ATLANTA -- In what marks a fundamental shift to its frequent-flier program, Delta will become the first major network carrier in the U.S. to have passengers earn award miles based on the fare they pay, rather than how far they fly.
Starting today, members of Delta's SkyMiles program who book a trip taking place after Dec. 31 will accumulate miles under the new model.
No longer will a flier who pays the cheapest fare in coach be able to earn the same number of miles as a fellow passenger who purchased a perch in business class. Instead, the flier who spends more for a first-class seat or perhaps a last-minute business trek will
also earn more.
"The current distance-based model was developed 30 years ago when fares were highly correlated to distance,'' says Jeff Robertson, Delta's vice president of SkyMiles. "We think the spend-based model allows us to invest more in our premium customers and
is right for Delta today.''
In making the change, Delta is shifting toward a model used by younger, lower-cost airlines such as Virgin America, JetBlue and Southwest, and abandoning the traditional
way it and the other so-called legacy carriers allowed fliers to earn their way toward free trips.
Depending on their program status, Delta's roughly 91 million frequent fliers will earn between five and 11 miles per dollar of their base ticket price, plus airline surcharges. They can earn an additional two miles per dollar if they book the trip with Delta's co-branded SkyMiles credit card.
"This is huge ... and that's because this is the first time that we've seen one of the
major U.S. carriers go down this road,'' says Tim Winship, publisher of FrequentFlier.com.
Since making their debuts in the early 1980s, airline loyalty programs have become one of the industry's premier perks. But in 2007, Virgin America became the first U.S. carrier to tie the earning of loyalty points to ticket price instead of distance. JetBlue and Southwest followed. Travel-related industries such as hotels and credit cards have long awarded points or miles based on dollars spent.
Altering a loyalty program, however, can be an expensive and daunting task, with a carrier having to makes changes to everything from its reservations system to marketing, Winship says. Some passengers may prefer the old way.
"If you are someone who has been able in the past to accumulate large numbers of miles from long, cheap trips, then you are going to be unhappy with these changes," Winship says.
Still, Delta is likely betting that the additional revenue it stands to gain from its bigger-spending frequent fliers will be worth it. "That's the calculation,'' Winship says. "I think they're right.''
Delta will also make other changes to its program, including boosting the number of seats that can be redeemed for the lowest amount of miles, increasing the number of reward tiers and allowing passengers to redeem one-way reward trips starting at 12,500 miles.
"What they're trying to do is make the airline better and SkyMiles program better for those who spend more,'' says Henry Harteveldt, travel analyst for Hudson Crossing. "But Delta's not ignoring the casual traveler."
The airline emphasized that what it takes in miles, frequency of travel and cash to gain elite loyalty program status will not change.
Winship and others think it may be only a matter of time before the remaining legacy carriers, United and American, also switch to an earnings model based on money spent rather than miles flown.
"I think now that Delta has done it, it becomes a question of now can we afford not to do it, for competitive reasons,'' he says. "If we include the low-cost carriers, and then we add Delta to the mix, this becomes ... the industry standard.''
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