Why SaveSkyMiles and Other Campaigns Most Likely Would NOT Be Successful This Time Around
Some FlyerTalk members are rallying to give new life to the SaveSkyMiles campaign, given the “enhancements” implemented by Delta Air Lines over the past several months — such as the introduction of Medallion Qualification Dollars, the reduction of the earning of Medallion Qualification Miles on certain fare classes of partner airlines, the changes to the policy of the Same-Day Confirmed option, and the expiration of your SkyMiles when you die.
A campaign called SaveSkyMiles was launched in 2000 by four FlyerTalk members — RSSrsvp, bdschobel, mikey1003 and EyeFlyDoc — but the movement gained significant momentum in response to changes to the SkyMiles frequent flier loyalty program announced in December of 2002 for implementation in January of 2003 which were widely viewed as unfavorable. Many considered the campaign a success because Delta Air Lines rolled back some of the changes it implemented that were considered unfriendly to the customer — including but not limited to an increase in the price of upgrades, and the loss of complimentary upgrades upon qualification of Medallion elite status.
In fact, it was because of the unreasonably short notice of the announcement of these changes that prompted me to join FlyerTalk as a member. Before then, I had no interest in participating in any Internet bulletin board of any type or kind. I suppose that was a blessing in disguise, as joining FlyerTalk benefited me in many ways — so please allow me to pause for a moment to say “Thank you, Delta Air Lines.”
Anyway, tactics employed as part of the SaveSkyMiles campaign — which lasted a total of 734 days — included:
- The manufacture of buttons with the acronym of Driving Every Loyal Traveler Away
- A “rolling billboard”, which garnered attention at the annual shareholder meeting of Delta Air Lines in New York and at Fiorello La Guardia Airport on April 25, 2003
- Paid advertisements in such publications as USA TODAY
- Attention from the media, such as an article by a reporter for the Atlanta Journal-Constitution
If the campaign was such a success back then, why do I not believe that it would be as successful today — if at all?
There are several reasons why, in no particular order:
- Delta Air Lines is financially stronger today than it was in 2003. Although it announced last week that it is lowering its revenue forecast for the first quarter of 2013, Delta Air Lines is still expected to be profitable — and ancillary fees are part of the reason why Delta Air Lines and competitors are performing better financially than they did ten years ago. In fact, in April of 2003, Delta Air Lines was so financially strapped that it was asking its pilots to reduce their pay by approximately 33 percent while its executives were securing their pensions and increasing compensation as the airline was reportedly struggling to survive.
- Delta Air Lines has different management. Richard Anderson — the current chief executive officer of Delta Air Lines — has greater than 26 years of experience in commercial aviation, which includes executive-level positions at Continental Airlines and Northwest Airlines, where he eventually became its chief executive officer. Compare that to Leo Mullin — the chief executive officer of Delta Air Lines from August of 1997 to January 1, 2004 — who had virtually no experience in commercial aviation other than serving as chairman of the International Air Transport Association, as the bulk of his experience and background was in banking and finance. The very mention of his name is still reviled to this day by both passengers and employees of Delta Air Lines, as many say he drove Delta Air Lines towards bankruptcy and had no business being involved in commercial aviation — let alone be chief executive officer of a major airline.
- Too many customers chasing too few benefits. Genuinely high-value customers are expecting to enjoy more benefits as “the herds thin out” in terms of elite status as a result of the implementation of all of the announced “enhancements.” Those high-value customers tend to believe that they are being denied the benefits which they truly deserve, as the demand for those benefits greatly outweigh the supply due to a number of factors — seemingly more so today than in 2003. The simple concept of supply and demand dictates that if there is too much demand for too little supply, the company can introduce and raise prices with little attrition in terms of customer base. Think about it: when was the last time prices for products or services were reduced as demand significantly exceeded supply? This, of course, is part of the impetus which leads to…
- Monetized benefits and ancillary fees. If you are not a high-value customer and want to enjoy a benefit, Delta Air Lines is betting that you will pay for it — and experience suggests that the airline is correct. Delta Air Lines earned 814 million dollars in revenue from ancillary fees alone in the third quarter of 2011. As much as passengers may not like the benefits and amenities split out — or diminished or even eliminated altogether — from what used to be included in the price of the airfare back in 2003, Delta Air Lines would be foolish to stop now. In fact, the airline appears to be continuing to find new ways to profit from ancillary revenue. However, I would tend to agree with you if you believe that Delta Air Lines could improve how it implements these “enhancements.”
- Affinity credit cards. If you cannot earn and enjoy your benefits and amenities the traditional way — by flying many thousands of miles — you might be more tempted to apply for an affinity credit card. Just pay an annual fee of $450.00 for one of those affinity cards — this one in particular did not exist in 2003 — and earn yourself 10,000 Medallion Qualification Miles after your first purchase and earn up to 30,000 Medallion Qualification Miles and 30,000 bonus SkyMiles each calendar year. You can earn elite status before you know it — and without ever stepping aboard an airplane. Affinity credit cards are another revenue generator for Delta Air Lines.
- Diversification of business. In addition to its cargo business, did you know that Delta Air Lines also owns an employment agency and a vacation provider service, amongst businesses other than passenger service as a commercial airline? Moreover, the Technical Operations Center is world renowned in that it services and repairs the aircraft of other airlines and the United States federal government in addition to the ones owned by Delta Air Lines — and let us not forget about the investment by Delta Air Lines in an oil refinery in Pennsylvania, which was purchased last year to save money on fuel. Whether or not these businesses significantly contribute to the bottom line, diversification helps to not be as dependent on your main business for revenue — leading to having more control over what policies you decide to implement, even if that increased control is only marginal.
- There are fewer competitors in domestic commercial aviation in the United States. Airlines which were operational businesses in 2003 but no longer exist today include Continental Airlines, Northwest Airlines, America West Airlines, American Trans Air, Midway Airlines and Aloha Airlines. AirTran Airways could be included on this list if you consider it a part of Southwest Airlines. Fewer airlines means less of a reason to be as competitive today as in 2003.
- …so to which competitor will you defect? With American Airlines and US Airways likely to undergo a merger of the two companies — and with United Airlines still experiencing fallout from its less-than-smooth merger with Continental Airlines — is there really a better airline to patronize? Perhaps, depending on what its important to you — but what are your other options — Southwest Airlines? jetBlue Airways? Train, bus, boat or car? Not travel at all? Regardless, it seems as though Delta Air Lines is betting that you will not defect to its competitors — direct or indirect. The commercial aviation industry is shaping up to be the classic result of the forces of an oligopoly at work.
For these reasons and more, Delta Air Lines has less of an incentive and would not be under nearly as much pressure to cave into the demands of its customers, no matter how passionate — which is why I do not believe a campaign such as SaveSkyMiles would be as successful today as it was ten years ago. Even the post-bankruptcy stock price per share of Delta Air Lines has been edging closer to its all-time high.
To exacerbate the conundrum of the frequent flier of today, other major airlines enjoy at least some of the same reasons for their success as Delta Air Lines. Just venture into virtually any airline forum on FlyerTalk, and you get the sense that the “grass” is not greener at a competing airline. I do not believe that a resurrection of the “cockroach” movement by frequent fliers of US Airways would be any more successful these days than the SaveSkyMiles campaign would be by frequent fliers of Delta Air Lines — especially as US Airways will most likely become American Airlines anyway.
Please do not misunderstand me — just because I do not believe that a campaign similar to SaveSkyMiles will be as effective today as it was ten years ago does not mean that I am suggesting that you forget about it and discourage you by not trying. I am simply arguing that the conditions which exist today — economic and otherwise — are significantly different than they were ten years ago. Delta Air Lines may want your business, but let’s face it — they are not desperate for it these days like they might have been back in 2003.
Then again, I do believe things happen in cycles. Whatever “gravy train” — or airplane, I suppose — on which the commercial aviation industry may be riding will certainly not last forever. Some customers will remember the unfriendly policies implemented by the airlines and not patronize them due to a perceived lack of trust — and lack of trust can be potentially harmful to a company in a significant way.
However — as with any other company in any other industry — if you are not happy with the changes in policy, the product you experience, or the service you receive, then vote with your wallet and do not patronize Delta Air Lines anymore. If revenue from customers is reduced significantly enough, then Delta Air Lines will likely roll back one or more of the changes in policies, as they did in 2003. If not, that means that the changes in policy are working for Delta Air Lines, which means that they made the right decisions — even if only for the short term, but with an unknown effect on the extent of the future detriment of its customer base, if any. It is that simple…
…so which would you rather have: a struggling airline which “gives away the store”, or a strong airline which restricts benefits to all but its highest-value customers?