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.


45 Responses to As Delta Grows Stronger, Partner Benefits Suffer

  1. DC says:

    So what’s you take, Cranky? Are they visionaries and FF programs really going to matter less in the future, or are they being short-sighted and planting the seeds for more long term loyalists to go elsewhere, especially to Star with SQ and NH for the big spenders?

    I don”t fly as much as I used to and have kind of been half-thinking of a SkyTeam membership. Korean sure isn’t the Greyhound of the Pacific they used to be. And with 3-year visas for US passport holders, SVO no longer the dungeon it once was, and occasionally very attractive discount business class fares, Aeroflot might be worth a try. I’m just so tired of UA. But this post really gives me pause. What’s to say it’s not going to get worse still?

    • CF says:

      DC – It’s really hard for me to answer that, because I just am not sure yet. I’m not a big FF person anyway, so this kind of thing doesn’t bother me. For others, it could be a big deal. But what else are they going to do? Not a lot of people can get the same level of utility from multiple airlines. People in Chicago have a choice. Same in New York or LA. But if you live in Dallas, Atlanta, Philly… what’s your move if you’re unhappy with the hometown airline?

    • I’d agree with disappointment about DL-SU deal. I had been Aeroflot’s FFP before 2011, and then decided to start keeping miles in SkyMiles due to its “your miles live forever” rule and because Aeroflot’s rules had been made worse (your miles no longer live forever if you just pay with a co-brand card, you have to fly). Now again I have to think of where to go…

  2. Tom says:

    As airlines continue to consolidate, partner benefits are no longer that necessary. It will come down to fly us or don?t fly at all. This last memorial day? AAA said that people are driving more for travel than flying because airline fares continue to rise due to reduced competition and fee over load.

    • Todd says:

      As long as there are limits on foreign ownership, partner benefits will continue to be very important to international frequent fliers.

  3. Andrew C says:

    The thing is, with Delta adding the minimum-spend-on-DL-metal requirement to achieve status, I can’t fathom why they’d bother turning the screw on their partners … since you still have to give DL a healthy chunk of your spend anyway!

  4. Michael says:

    What brought you to Seoul? Did you enjoy your time here? Where did you stay and eat etc? I hope you do a trip report! Korea is a magical place that most people never even think about…

    I have lived here for almost two years. I actually hit Silver medallion status last year (by 800 miles) with my annual visit to the US and various vacations. I know silver isn’t much, but for a casual traveler like me it was nice.

    Now I really can’t decide if I should switch to KE Skypass. I won’t maintain silver mileage in 2013. Should I keep my DL number on my flights this year to get my benefits while I can?

    Then again, I am going to the Us in July, so I could get a good start on Skypass….

    • CF says:

      Michael – I did a 72 hour trip with Korean Air to experience all different kinds of things around the airline. It was a pretty fantastic experience to see inside an airline that’s very different from what we have in the US. I’m going to be writing about it extensively.

  5. Ron says:

    Clearly Korean is becoming a lesser partner this coming fall, with Delta starting its own nonstop flights from Memphis to Seoul and Busan.

    • Oliver says:

      Operated by FedEx? ;)

      • Sanjeev M says:

        Good luck getting a SkyMiles redemption on Fedex…

        Seriously though, this is mixed news. On one hand airlines are pursuing their own alliances according to their needs. So the number of “alliances” is about to grow considerably. Yes this means the traditional alliance will decline in size but that is a good thing. Basically instead of airline to airline competition, we have alliance to alliance competition with each alliance having 4-5 strong airlines in its ranks. For instance:

        1. All the Tier 1 carriers mentioned above DL/KL/AF
        2. UA/LH group/AC/CM/Avianca “cream of Star alliance”
        3. AA/BA/CX/QR/JL
        4. EY and friends
        5. EK/QF and maybe one other partner
        6. A Southeast Asia group of the remaining Skyteam (CZ,MU,GA,VN,China Airlines,and KE)
        7. A Africa grouping ET/SA/MS of current Star (possibly TK here if LH doesn’t play nice)
        8. A rest of the small middle East carrier alliance and Saudia
        9. Some sort of LCC alliance in Middle East/India/SE Asia (other than Air Asia)

        Delta’s move here is particularly aggressive, and given the large domestic exposure they have plenty of captive travelers and DL can then bid their alliance loyalty to the highest and most valuable bidders worldwide. Look for the bottom of that pyramid to slowly fall off…

  6. CP says:

    Interesting contrast to Delta’s “sky priority” brand and (with some modification) look being rolled out across many of the SkyTeam airlines.

  7. A says:

    I see this as Delta testing the waters to see how far they can go with diminishing the value of the SkyPeso program while maintaining profits.

    You mention that Delta is pouring $$$ into their on-board product. It’s been a while since I was on a foreign carrier that wasn’t Air Canada. Is Delta’s experience really as-good or better-than Korean or Air France, etc? If so I’m perfectly fine taking Delta across the pond but so far as I know the standard of using a foreign carrier for long haul trips still remains true.

    • SKD says:

      Correct. Despite the hardware improvements of their fleet, the experience is nowhere near as good as that of AF or KE. I personally don’t mind the minimum spend for Elite Qualification as I can see the business reasons for it; but for those of us who do extensive international travel, this is just crazy!

      • RAW says:

        I disagree. I’ve flown business on all three (DL, AF, KE) over the last 12 months, and Delta’s new direct aisle access product in biz is just the best of the bunch, by far. The other amenities (IFE, vanity sets, catering) all compare. Yes, because of strength of product, I’m seeking out DL for int’l biz travel. When were you flying to end up with your observation that DL is somehow inferior?

  8. Eric says:

    I think that there is room for a 4th alliance waiting in the wings. STAR and Oneworld have b*stard stepchildren who do not ‘fit’ into the mold. With global traffic flows becoming less US and western Europe-centric, the need for a US or western EU anchor partner is irrelevant.

  9. DL has learned it does most of its business with KL/AF/AZ via the Atlantic and with it’s own service over the North Pacific doesn’t really need anyone else in those area.

    Virgin Australia and Gol help in its weaker S.America/S.Pacific markets to help fill seats.

    DL doesn’t really need anyone else in SkyTeam so it makes sense to only be ‘friendly’ with its partners that bring in the most business.

    This is something we are starting to see more of isn’t it, EK/QF come to mind. Bypass your alliance partners and do what makes more sense for your bank account.

  10. I was surprised at the reaction to this across the interweb…..

  11. ChiliPalmer says:

    Any chance Korean got so burned by the RGN mistake fares with EQMs credit to Delta, that they saw their outlay to Delta spike and pulled the plug? The RDMs and EQMs probably cost Korean more than they collected entirely on those tickets.

  12. Maarten says:

    I am a MM Diamond Elite and due to my excessive travel have obtained that status through 2015. But over the last twelve months my DL loyalty and praise is being severely tested.

    The DL experience on the ground and in the air is getting really better and better (although I don’t like my feet cocoon experience in their new flat bed Biz Class… but perhaps my feet are just really big…). Overall – it is a really nice product from the priority check in to their reasonably cheerful personnel to their lounges to their technology products on line (although I am still not totally sure I love the new website), in flight, thru mobile (twitter!).

    But the loyalty does not translate. Many have complained about poor availability of seats for miles (either “nothing” or “ludicrous mile-amounts” or “stupid travel time/lay-over time”). Add to that the new rules for maintaining levels and now these new partner rules.

    It may well be that DL feels strong (and so they should… as a business they are delivering really good results). And perhaps this is indeed the beginning of the end of mileage programs as we used to know them, and DL is simply the first one out of the gate. But for me, I feel very drawn to AA at the moment.

    Their product is finally catching up, they seem to care more (I feel more loved) and their availability of seats seems better, more affordable for the amounts of miles needed, and the US Airways merger will make them (hopefully…. allegedly…) even more attractive.

    DL: if you are listening, I am an admirer of your business. But as a FF I am not an admirer of your approach.

  13. Rob Marais says:

    One would think that DL would want to strengthen alliances in Asia due to weaknesses in its schedule there, but apparently that is not the case. Bad on you, DL!

  14. Neil says:

    As a former Oneworlder, now Skyteam due to work, I gotta be honest and say I don’t get the comments about KE service.

    Am in the middle of a trip currently, heading back to JFK from BKK tonight. Last week the 777 was shabby and the seat was narrow. And while the bed upstairs on the A380 was fine, the reclaiming position wasn’t comfy. The food was pretty mediocre, at times bad. And the cabins on KE always seem warm to me.

    I’ve flown a lot of CX and BA in F and C. And KE is not at all like them.

    And please don’t make talk about the KE JFK lounge.

    • CF says:

      Neil – My experience on Korean was great this week. I was on the A380 overwater so that is admittedly somewhat different than what you get on other flights. But I found the biz seat to be really comfy and the onboard experience great. Lots of people have talked about the cabin being warm. I asked about that – it’s apparently a physical or cultural issue of some sort. Koreans seem to think that the cabin is freezing. Americans disagree. I hate that the A380 has no personal vents – that would be the best way to offer some level of variability. But instead, it gets a little warm. Though it wasn’t horrible for me until I made the mistake of having the udon noodles!

  15. Neil says:

    Reclaiming = reclining. Thx Apple.

  16. Jim says:

    Frequent flier programs are a way to stop customers from switching to other airlines. As airlines consolidate and it becomes harder and harder to jump ship, frequent flier programs become less important and airlines can no longer justify the expense.

  17. Jay F. says:

    My experiences with Korean Air lead me to conclude that for a frequent traveler in Economy they are the best choice. FA have a genuine disposition to serve and help, having requested the special seafood meal was served shrimp, scallops and smoked salmon; open bar, AVOD with hundreds of choices, 34″ pitch and bathrooms cleaned on the hour. Their A380 service is superior to older aircraft in their fleet. Their Malaysian phone customer service is powerless to make decisions in case of unforeseen circumstances arising. If one purchases the lowest fare, expect to be reminded constantly that any changes incur steep penalties and are at the bottom of the priority pile.

    Delta’s phone customer service shows more training in problem solving. The 747 business class has a seat close to AA and Cathay’s product. Cabin service is usually diplomatic and cordial. The few occasions that I have noticed a problem, a few kind words and expressing gratitude for their hard work has done wonders to improve attitude. Managers at check-in and gate provide resolution to complicated situations quickly and voice a desire to right any wrongs on the spot. Hope this helps anyone pass those 12-15 hours on the air easier.

  18. I think you nailed, bravo! Delta is pushing to see what it can get away with…been the modus operandi for several years.

  19. nealo says:

    Great analysis Brett. I understand that DL is being aggressive in fixing the ‘broken’ model of FF programs rewarding based on miles flown vs spend. What perplexes me is the communication, or lack of it. They clearly have a roadmap for where their loyalty program is headed. Why drip all these announcements out over a prolonged period of time, some with little or no notice? It’s not customer friendly and a stark contrast to the customer service onboard and on the ground. They should be ‘training’ or leading their loyalty customers to the behavior they desire rather than changing the rules in confusing drips and drabs.

    • CF says:

      nealo – I think they’re afraid to pull the band-aid off because it might hurt. So they’re going to just keep peeling it slowly but surely even though it’s like death by a thousand paper cuts. I’m with you – I wish they’d just articulate a true vision and then do it all at once.

  20. Will-yo says:

    While not on par with the Delta move, UA changed their policy last year to no longer count miles on non-UA flights in their ‘million mile’ program. When this happened it was especially disappointing to me since I would fly LH to Europe out of LAX. Now I stick with UA only to ensure long distance trips count towards that million mile program. Probably what UA wanted with this policy.

    Unfortunate because the a major reason to partner with airlines is the long haul flight coordination that comes with it. I won’t fly LH or any other Star Alliance partner any longer.

    Sadly, LH will accept UA Global Upgrades but why even fly LH now. Feels to me like a schizophrenic relationship. Tight but not that tight, just depends on who is the giver.

  21. SkyPesos strikes again!

  22. CF says:

    For those who are interested, I asked Korean for a statement about the change. Here it is:

    Korean Air has an incredibly strong, loyal customer base and premium service offerings that will continue to attract new customers to our airline. So we’re optimistic about this change.

    Our relationship with Delta spans more than a dozen years, and relationships change over time. Korean Air is now the largest Asian airline in the Americas and largest transpacific carrier, rankings we did not enjoy when we started our relationship with Delta.

    Korean Air has a very long-term point-of-view and, in the long-term, we know all relationships evolve. That’s why, over the past decade, we have grown our own strong presence and network in the Americas: 11 gateways, over 200 flights each week between the Americas and Seoul (if you count each way.)

  23. Harold says:

    Living in Seoul, I fly Korean regularly to San Francisco and Dulles, but also Jakarta, Istanbul, etc., and KE’s economy product, as Jay F. said earlier, is leaps and bounds above domestic carriers (the level of attentiveness and hospitality offered by the flight crew is only the start–and on long-haul flights, I’ve watched the stewardesses clean the bathrooms every 15 minutes). Some things about the company might seem strange if you’re culturally American, but if you are willing/able to “think Korean,” the airline can be easy to navigate. And things get even better once you get elite status: in a hierarchized culture like Korea, elite status opens doors.

    • Harold says:

      So, I’m very excited to hear about CF’s experiences at ICN!

    • Michael says:

      As a daily reader of the blog, I just want to say I am thoroughly enjoying the focus on KE right now! How much, you aren’t asking? I actually woke up early after a night of soju to add my extra fifty cents.

      I am a 29 year old English teacher living in the Seoul “suburbs” (Gunpo-si, Gyeonggi-do). I fly strictly for vacation 3-4 times a year. I’m not at the financial level to buy business class. I only have Delta Silver status from last year’s vacation travels. It won’t happen again in 2013 calendar year (short by maybe a few hundred miles).

      Side note: KE is perhaps the only airline where you can ask to get upgraded and they do it… on their 747 Japan flights (my success was GMP-KIX). It’s a trick I learned from FlyerTalk. As a airline nerd like the rest of us, you can imagine how thrilled I was to sit on the upper deck of said 747…even if only for 2 hours with no real noticeable service difference.

      Anywho, I am one of those “strongly loyal” customers KE talks about. Harold is also right about their economy product. Even with my healthy income (read: normal middle class in America, but “doing well” for a Korean of my age), I spend the extra money on KE. I always manage to buy their Super Savers for peak vacation travel (move quickly) and those fares are still fare more flexible than Delta’s sale fares. You can refund the ticket for only 50,000W (45 USD or so) and can change the return routing on the ticket for the same 50,000W. Certainly better than a 250 USD option to do anything.

      Case in point, I could’ve flown Cebu Pacific to MNL this summer (peak vacation time for Korea) for 400,000W but I waited and ponied up the 645,000W sale price (560 USD or so, I believe) for Korean Air. The legroom, the service, the culture and even the airline food and movies are all worth it to me. It’s just a 4 hour flight, but 34″ pitch can’t even compare to 28″ pitch. For my annual long haul to ATL, there is no question. KE is required.

      As I have Delta Silver Status, I only get an extra bag, priority seats (Front half of the plane) and early boarding. I also have to maintain Delta status yearly…which is now impossible as Delta doesn’t fly intra-Asia via NRT from ICN anymore. My only Delta option now is ICN-DTW-ATL once a year..certainly not enough to hit any status.

      This is why I think it’s time to take the switch to Skypass. As a casual mile collector, it feels weird to ditch my 50,000 skymiles I have built up, though. I want to make it bigger, but….

      Their program is staggered differently, but I think it may even be better. 50,000 gets you elite status (no matter how long it takes you to hit it) and you just maintain that every two years with 30,000 more over said period. Easy to do with one RT to ATL and three other vacation trips to SE Asia every year. The next level of elite is 500,000 miles. A jump, sure, but maintaining standard Morning Calm elite status is much easier year to year.

      Just with that simple status, you get the early boarding, dedicated check in, priority seats, etc…and even lounge access (4x every two years). They are also wont to upgrade you as a Morning Calm member without any hesitation. My boyfriend has held MC status for just a year or two and gets upgraded at least once a year….all he has to do is check in and they upgrade him no questions asked…solely because of his status.

      I’m just having a hard time parting from my measly FO benefits I earned for this year. Nothing to most, but it’s something to me….

      BUT 14,000 RT miles on Skypass would be a good start for my Morning Calm quest.

      Thanks for letting me share….

  24. Harold says:

    Michael: Ditto! We’re in similar situations. Get the Skypass Visa from US Bank. If you get the Signature card, you get two lounge passes / year, and they waive foreign transaction fees. Of course, a Skypass account can be based in only one country, so you’d need a US account. But yes, I can’t afford Prestige Class, so priority for exit rows and bulkheads is a must.

  25. Harold says:

    Michael,

    Ditto ditto ditto! Also, as you probably know already, if you have a Signature Skypass card, you receive two lounge passes / year, double points for KE purchases–and, US Bank waives the foreign transaction fees, which is very helpful for foreign travel.

  26. Trent880 says:

    So the DL-KE JV should be online in no time right;-)? I understand the give and take of alliances but DL just 86’ed its biggest and best Asian partner, at a time when DL’s own Asian network is in a state of flux, looking for a long term strategy. Odd, to say the least.

  27. Marly says:

    “People keep flying [Delta] for other reasons.” Cranky, could you please elaborate on this more?

    • CF says:

      Marly – Well, people generally pick their airlines first by price and schedule. But as I mentioned, Delta has been spending a lot on upgrading its onboard product as well.

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