Delta Cuts Some Frequent Flyer Fees but Ups Others

Let’s begin at the beginning, by quoting the lede in yesterday’s official news release from Delta:

Delta Air Lines is eliminating award ticket redemption fees for SkyMiles frequent flyer members. Effective immediately, members will no longer pay fees of up to $150 for award tickets redeemed within 20 days of departure.

That’s a significant move on Delta’s part. The airline didn’t disclose the amount of revenue generated by those so-called close-in fees, but it’s considerable. My own best guess is that the fees account for tens of millions of dollars annually.

Which raises the question: Why? Why are they taking the revenue hit? And why are they taking it now?

First, and most obviously, this is a competitive counter to a similar move made last summer by United, which is poised to supplant Delta as the world’s largest airline when it merges with Continental later this year.

But there are larger forces at work here than the skirmishes of warring mega-carriers. Delta is fighting to resuscitate its sagging reputation.

Since the implementation of Delta’s three-tier award chart in September 2008, SkyMiles has come to be viewed as among the least generous programs for award availability. The program is widely derided as SkyPesos, a pointed statement of travelers’ loss of faith in the program’s value.

That perception was reinforced by a recent report on award availability, in which Delta award trips were successfully booked only 12.9 percent of the time, second worst of the nine U.S. programs reviewed.

In short, Delta has an image problem. A serious one, that could have a significant negative impact on the airline’s earnings. SkyMiles, after all, is a loyalty program, designed to maximize not just loyalty but consumption.

The fee waiver is clearly designed to restore some of SkyMiles’ lost luster.

The news release is a textbook case of defensive communications, including the following, which could be interpreted as an acknowledgment of Delta’s award-booking problems:

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We want members to be able to redeem their miles—whether it’s for a last-minute trip or a vacation of a lifetime—and eliminating this fee for our loyal travelers makes doing so significantly easier. We are actively listening to customers’ concerns about the SkyMiles program and are responding.

That statement is followed by a bullet-point list of recent SkyMiles changes—mostly benefiting only elite members and SkyMiles credit card customers.

But then, buried at the bottom of the press release, Delta slips in this:

Delta also has changed award ticket redeposit and reissue fees to make them consistent with fees for non-award tickets. These fees, which have increased from $100 to $150, will continue to be waived for SkyMiles Diamond and Platinum Medallion members.

So, all P.R. fluff and dissembling aside, Delta has eliminated one type of fee, but increased fees elsewhere. No doubt the rush-fee waiver will affect more SkyMiles members than the increased redeposit and reissue fees. Net-net, SkyMiles has taken two steps forward, one step back.

And the crucial question of award availability remains: What is Delta doing to address that issue?

Reader Reality Check

SkyMiles or SkyPesos?

What has been your experience when redeeming Delta miles for free flights? Were seats available or not? And at what price?

What’s your overall assessment of the value of SkyMiles?