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Feb 28

Why are Delta’s changes important?

In a previous post I noted the big changes that Delta made to its program, with the main change being that miles will now be given based on frequent flyer elite status and dollars paid, instead of based on distance.  The question, why does it matter, has some interesting answers.

First, I do not believe that it will result in Delta giving out fewer miles.  That might seem odd, but since you obviously spend far fewer dollars than miles that you fly, but it’s realistic.

In fact, I believe that Delta made this change to reward high-value passengers and change the behavior of others.  As we know, you may be paying a drastically different price for your ticket than the person sitting next to you.  Yet you will each receive the same amount of miles, which seems unfair to the person paying more.  By changing the method by which miles are awarded, Delta is rewarding its customers based on the value that they bring to the airline’s bottom line, not an arbitrary measure like how far they fly.

Delta is also hoping to change its customers’ buying patterns.  Previously, there had been no incentive to pay a higher price for a ticket, other than a few perks related to bags, seating and the ability to change flights.  The airline is hoping that adding more miles to the mix will bump a few passengers into a higher fare.  Likewise, corporate customers who frequently book their own trips may be tempted either to book a more expensive ticket or book their flight on Delta, if they know it is a costly ticket and determine that the mileage rewards will be better if based on dollars.

Finally, anyone who is close to moving up in elite status will make that much more of an attempt to do so, knowing that it will affect their balances.

As far as I’m concerned, the “break-even” status level, where you would be agnostic in the “miles vs. dollars” debate, is when you reach Gold status, or 8 miles/$.

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