It’s no secret that Delta is running a fantastic operation these days. On-time performance is impressive, and only a tiny number of flights end up canceled. Now, Delta is taking this operational performance and turning it into a guarantee for its corporate clients. If Delta doesn’t beat United and American in operational performance, then it’s going to pay those corporate clients with future credit on Delta. Great, right? It is, though it’s highly unlikely Delta will ever pay a dime on this. It’s really just a great marketing message.
The program is called the Operational Performance Commitment (OPC). And while I wasn’t able to get details on exactly what kind of payouts we’re talking about, this is certainly an enhancement for corporate clients. It’s also a good incentive to get them to perform. Those clients who don’t live up to at least 90 percent of their market share goals aren’t eligible for payout. And those who reach 110 percent of their market share goals will get a 50 percent increase in the payout. So, be loyal to Delta and you have the chance to get paid more.
But let’s be honest, neither American nor United are in any place to challenge Delta’s operational heft right now so Delta isn’t going to pay out anytime soon. Throw Alaska into the mix for those Seattle-based clients and it would be interesting (and costly). This has to be more of a marketing exercise than anything. It’s just another way to reinforce with corporate clients just how good of an operation Delta is running.
The reality is that this program has been structured with so many carve-outs that even if American and United did step up their game, it’s still unlikely Delta would have to pay. Here’s how the structure gives Delta the advantage.
The Payout Requires Underperformance for a Full Calendar Year
Even though the Department of Transportation (DOT) puts out a monthly scorecard on performance, this program runs for a full calendar year. So Delta could, in theory, have a bad month but it could make up for it later. That doesn’t lessen the impact poor performance would have had on its corporate clients during that one month, but Delta has a buffer to avoid paying if that happens.
The Metric Only Counts Domestic Flights
Delta is using the DOT stats available for domestic flights only. So if there was a widebody meltdown (ahem, United) that hurt the international operation, that wouldn’t make a difference.
This Only Includes Controllable Delays
The DOT statistics break delays down into 5 categories. The extreme weather, national aviation system, and security delays won’t count toward the payout, because they aren’t within Delta’s control. It’s only the air carrier and late arriving aircraft delays that will count. (At least, I assume the late arriving aircraft delay counts.) This means that if there is a bunch of weather that messes with a Delta hub, it won’t impact the payout status even though corporate clients will have been inconvenienced.
This Doesn’t Include Connection/Express Flights
Without question, this is the biggest carve-out of them all. This payout only looks at Delta-operated flights. That means the giant Delta Connection network can fall apart completely and it won’t count toward this calculation.
Now let’s be fair here. Today, Delta generally outperforms everyone even if all these exclusions aren’t… excluded. I pulled up delays for June. The delays and controllable delays in the chart below came from the DOT. The Express delays came from masFlight.com. I should note that the Express delays aren’t just domestic, so those regional flights into Canada and Mexico/Caribbean snuck in there.
Yes, Delta outperforms across the board, but it may not always be that way. Delta has built this with enough safety valves, so that it probably won’t ever have to pay. Instead, this is just a great marketing message that reminds corporate partners just how good of an operation the airline is running today.
[Original race photo via Denis Kuvaev / Shutterstock.com]
5 comments on “Delta’s Promise to Pay Businesses if American and United Run a Better Operation Isn’t Much More Than a Great Marketing Message”
Er, they weren’t very fantastic last week, Cranky.
United excelled themselves in finding me Saver award availability within 4 days of departure for my mother-in-law to visit her sick mother in Toronto; tagging on an ‘internal’ flight (YYZ-JFK) to see other relatives for her meant booking Delta as the cheapest option. They cancelled at least two YYZ-JFK flights last Tuesday. Their solution was to book my MiL on an indirect flight (via MSP) on a 7 hour itinerary……..I wasn’t gonna let them do that to a 72yr old travelling alone. On top of that, Delta’s phone support it utter shite – I was on hold, from the UK, for 50 minutes, and never got through – the cost of the phone call was probably as much as a one-way flight to JFK!
Rant over (as if anyone else gives a sh1t!) – just pleased UA didn’t (or haven’t, so far) let my MiL down – over to AC for the return leg on Thursday now….
The YYZ-JFK flights I believe are all on Delta Connection so they wouldn’t apply anyway. I’m not traveling to YYZ much anymore but when I was that one was notorious for canceled flights in the summer due to weather. Often weather on the US east coast keeping the plane from getting to YYZ for me, but regardless it wouldn’t apply in this Delta promise.
This is just to try and push corp clients to use more DL then UA/AA since most large companys have contracts with all three. DL is hoping the bean counters at companies will try a push to get more workers to use DL just in case there is a pay out, they would get money or more money.
We all know DL wouldn’t do this if there was the slightest chance of having to pay out tons of money. They won’t mind a little PR press paying out a few dollars if they had to, but they don’t even that would be slim.
#Airline swag
I think you are spot on about risk Brett. UA’s ongoing slow burn and AA’s integration indegestion + regional heavy network don’t pose a threat in the near to medium term. The Connection carve out is interesting. What % of North American city pairs are accessible with nothing but mainline? My guess is >45%.
Can’t say I know the answer to that, but if you think about corporates in a hub, there’s a ton of Connection there. NYC especially seems like a place where it’s a huge amount of Connection.