Let’s not kid ourselves to think Delta Air Lines is going to escape bankruptcy again. It should be clear to everyone that air travel, as it was before “the virus,” will likely never be the same.
I will not get involved in the discussion about the merits of a government bailout and if the government should take an equity stake in the airlines as part of the bailout. Nor if strict rules should be placed on the airlines as part of the loan / gift / grant – whatever they end up getting.
No, what I want to talk about is your Delta SkyMiles points. They matter to you and me who have been loyal Delta (and their partner Amex) members for years and years. First some history.
Bankruptcy is nothing new to airlines. Delta, back in 2005, filed for Chapter 11 bankruptcy protection. It was ugly. The year before this Amex did what they could to inject cash to keep the airline flying. It was not enough.
So what happened to the SkyMiles back then? Did they go away?
NOPE!
Notice what Fortune.com posted way back in November of 2004 that included a quote from the founder of BoardingArea Randy Petersen:
“American Express came through for the carrier because the two companies are joined at the wallet by the Delta SkyMiles credit card. The airline business is in a shambles, but airline-affiliated credit cards are gold mines.
Balances typically run four times higher than on the average card, because users consolidate their charges on the cards to rack up frequent-flier points. They’re also a low-risk proposition, because of the affluent customer base. “It’s a really, really profitable business,” says Randy Petersen, editor of InsideFlyer. So issuers have a strong motivation to rush to the patient’s bedside when their golden goose is ailing.” – Fortune.com (BOLD MINE).
In fact, when Delta came out of bankruptcy, one of the things they were bragging about was the SkyMiles program when they said:
“Delta’s marketing alliances also allow customers to earn and redeem SkyMiles on nearly 15,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Including its SkyTeam and worldwide codeshare partners, Delta offers flights to 462 worldwide destinations in 98 countries.” – Delta.com (BOLD MINE)
Clearly, if Delta was to survive then, they needed the SkyMiles program to survive and for folks to have faith in the program and the “travel currency” that is SkyMiles.
But will it be the same today?
My guess is yes and for 10x the reasons from last round. Just months before the virus spread around the world Delta and Amex announced a massive decade plus reworking of the credit card and points program. The result would be billions (yes BILLIONS) of dollars to Delta.
Amex did not let Delta fail in the 2000s nor will they allow them to fail now!
Phew! So we are all good then?
Not so fast – there will be pain.
The other day we broke the news that Delta has already removed the ability to redeem SkyMiles for ANY kinds of gift cards including Delta gift cards (getting 9/10th cent value per SkyMiles). Other stores gift cards were really bad – when you could get them – at about 4/10th cent value per SkyMile. Now there are only really horrible choices that remain. Like what?
If you wanted to get a Samsung 8″ tablet with your SkyMiles you would pay 65,480 SkyMiles to get one. You can buy that same tablet on Amazon for $147.99. That means you are getting a dismal 2/10th cent value for your SkyMiles if you did this. Clearly not wise.
Between my wife and I we have nearly 1 million SkyMiles right now. I have zero fear they are going away (well unless I die and then Delta will coldly take them from my family). But I do have other fears.
Last time, when Amex gave Delta tons of cash and the marketplace was literally FLOODED with SkyMiles, finding “low level” awards was really hard i.e. you had to spend more SkyMiles than you wanted to get a seat at “mid level” or even, shudder, “high level” (there were only 3 levels back in the “good old days” at a set cost). Delta has trashed fixed that with revenue based awards, that is, the ticket costs something in the neighborhood of the cash price for the ticket. Thus the value of a SkyMile is around 1 cent each for an airline ticket.
So we wait to see what happens next.
Who knows what Delta will look like 6 months or a year down the road flying in bankruptcy again (yes, I know they have not filed yet – I think it is inevitable and they will). Who knows what ticket prices will be like under whatever rules are imposed on Delta by that point.
Either way, at some value, I will be able to spend my SkyMiles. They will not go away – they will simply be worth even less than they are today! – René
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So much care and focus to the worst currency of all world currencies. Best use of sky miles is the donate miles feature. You can help others while eliminated the need to worry or stress about the “value” of skymiles.
@Ryan – Most charities want cash donations – not SkyMiles.
Rene,
Although the previous “Bankruptcy” filing was “limited” in scope with an understanding that the market would come back, now it is different. A “major” Nationally Syndicated Consumer Protection Radio Host just last week said that holders of Sky Miles are in trouble….PERIOD! He mentioned that once the filing is complete, the airline has the right to prohibit anyone from using these miles. So, I guess the “key” is to BURN them as soon as possible before the filing. On a personal note, I have “heartburn” for an Airline to take a federal “bailout” to wipe away some of their liabilities on their balance sheets. Like you and many, I’m sitting on almost 4.8 million. I was baffled to hear Ed Bastian make the statement that he still would like to keep the employee profit sharing(even) to a similar number……so, let’s give the employees another $1.6 Billion in profit sharing but takes my miles….. ONLY IN AMERICA!!!!!
If Delta goes bankrupt, it will not be the only company and SkyMiles will be the least of our worries. Hopefully our political leaders will come together, as some are trying to, and ensure the survival of our economy which is only suffering because of the panic (not because of the actual virus).
They will all do what the other guy does…if United keeps their miles intact…expect Delta to do the same. Ditto for the other larger carriers. But, if the prevailing sense among the major’s are to squash the miles….then that is what they’ll all do.
Do people really need to be generating concern for no good reason? Clearly “Yes” since that’s mostly how we got here. Anyway, the airlines aren’t going to stop operating and they aren’t going to take away our miles.
My wife and I have a little over 3m skymiles; I obviously do not want to lose them but if that happens I will change how I fly and become a free agent. The main reason I have so many (I do like the airline) but it is chasing status every year I have contemplated this strategy and if it’s even worth it. I have been working to build AMEX points and other programs. I am to the point I usually fly first/business so why do I even need status? So this might end up completely changing strategies in the years to come many.