As Delta Grows Stronger, Partner Benefits Suffer

I received more than one email this week asking me if I had seen Delta’s new partner mileage-earning chart. There are some real downgrades in there, and a lot of people are wondering what the heck the airline is thinking. My guess is that as Delta keeps getting stronger, it has decided to start negotiating with partners from that position of strength. And that means some will balk. It might make sense for Delta to do this financially, but it’s making things confusing for travelers and hurting the already-weak SkyTeam alliance.

Think about it this way. When it comes to partnerships, it’s always a give and take. If Delta is partnering with the right airlines, then it can provide much more utility to travelers by offering more flights to more destinations. That means that travelers are more likely to choose Delta, and it’s a positive for the airline. On the other hand, when it has to dole out miles for all these flights on partner airlines, there is a cost to that. Delta could simply absorb that as a cost of doing business, or more likely, it could charge those airlines for the privilege of participating in the SkyMiles program. I’m guessing that regardless of how things were set up before, Delta decided that it was time to start making more money on partnerships. Naturally, some aren’t going to play along.

Delta has decided to push all the blame on the other airlines — it says “each airline determines its level of participation.” That’s silly, of course, since no airline is going to say “Hey man, please stop giving out miles when people fly on us. We hate the business.” Instead, what this means to me is, “We decided to charge more if partners want us to award miles for travel on them. And some airlines didn’t want to pay the price.”

This is absolutely terrible for the mileage-loving traveler, because it seems arbitrary. No traveler cares about business arrangements between airlines. Travelers want to know that if they book a SkyTeam airline, they can earn miles for it. That’s no longer a given. And it’s not even that simple – the complexity is fairly painful with 5 tiers of mileage earning levels. Bleh. Keep in mind these are rules are based on the marketing airline, so if you buy a Delta codeshare operated by someone else, Delta rules apply. Here’s the breakdown:

New Delta Mileage Earning Levels

Just look at this chart and it seems pretty clear what’s happening. The top level is filled with Delta’s closest partners. You have joint venture partners in Air France/KLM, Alitalia, and Virgin Australia. You also have Gol and Aeromexico, which have received significant equity investments from Delta. And you have perennial strategic partner Alaska. I would expect that Virgin Atlantic will end up in this tier too. If Delta travelers fly these airlines, they earn full redeemable miles for flights flown. They also get full elite qualifying miles and they get bonuses if they are elites or if they’re flying in the premium cabin.

The next step down looks to be filled with airlines that respect the power of partnering with Delta SkyMiles, but for a variety of reasons, haven’t opted to go all-in. I’d bet poor airlines like Air Europa, Czech, and Tarom can’t afford to play the game fully. Airlines like Aeroflot and Kenya probably think the relationship is important but just don’t see enough value to get to that top level. I do find it amusing to see Saudia in this group. Remember when Delta proclaimed that it did not intend to have frequent flier benefits with Saudia after the whole “No Jew Policy” fiasco? So much for that. The difference in this tier is that elite qualifying miles, redeemable miles, and premium cabin bonuses will be awarded on a reduced basis, especially in the lower fare classes.

The next group down looks like it just doesn’t really care. I don’t know why, but I view the Chinese airlines as looking at this and saying, “It’s not good to be at the lowest level, so just sign us up for the next cheapest deal so we don’t look bad.” This group is very similar to the second tier in terms of benefits, but there are no elite bonuses and premium cabin bonuses are reduced even further.

The last group is my favorite. These are airlines that are telling Delta to screw off. In this level, no elite miles, no premium cabin bonuses, and no elite bonuses are awarded. You’ll still earn regular redeemable miles in most cases. This is hardly a surprise for an airline like Hawaiian which will get most of Delta’s interisland business via codeshare. No reason to participate beyond that. And Malaysia, well, it’s a oneworld airline now, so Delta is an afterthought. It’s probably not interested. Olympic is a mess, so that’s not a surprise either. But the one everyone is talking about is Korean.

Korean is a major SkyTeam partner and now no elite qualifying miles will be awarded at all for any flights booked on the KE code. I just spent a couple days with Korean in Seoul so I wish I could have asked them about this while I was there. But I can guess how this went down.

Delta: Y’all ‘re gonna have to pay more if you want your travelers to earn elite miles in our program
Korean: No

Now Delta can say that each airline chooses its level of participation, even though Delta clearly had to do something to spark Korean to no longer be willing to participate.

Delta is showing it doesn’t really value the alliance that way it was designed to be valued. The idea was for seamless customer benefits to be doled out for travelers within a single alliance. Delta, feeling pretty good after seeing its profits soar, has been pouring money into its onboard product. With business booming, Delta is now looking for ways to leverage its strong position. That means making partners pay more to get more. Call it Preferred Access. Oh wait, that’s a US Airways term, but you get the point.

I’m guessing Delta has simply decided that SkyMiles doesn’t need to be very generous. AAdvantage and MileagePlus are far better from a traveler perspective, but people keep flying Delta for other reasons. So Delta will continue to find ways to either make SkyMiles more profitable for the airline or it will simply marginalize it even further than it already has.

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