Delta’s availability tax AKA how American and United are letting them get away with frequent devaluations

Sometimes I wonder how much Delta pays attention to what their legacy US competitors are doing. They tend to lead rather than follow, which suggests a certain insularity in their thinking; in other words, they know their customers well enough to know what they will and won’t tolerate, regardless of whatever American and United are up to. On the other hand, though, industry consolidation produces a bandwidth of acceptable behavior, and the game that everyone seems to play is to figure out how to operate on the margins of this bandwidth.

Supposedly, Kierkegaard’s father wanted to test his son’s intelligence, so he told him that he wanted him to be the third best student in his class. Being number one only requires outpacing all your other classmates; being number three is a greater challenge, since you need to adjust your performance by forecasting what #2 and #4 will do. The recent behavior of the big 3 legacy carriers suggests they’re all vying to be little Kierkegaards, making sure they aren’t too much better or too much worse than anyone else.

With that in mind, I can’t help but think that Delta calibrates what they can get away with by looking at United and American. (This is true for the other two as well, although this post is about Delta, hence my focus on them.) Here’s where I’m going with this: Gary Leff published an article about yet another Delta devaluation, which have become depressingly common, and I’m wondering how much this has to do with the piss-poor availability on United and American lately.

In general, domestic first class award availability on Delta is better than United and American, because Delta’s lack of a published award chart permits a range of pricing beyond just saver and standard awards. (A while back, I wrote about the same thing regarding how Flying Blue prices economy awards, meaning it’s often much easier to get intra-Europe economy awards directly through Flying Blue than it is through Delta.) Of course, this sucks because the lack of a published chart enables Delta to pull all kinds of shenanigans, including exactly the type of no-notice devaluation that Leff points out in his article.

I’m not defending Delta here, although I don’t know that I think Delta’s devaluations are any worse than United and American’s refusal to open up domestic first class award seats. Charts are great and all, but they’re dependent on availability, and consistent lack of availability is a bait and switch. Delta tells you up front that you won’t know how much you’re going to pay until you book your flight, whereas American and United tell you up front while making it all but impossible for you to book at that rate. Seen this way, Delta’s program could be seen as a savvy combination of a traditional program with chart-based pricing and the kind of revenue-based system disingenuously marketed by the Capital Ones of the world to convince people that traditional frequent flyer programs are too hard to bother with.

Leff illustrates his article with this photo, as evidence that 30k is the new 25k (and that Delta’s hidden award chart is getting fuzzier by the day).

lowest30k.png

However, I look at this and say “holy shit, that’s a LOT of lowest-level first-class availability on a hub-to-hub route!” Let’s look at a couple other hub-to-hub routes that I’m choosing at random right now…

unitedSFOIAD
BTW, those premium cabin saver awards are mostly insulting mixed cabin bullshits, with 5 hour flights in economy and short hops to IAD on regional jets.

unitedSFOIAH

americanLAXCLT

americanLAXMIA

(In defense of American, some of their hub-to-hub routes do have pretty good availability, including LAX-ORD and LAX-DFW. However, in general the longer the distance, the worse the availability gets. Also, I excluded premium transcon routes here, since all three carriers mess with variable pricing and sporadic availability on these routes.)

So anyway, my point is that while the principle behind Delta’s oft-changing pricing is obviously craptastic (“Loyalty programs should be loyal” indeed), in practice, Delta’s pricing is lower on a long-range hub-to-hub route than either American or United. Yes, Delta jacked up the price by 5000 miles, but United and American are effectively doubling their prices by forcing you to book standard awards on these types of routes. In this way, the 5000-mile surcharge becomes an availability tax… due to United and American’s lack of availability, if you want saver seats at all, you’ll have to pay Delta a little extra.

I suppose the bottom line is that Delta isn’t unique in being disloyal to their loyalty program members – their tricks are aided and abetted by their competitors. If United and American offered gobs of saver seats on their flights, Delta would look bad in comparison. Instead, they’re able to make the case that even after they jack up prices with no notice, they’re still the best program for domestic awards.

What do you think? Is Delta uniquely terrible, or are they merely exploiting the award seat scarcity created by their competitors? Pushing this theory a little further, Delta just proved again that they’re the smartest people in the room – as United and American restrict inventory to [presumably] save money, Delta is in position to siphon off their frustrated customers at the same time that they charge those customers more.

 

2 thoughts on “Delta’s availability tax AKA how American and United are letting them get away with frequent devaluations”

  1. Delta’s major competitors aren’t United or American. A majority of their miles are sold to third parties. Their largest customer constituting at least two-thirds or frequent flyer revenue is American Express.

    Their Delta Amex is competing with the entire slate of Amex products, and with Chase Sapphire Reserve.

    30k one-way LAX-ATL in domestic F look good to you? You’re still better spending on a Sapphire Reserve or an Amex Blue Cash Preferred, earning at a faster rate, and using pay with points – forget even the leverage of transferring to a frequent flyer program.

    Delta [and yes United and American] are slow to realize that they ostensible bank partners are engaged in a game of creative destruction. Rather than devaluing their points, they need to INCREASE value in order to remain competitive when their competitors are spending ten figures more on rewards than a year ago.

    They aren’t the smartest in the room trying to maintain and even grow their better than 50% margins while bank issuers steal their margins.

    The simplest thing they can do — and what matters as everyone chases ‘millennials’ — is trust. The constant game of hide the price doesn’t engender trust, it won’t attract the customer segment everyone wants.

    I wouldn’t call them uniquely terrible, they have pretty terrible competitors, but they’re missing the boat if they think their competition is merely United and American.

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    1. Thanks for all this. It’s interesting to bring the credit card angle into it, since Capital One has built a years-long marketing campaign on the idea that frequent flyer programs are too hard to use. My point is that for many consumers, the breach of trust is worse at American and United, where you can’t redeem points *at all*.

      I talk a lot on the blog about how I’d love to get my hands on some insider data, and this is a great example. I’d love to see co-brand card usage trend lines through the last 3-4 years to see if Delta is losing out to their non-airline competitors (proprietary rewards currencies, as you noted). You and I and everyone who reads this blog knows that if you want to earn Delta miles, then you should use an Everyday Preferred card. But I have friends who fly Delta all the time, and it just makes sense to them to the Delta Amex for all their spending. I’ve talked and talked about how easy it is to transfer Membership Rewards points to Delta, and their eyes glaze over.

      What’s the norm? How much share of the credit card market is Delta losing by people swapping out Delta Amexes for more lucrative cards? I’m not asking that as a rhetorical question – I’m actually curious.

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