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There is a full copy of the transcript of the Q2 earnings call from Delta on seekingalpha.com and clearly Delta continues to do well, but the part that really got my attention was the above. That is, the up-selling of first class seats.
I have talked about this before, then re-evaluated my stand and posted again a sequel, and this also seems to be working for Delta and this “could” be bad for us. Here is why.
I am most happy Delta is making a ton of money. I am thrilled they are making staggering cash from bag and other fees (as long as Delta Points readers are not part of that). But to see the amount of open seats available for upgrade for elite’s shrinking is worrying.
Now before you pile on the WFBF that is “want first buy first” bandwagon, or as a reader commented once (who’s husband is a DL pilot) that us over-entitled elites should basically never ever get upgrades and are just whiny to begin with, understand that medallion upgrades are one of the BIG reasons a flyer stays loyal to Delta. I mean, it sure will not be for the frequent flyer program in 2015 as there will be few rewards there after 1JAN2015. Upgrades are still one of THE top perks and a major reason to shoot for top status with the airline.
Also understand I really am fine with the current system Delta has put in place. After all, anyone paying for these upgrades are overpaying IMO. They are basically paying close to retail for the upgrade either with cash or points. Even I sometimes buy and recommend 1st class tickets including mileage runs in 1st class when the price is right.
However, what I can see happening is the prices for these upgrade going lower and lower to the point where medallion upgrades become almost impossible to get.
For example, I am on a one day mileage run later this year and paid $196 for the ticket (less a $50 voucher). Now the current price to buy 1st class for the round trip is just $409. So, the up-charge they are offering me is simply the price difference between what the 1st class ticket “buy price” would be and what I paid. I love this. Not that I would ever do it, but I love the math. I love that Delta can make more money selling a seat at the current first class price.
But what if? What if they decide 10 days out to send me an email that I can upgrade to 1st for say $50 or even $100 round trip? I would personally still not do it as I expect the upgrade as a Diamond (currently running about 90% for me this year) but I bet a TON of folks would buy an upgrade in a heartbeat at that kind of price.
At this point this is just speculation. We will have to watch very closely to see if REV MGT decides it is worth taking the next step in decimating the value of being an elite Delta flyer. I sure hope not! – René
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“medallion upgrades are one of the BIG reasons a flyer stays loyal to Delta”
I don’t think this is accurate for most of the flying public. I would argue that the reasons a person stays loyal to an airline:
1) Price — most people will take the cheaper fare. So an airline that can provide cheaper fares will be the one most people are “loyal” to
2) Location — as much as you might love United, if you live in Atlanta, you are going to be loyal to delta. So if an airline can make more money and expand service, they will get more flyers. This is better money spent than giving out free upgrades.
3) Service — Better staff, safer flights, more comfortable planes, etc.. One of the reasons US Air got hit hard over the past few years even though they had a great loyalty program with easy to get upgrades… now improving.
4) Loyalty programs — Least important of the factors I have mentioned. Most of the blogs focus on this but the vast majority of the public couldn’t care less… why? because most people don’t fly enough to achieve loyalty status. And those that do, are affected more by price, location and service. And those that fly ALOT (diamond, Premier 1K, etc) aren’t going to be affected a lot by these changes. The people getting squeezed are your silver, gold, and platinum members — several of which are loyal to delta for reasons of location, price, service, etc..
@Satya – as in the text you quoted I am talking about medallions. the general public are not Delta elites.
Rene, not sure this is all that surprising. Lack of competition breeds contempt and greed.
Shareholders(and Anderson) have had a taste of stock price success. With that comes thirst for more.
If selling F(or J) before handing them out to high-level Medallions means more to the bottom line, then expect more and more of it.
What are the ATL(or DTW, MSP, SLC etc..) Meds going to do?
Switch to Spirit, Allegiant, connect on RJ’s to regional hubs(on inferior airlines)?
Nope. I don’t think it’s particularly polite of Delta but alas, they haven’t asked me(or you unfortunately).
I think you may be somewhat skewed on what “most” Delta elites want (or perhaps it’s just me). The budget MRing “elites” enjoy the status, sure. But as a frequent Monday/Friday CRJ-to-hub-to-hub-to-CRJ business traveller, I say bring on the $50 upgrades – I’ll consider paying out of pocket. This year, my DM upgrade percentage has been less than 50% on morning SLC-DTW/MSP/ATL/JFK flights that I have to take (unless I want the Sunday night redeye). FC is nice, but an EC aisle seat is perfectly fine, and I’ll keep flying Delta because it gets me where I need to go on time (I’m also a United Premier 1K: my complimentary upgrade percentage is around 20%, and on-time percentage is close to zero – and their FAs/GAs pale in comparison to DLs).
I’ll enjoy the DM status for my leisure travel upgrades and all the other ancillary benefits, but complimentary upgrades are way down the list on my loyalty index.
Whittling away at the perks will definitely make it easier to settle for gold level on a couple different airlines. Back in the day, when silver actually had a value it was easy to maintain it on a couple of airlines. Degrade of the status pushed me to focus. Reduction in perks will once again become a leveling effect. DAL, UAL and AA are all options and I’ll start using if the degradation continues.
Medallion upgrades are one of the top reasons I’m loyal to Delta, too! Otherwise, I likely would focus on AA/US and jetBlue a lot more. I will make Platinum for the first time in mid-August and am dying to see how big the difference is from Gold.
@JEM so what you’re saying is that Delta can drive the “free upgrade” percentage down even closer to 0% on the “business scrum” flights, but this probably won’t be a big deal on the non-scrum flights?
Or, to put it another way, it’s going to hurt the people Delta most wants to keep, while not being a big threat to those of us they’d be happy to get rid of?
I think it’s rather sad that they’re focusing on selling upgrades that would take the place of free upgrades, but aren’t doing “Business Elite” upgrades, where they could get money for an otherwise empty seat.
Interesting logic there.
I actually just upgraded my son from coach to 1st on a UA flight home from camp. His 2 bags were 60+ lbs each. The 189 upgrade fee at check in was cheaper than the $100 per bag over weight fee plus the $65 for two bags.
Gregg