to American Express' image as a high-end, differentiated credit provider.

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Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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