Implications Of Delta Introducing 5,000 Mile One-Way Awards

As I’ve always said (and people like to misquote me on this), I think Delta is a fantastic US airline in spite of their frequent flyer program. They don’t need a good frequent flyer program and they know it. They were the first legacy US airline to introduce a revenue requirement for status. And they were also the first legacy US airline to go fully revenue based on awarding redeemable miles.

Which brings us to a change which on the surface sounds like it should be good, though there’s more to it than meets the eye.

Yesterday Delta Points posted about how Delta has introduced shorthaul one-way awards for 5,000 SkyMiles.

For example, this 5,000 mile award rate is available for travel between Los Angeles and San Francisco:

SkyMiles-1

And it’s available for travel between Portland and Seattle:

SkyMiles-2

As y’all know, arguably the best thing about the British Airways Executive Club program is that they have a distance based award chart, and that can be a great value for shorthaul awards. For example, you can fly a distance of up to 650 miles for just 4,500 British Airways Avios one-way.

New-Avios-Redemption-Chart

Great, so is Delta SkyMiles also going distance based, and are awards under a certain distance going to cost just 5,000 SkyMiles?

Let’s take a look at their award chart to see… oh wait, they don’t have an award chart anymore.

But what’s interesting is that when you price the revenue cost of tickets on this route, you’ll notice that these are highly competitive routes with cheap revenue fares. For example, one-way fares between Los Angeles and San Francisco start at ~$70:

SkyMiles-4

The same is true for fares between Portland and Seattle:

SkyMiles-3

Suddenly those 5,000 mile awards aren’t looking like quite as good of a value anymore, eh?

Despite being an even shorter distance, there are no 5,000 mile awards between Los Angeles and San Diego:

SkyMiles-5

For reference, the lowest paid fares in that market are ~$250+ one-way:

SkyMiles-6

So what should we take away from this? Short term the introduction of 5,000 mile one-way awards is good news. After all, who doesn’t want to pay fewer miles for an award?

But the strategy and logic here is very simple. This isn’t a conspiracy theory, but rather what Delta will gladly admit they’re doing. Long term they’re trying to more closely peg the cost of an award ticket to what a revenue ticket would cost. So it’s perfectly logical to charge just 5,000 miles for a one-way ticket which would cost less than $70 (without tax). Just as it’ll be perfectly logical to charge 800,000 SkyMiles for a business class ticket which would cost ~$10,000+.

And that’s also exactly why Delta eliminated their SkyMiles award chart.

Bottom line

The introduction of 5,000 mile one-way awards is theoretically good news short term, though it’s part of Delta’s overall plan to make SkyMiles as much of a revenue based program as possible, both on the earnings and redemption side. And there’s nothing wrong with that — ultimately it’s Delta’s program to run, and each consumer will have to decide whether they care more about flying a reliable/global/consistent airline while taking it up the chutney on the frequent flyer program front, or whether they care more about a great frequent flyer program.

Pretty soon we can have a contest to see who can find the most expensive one-way award on Delta, as every action does have an equal and opposite reaction in the case of SkyMiles.

What do you make of Delta introducing 5,000 mile one-way awards?

Comments

  1. I welcome this development. What I wish they’d do is do what Southwest did and introduce a value for their points and stick to it. Something to make the program more transparent than it currently is. As of now I’ve had one Delta card and after dealing with them and realizing that they’re much worse than AA and United on the redemption front have stayed away from SkyPesos.
    In my experience flying on Delta hasn’t been significantly better than AA or United. If their product was exponentially better then “taking up the chutney” would make more sense (for some) but since that’s not exactly the case I don’t think their handling of SkyMiles is best – for them nor for customers.

  2. @ Gene — Except it’s not 1.4 cents per mile. It’s basically a ~$65 ticket (pre-tax), and as a Diamond you’re forgoing 715 miles by booking that. That means you’re really “spending” 5,715 miles for ~$65, which is ~1.1 cents per mile.

  3. A couple thoughts: going to be sad if you have to make any changes to your award ticket and the cost goes up 3x l at the “saver” level even months out as prices increase. Second, frustrating to think of a future where last minute award trips are prohibitively expensive.

  4. No one’s found these fares outside the West Coast so far. It’s possible it’s a competitive move against Alaska’s intra-state awards, which start at 7,500 miles.

  5. @ Jake “what Southwest did…introduce a value for their points and stick to it”

    Not any longer!

    SW has done something even worse than what Lucky is saying about Delta. Not only are they pricing points awards based retail ticket cost, they are using a variable scale based on what they expect the demand to be on that particular day. Compare the points per $ for tickets on Nov 29, the Sunday after Thanksgiving, and Dec 1st, the Tuesday after Thanksgiving. Not only does the former date have no sale fares offered, but SW is charging as much as 2x the points vs the $ price. On the flight I checked, for the lower demand Tuesday, they are charging 54 points per $ on the sale fare. On the very high demand Sunday, they are charging 87 points per $ on the non-sale fare. 🙁

  6. I’m no longer invested in Skymiles. But I fear the day when 72$ flights are available for 5000 miles, and 3000$ flights are available for 300,000 miles or more

  7. “I fear the day when 72$ flights are available for 5000 miles, and 3000$ flights are available for 300,000 miles or more”

    Right, when that day comes, that’s pretty much the end of the line for frequent flier programs: that sort of structure would basically eliminate the “sweet spots” that make accumulating points worthwhile. Essentially, you’d have something like a cash-back credit card: spend $500 on a ticket and get $5 or $10 to spend on your next flight. Almost completely useless.

  8. “Almost completely useless.”

    Useless for arbitrage, not useless if you’re generating boatloads of miles (flying a ton, manufactured spend).

    That being said, the 2% cash (or more) back card becomes the value play unless you’re getting 2%+ back on your air mileage spend.

  9. It is worth noting that, while I don’t agree, and I think many readers of this blog would not agree, the vast majority of people redeeming frequent flyer miles want cheap domestic economy redemptions. So if Delta moves more in this direction, there are probably a lot of Delta fliers who will actually be happy with the change. We will see..

  10. DL was probably going to a 1.4 cent point program. Now that Southwest has even scuttled that model, DL will probably also follow variable pricing (never above 1.4 cents tho).

    FF programs make little financial sense anymore. 2% cash back or 2.2 % travel rewards cards will be much better.

  11. @lucky I think that was even less than 1.1 cpm because you don’t early elite qualification credit/segment/miles by redeeming miles.

  12. to put it in AA’s perspective, even the $70 tickets would have cost 12.5k miles… Most of general public just think miles are “free” and use them whenever they can. For those people Delta miles at least gives you a good option to redeem for those cheap tickets. I once helped a friend get a signup bonus from Citi AA card, and she just wanted to use her miles since it doesn’t cost her out of pocket.

  13. I agree that this 5k award isn’t such a great value relative to the cost of a revenue ticket. However, I will give DL credit for doing it, because that same route (SFO-LAX) on AA would cost 12,500 miles each way.

    Yes, DL has slowly but surely eroded the ability to arbitrage miles at the high end, but at least they are removing the big disparities that exist at the low end.

    I’ll still stick with AA since I can get such a great value at the high end (e.g., a $6,000 J class ticket for 100,000 miles) and don’t mind just paying out of pocket for those cheap, short-distance flights where 25k miles are too much.

  14. I welcome these changes! Delta is screwing the everloving hell out of the Skymiles membership once again. This one change looks awesome, but the implications are just awful. These short range flights are being offered at less than the 25k saver round trip price. What does that mean in English? It means that Delta will find a way to charge the vast majority of the Skymiles membership more to get less for their miles. If they charge 5k for an extremely short flight, they could try to justify charging 20k for a coast to coast flight, one way. With pretty much every single change in Skymiles within the last couple of years being just awful for the customer, unless Delta has suddenly decided to become reasonable, then this is the first move in an elaborate ploy to short the customers another time.

  15. Hey, if it helps me at last burn my languishing 25K of SkyPesos, well then fine. I’ll lay odds that I’ll never be able to find availability. (at my home airport, CHO, actually using the miserable skypesos remains…. impossible) So maybe I’ll go somewhere via SWA and then burn off the Delta.

    and ps to Mr. Lucky, why would you presume that Delta doesn’t needs its frequent flyers? That kind of arrogance is why US legacy carriers are now facing serious competition from Gulf based carriers — more than eager to scoop up megaskads of irate, frustrated, tired Delta customers.

    And the old canard about they getting more guv’ment support than he’uh will only work so far with the bubba crowd.

  16. @escot – “and ps to Mr. Lucky, why would you presume that Delta doesn’t needs its frequent flyers?”

    Well, probably because DL is making pretty good $$$ in spite of it’s piss poor (for most) frequently flyer program.

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