Feb 26, 2014 3:08 PM GMT
I think this would end up being a net positive if adopted industry wide... but I prefer paying lower fares anyway... which still amount to a significant amount unfortunately.
Delta Air Lines (DAL) is making a radical change in its frequent-flier program designed to win more business from its biggest-spending customers, including corporate travelers. These "elite" fliers account for just 2% of Delta's customers but generate over 20% of the revenues, numbers typical of the industry.
Delta's gambit, announced at midnight, marks an historic shift: It's the first of the so-called network carriers—large, hub-oriented airlines with international service—in the U.S. to base frequent-flier rewards on the fares its customers pay instead of the miles they travel.
The announcement will affect all classes of travelers. The move from distance to dollars represents a huge benefit to the elites in the form of lots of free tickets. The non-elites who relish flying long-haul on cheap fares, in many cases, will suffer. Delta's major rivals, American (AAL) and United (UAL), will be watching closely to see if Delta lures more big-payers, or if the move mostly irks folks who occupy the back of the plane. If it's the former––a likely outcome––expect its competitors to be strongly tempted to follow Delta's example.
Delta isn't the first airline to de-couple reward dollars spent vs. miles flown. The pioneer was Virgin America, which offered a similar program about eight years ago, followed by JetBlue (JBLU). And Southwest (LUV) made the switch 18 months ago. But for these low-cost carriers, frequent-flier rewards don't carry the same allure—or opportunity to shift lucrative tranches of business—as for the major carriers. So Delta's frequent-flier change is likely to have a much bigger impact.