How Will Delta's 2015 Change To Its SkyMiles Program Impact Consumers?http://www.fool.com/investing/general/2014/03/30/how-will-deltas-2015-change-to-its-skymiles-progra.aspx Jonathan Wu
March 30, 2014
Delta Air Lines (NYSE: DAL) has announced that it will dramatically change its SkyMiles frequent flyer program beginning in January 2015. At that point flyers will accumulate miles/rewards based on the amount of money they spend on flights instead of the distance flown. Today, nearly all airlines still reward 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 new system will have the biggest positive impact on business travelers. On shorter domestic flights the cost of business class is often only incrementally more expensive than an economy-class ticket. But when it comes to longer flights, especially international travel, business and first-class tickets can cost up to 10 times as much as a coach ticket for the same flight. Despite spending significantly more, business and first-class passengers only earn an additional 50% of the miles flown under the current system. By adopting a revenue-based approach, Delta is upping the relative rewards rate for business and first-class travel. The new program is clearly designed to cater toward Delta's highest-spending clientele.
How, though, will this change affect the rewards rate for SkyMiles memgers flying economy? We studied this question by examining a number of scenarios using Delta's own comparison tool. Delta's tool could only handle nonstop flights, so we were constrained to those routes in our analysis.
JFK (New York) to NRT (Tokyo) Round-Trip: $1,704
JFK (New York) to LAX (Los Angeles) Round-Trip: $458
JFK (New York) to BOS (Boston) Round-Trip: $258
These examples are nowhere near comprehensive but should give you an idea of how the new program will change rewards rates. For shorter flights, such as the New York to Boston itinerary, passengers will earn rewards at a similar or even better rate under the 2015 SkyMiles program. The changes are more dramatic on the long-distance flights. For both longer trips shown above, passengers would 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 nonstop flights, 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 fewer rewards points with Delta beginning in 2015, with certain exceptions for short domestic trips or some of the more expensive international routes the airline flies.