Thursday, September 6, 2012

Delta slowly strangles it's frequent flyer program

(Or: Why United is STILL the best bet for travelers out of Houston.)


Even though United has had their problems, and despite some shaky recent news, they do seem to be, slowly, getting a little better, I'm still holding the opinion that, for the Houston flier, they are the best option for the frequent Houston traveller. Most of my reasoning behind this is tied to their still relatively attractive Mileage Plus frequent flier program.  For the family flying once a year or the occasional traveller I recommend price shopping, and taking advantage of package deals.  For many, with bag fees added, this means that Southwest is a viable option and other discount airlines.  For many in Houston, I understand that your personal feelings regarding the loss of Continental is too much to bear.  For you United will NEVER be an option because of how they "dissed" the City of Houston. Whatever. I might also submit that this blog is probably not for you.  I'm writing more for those who make their travel decisions with their head (and wallets) and not their hearts.  If you travel frequently the numbers still fall out in United's favor. In terms of route network, alliances and benefits, United is a clear number one.

That gap grew recently as Delta has seemingly decided to decimate their SkyMiles program (and offer up a
rather ham-fisted excuse for how they handled it.  The driver behind this is the coming move to revenue-based frequent flyer programs where, instead of miles flown, you receive "points" based on how much (or little) you paid for your ticket.

I've stated before that I believe something like this is inevitable, that the executive floors at most major airlines are currently incapable of seeing the forest for the trees. While there are a Million theories about why revenue based FF programs will be BAD for the airlines (and the traveller) with a few tweaks here and there I think they can be a positive, IF you're willing to accept a certain amount of risk and are willing to invest in a few credit cards.

First, this is NOT a blog post suggesting you should run out and start churning cards.  I don't believe in that & I don't think that, for most people, this is a good idea.  Second: I'm not going to provide any "referral" links to apply for credit cards because I don't receive any.  If you want to go help a starving blogger feel free.  Third: The credit cards that I'm going to talk about dont' yet exist. That's very important, this is speculation blogging, a peek into what I believe will become future air-travel.

The first thing to discuss is the move to revenue-based frequent flyer programs.  I don't think any of these are going to be worth the money.  If you think the airlines treat the mid-to-lower tired elites poorly now, wait until there's a financial number pinned to it.  If (when) this becomes the norm my brand loyalty is 100% done.  I plan to fly the cheapest option available and don't care who's metal is getting me there.  (Except Spirit, I refuse to fly them because eventually they're going to charge me for being stupid enough to fly them)  The good news is I believe that, once the mid-to-lower tier benefits go the way of the Dodo, you'll see a lot of other travellers abandon their plans as well and start price shopping in earnest.  This *should* increase competition and result in moderately lower prices across the board.

The wild card in my vision are Mileage-based credit cards, and this is where I expect we'll see the biggest change.

One of the largest carrots that the airlines hang over the heads of frequent fliers are cabin upgrades. Early boarding and mileage bonuses are nice, but what people really want is the opportunity to fly Business or First class at economy prices.  Even a free nudge up to economy plus is welcome.  I believe that upgrades of this type are going to be the first thing to go from frequent flyer plans.  When airlines start paying a lot of attention to how much people actually spend with them (they are paying attention now, and the tiered upgrades plans are evidence of this) then they're going to quickly move away from providing Business and First upgrades to mid-to-lower tier elites.

I believe they're going to outsource these upgrades to cards with higher annual fees to pay for them.  Just as they currently do with miles, the banks will pre-purchase upgrades which will come along with the card.  The higher level of card, the more upgrades are available per year. (including International and partner upgrades, expect to see a Star Allaince, OneWorld and Skyteam card with system upgrades).  As a flyer you'll have to align your travel cards with whatever you would use the most.  If you don't want to play this game then economy will probably be your best option, there are things you can invest in to make sleeping possible, and the seats more comfortable as well.

How far are we away from this?

Well, Delta is starting it, but I think we're a good five years away from seeing it implemented in any large-scale way, the public is going to have to be made to accept it over time just as we've accepted no snacks in economy, fees for bags etc.  The lessons the airlines are learning is that the flying public will accept almost anything provided it's put in place on the sly and then the furor is allowed to blow over.  Their argument is that you always have a choice to change preferred carriers or stop flying at all, the reality is that air-travel is not a true competitive market and in many cases the second choice is often far inferior to the first.  We're now seeing in Houston what other markets have learned in the past.

Until that time however there are still major benefits for frequent travellers to apply to, and use, an airlines frequent flyer program.  On Delta however those reasons are getting fewer and fewer.  If you can, I might start looking around for other options. Expect a competitor to offer a status match soon.

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