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Dec 11

How Delta Rescued Diamond Medallion Status

As you know, this blog is tailored to novices in the frequent flyer world but, every so often, it’s fun to get a little deeper on a particular subject. Today, I’ll talk about Delta’s Medallion program and its top status, Diamond Medallion, in particular. If you need a quick review of what elite status is, you can refer back to this post.

Was Delta’s Diamond Status Too Easy To Earn?

delta, medallion, diamond

Status is earned by flying a certain number of miles or number of segments, combined with spending.

While top tier status at each of the major airlines has its own advantages, Delta’s Diamond status is arguably the most valuable. In addition to the standard upgrades 120 hours prior to departure and 11 miles per dollar spent, Diamond earns you the ability to roll over unlimited Medallion qualifying miles (MQM), a free Clear membership and several choice benefits, among other perks. Earning Diamond status required flying either 125,000 status miles or 140 segments, in addition to spending $15,000 on Delta (Medallion qualifying dollars, or MQD, which was the ticket price minus any taxes and fees) or earning an MQD waiver by spending at least $25,000 on a Delta American Express card.

The problem was that achieving Diamond status had become too easy (a relative term). Too many Diamond elite members devalued the status for everyone, in particular, making it that much more difficult to get free upgrades.* 125,000 miles isn’t exactly simple, but it is doable, since many of the Delta credit cards offer you miles toward elite status if you spend enough. On the other hand, spending $15,000 on tickets was out of a lot of people’s reach, so the waiver was a huge benefit.

Volume to Value

Almost 20 years ago, Kellogg’s CEO (and future Secretary of Commerce) Carlos Gutierrez implemented a policy called “volume to value.” Instead of focusing on how many boxes of cereal the company sold, it spent more energy worrying about how much profit it could generate from each box. Making a dollar on one box of cereal was much better than selling three boxes that only generated 25c of profit each.

Earlier this year, Delta made a similar decision. The airline doesn’t generate profits based on how many miles its passengers flew, but rather, how much money they spent.** Thus, it wanted to tie elite status to that number, as well. Spending $25,000 on your American Express credit card is not nearly as profitable for Delta as when you spend $15,000 on tickets. So Delta made an adjustment. Starting next year, you can still earn status for 2019 by spending the $15,000 but, in order to get the waiver, you need to spend $250,000 on your Delta American Express card (or combination of more than one). Ouch. That’s ten times the former number and puts it out of reach for most consumers, particularly since American Express has been cracking down on Manufactured Spending.***

Loyalty Or Value?

As a publicly traded company, Delta has an obligation to maximize profits for its shareholders, and it decided to differentiate between its own views on loyalty and value (which may or may not differ from how customers view those terms). In other words, Delta is placing significantly more value on customers who fly fewer miles but are willing to pay more to fly them. There’s a risk, of course, that the airline is only able to sell a few expensive tickets and can’t generate incremental revenue in the back of the plane, but it’s unlikely. If you’re reading this now, you care more about miles than 99.99% of the population, and most people don’t make their flight decisions based on what they’ll earn (and shame on them for that).

And It’s Probably Good for High-Value Passengers

If you spend a ton of money on Delta, the change to the waiver is good for you.

  • Obviously, you’ll have less competition for upgrades. Making it harder to achieve Diamond status can only lower the total pool size, and I believe that it’s a pretty significant decline. Delta will still sell upgrades, but those holding out for a freebie will find it a bit easier.
  • It reduces the risk of “benefit devaluation.” Give everybody an easy shot at Diamond status and the valuable upgrades and choice benefits that come with it and Delta will be tempted to reduce those options.
  • Platinum is still a strong status and maintains the old waiver. Platinum is one step below Diamond and requires 75,000 MQM plus either $9,000 in spending on Delta or $25,000 on the credit card. Thus, it’s still “easy” to earn some great benefits, while maintaining the integrity of Diamond status.

Otherwise…

Vote with your feet. American and United only require $12,000 in airline spending for top-tier status, but the former has no waivers at all and United only offers a credit card spending waiver for its bottom two tiers.

And if you’re not in a position to hit the top tier anyway, I’d avoid the various elite battles altogether. Status is great to have, but it’s rarely worth spending thousands of dollars to leap up a tier. There’s always somebody above you.

 


*Delta hasn’t made it any easier to get those free upgrades, regardless of how many Diamonds are on a flight. It has done a better job than its competitors of monetizing upgrades, figuring that earning a couple of hundred dollars from somebody buying an upgrade at a discount is better than giving it away for free.

**From the beginning, the airlines would have been better off awarding points based on how many dollars you spent rather than how many miles you flew. Any program created in the past ten years, airline or hotel, has been based on spending.

***Beginner’s Hint: “Manufactured Spending” is a way of spending money on your credit card to buy cash equivalents, thereby earning miles while being out of pocket as little as possible. The classic example is using your credit card to buy Visa gift cards, which you would then convert to cash by buying money orders. You’d only be out of pocket for the fees, which are usually far less than the value of the miles that you earn. I spend almost no time on MSing, but two good blogs that do are Frequent Miler and Point Chaser.

 

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