20 years ago, during a dinner, I expressed my feelings to a friend and hoped for the same feelings in return. To my surprise, she responded by saying that if she wanted me as her boyfriend, I would already be her boyfriend. I admired her self-awareness and clarity. Similarly, Delta Air Lines has made the decision to restructure its SkyMiles loyalty program, which has received mixed reactions from customers. Delta has informed customers that they will need to meet higher requirements to attain higher status in the program, resulting in fewer people qualifying. This may feel like rejection for some SkyMiles holders, but it also provides them with a clear understanding of where they stand and the opportunity to make alternative choices regarding air travel and credit card use.
Speaking from my own perspective, unless there is a significant increase in my income or the Star Tribune frequently sends me on flights (which they have never done), I will not be able to reach the higher levels of Delta’s program. However, I appreciate having this knowledge. Like many other businesses in the travel industry, Delta is facing challenges due to the sustained increase in traffic, even after the initial surge during the post-pandemic period. Additionally, consumers are dealing with rising interest rates and other costs. As a result, Delta’s Sky Clubs are often crowded, and the demand exceeds the supply. From Delta’s standpoint, it makes sense to increase the requirements for passenger rewards.
Starting next year, individuals will need to spend a minimum of $6,000 (previously $3,000) on Delta tickets to attain Silver status for 2025. To achieve Gold status, the spending requirement will increase to $12,000 (previously $8,000). The biggest change is that Delta will now only consider dollars spent, rather than the number of flights or miles flown, for rewards in its SkyMiles program. This includes spending on the Delta-affiliated American Express Platinum card, which has an annual fee of $250. Initially, I viewed Delta’s changes as a sign of inflation, especially since the Consumer Price Index only tracks airfare and not customer loyalty program costs. However, after speaking with Scott McCartney, a former Wall Street Journal columnist and aviation consultant, I realized that this decision by Delta is aimed at aligning itself with its highest-spending customers, a goal airlines have been attempting to achieve for years.
According to McCartney, airlines have always faced a fundamental problem: they charge their best customers the highest prices. Delta’s shift towards rewarding customers who spend the most is in line with this goal. American Airlines and United Airlines have also started tying rewards to spending alone. As a result, those who fly at lower fares, especially those who accumulate miles through long flights, will lose out. On the other hand, those who pay premium fares and utilize Delta’s premium Amex card for most of their spending will benefit. Delta’s president, Glen Hauenstein, stated that this change is aimed at providing truly premium experiences to their best customers, a strategy that makes sense as businesses risk losing customers if they fail to satisfy their highest-spending clientele.
During the pandemic recovery period, Delta noticed that its most profitable business customers were the last to return to air travel. To compensate for this loss, Delta introduced tiers in its main cabin to attract more leisure passengers. Additionally, it offered incentives to customers who used its Delta-branded Amex cards, leading to millions of sign-ups. American Express paid Delta $3.4 billion for its customers’ credit card usage in the first half of the year, which far exceeds Delta’s overall profit of $1.5 billion during the same period. This highlights the importance of loyalty programs and credit card affiliations for airlines. McCartney aptly stated that airlines are essentially loyalty programs that happen to fly airplanes.
Interestingly, most people are motivated to join loyalty programs not for the free flights they can earn, but for the possibility of earning them. Many individuals hold onto their points for years and often end up losing them when they miss the deadline. This behavior is driven by the psychology of the potential for free travel. For affluent individuals who can attain Delta’s new elite status with greater difficulty, free flights may not be of great importance. The status itself is enough incentive for them to choose Delta over other airlines. However, it is important for the rest of us to stop seeking validation from businesses. We have always known what they truly want.
In summary, Delta’s decision to restructure its SkyMiles loyalty program has sparked mixed reactions among customers. While some may feel rejected, the changes provide a clearer understanding of where they stand and the opportunity to make alternative choices. Delta’s focus on rewarding customers who spend the most aligns with a strategy aimed at satisfying their highest-spending clientele. By tying rewards to spending alone, Delta aims to provide premium experiences to its best customers. Furthermore, the importance of loyalty programs and credit card affiliations is evident, as they contribute significantly to airline revenue. Ultimately, it is crucial for individuals to stop seeking validation from businesses and instead make choices based on their own needs and preferences.