Delta Devaluation Blog Fight: Willful Mendacity edition

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Instead of enjoying my weekend,  here I am shaking my head at some of the rhetoric coming out of Boarding Area since Friday's bonus Delta devaluation (introducing "interim" redemption rates for travel between February 1, 2014 and May 31, 2014).

First a quick roundup: 

  • One Mile At A Time asserts: "I think that anyone that cared about the value of their miles likely left Delta a long time ago."
  • View from the Wing piles on: "the miles are worth less than in other programs and...the people running the program are, in my view, completely untrustworthy."
  • Delta Points shoots back:  "they are both flat out wrong in this case."
  • View from the Wing makes fun of Rene:  "of the 20 reasons he offers, only a small few are directly related to the frequent flyer program."

The problem with all the participants in this little spat is that they're willfully confusing three different issues:

  1. Is Delta Airlines a good airline?
  2. What is the value of 1 SkyMile?
  3. What is the value of the Delta SkyMiles frequent flyer program?

Trying to answer all three questions along one axis is just going to confuse your readers (and in this case, the bloggers themselves seem pretty confused). 

Is Delta a Good Airline?

Delta's isn't just a good airline, it's the best domestic US carrier. Most of Delta Points' arguments fall into this category:

 

1) They were almost ALL on time and worked
2) Almost all of the reps I interacted with were TOPS
3) The wifi worked on almost all the jets
4) The seats were comfortable
5) The Skyclubs are fine and reps are good there
6) When issues came up I was taken care of well
7) The phone app, while slow, works
8) The seats are being upgraded to nice full-flat seats
9) The food is good
10) The drinks are good (if they get rid of Woodford I will cry)
12) The partners are good
13) The routes and frequency are good
16) Pilots are well trained and professional
17) HUB airports flow well
19) @DeltaAssist works and works FAST
20) Compensation for issues that do come up.

 

      View from the Wing begrudgingly acknowledges these points: "Delta is a good airline, and it has an awful frequent flyer program...in saying they’re good I am grading on a curve (comparing them to US carriers)...Non-stop flights and frequency are worth something and Delta runs a pretty good operation."

      So, they're better than all their domestic competitors (who else should we compare them to? Singapore?), have non-stop flights, good frequency, and they run a good operation? In other words, Delta's a great airline for US travelers who travel primarily...in the US?

      What is the Value of 1 SkyMile? 

      1 SkyMile has a floor value of 1 cent when redeemed for "Pay with Miles," a benefit of their co-branded American Express cards. Economy Pay with Miles redemptions don't earn MQM or redeemable SkyMiles, but first and business class redemptions do (with corresponding class of service bonuses).

      I've never made a Pay with Miles redemption and I hope I never do, but it's worth trying to establish what the lowest possible value of a SkyMile is. 

      Now, the value you get from SkyMiles is going to depend on your redemption pattern. After June 1 (post-devaluation) economy class redemptions to Europe from the Continental United States still cost just 60,000 SkyMiles. Assuming that's a $900-$1,300 ticket (with a free one-way!), you're getting 1.5-2.17 cents per SkyMile. If you book a 125,000 SkyMile award in BusinessElite, you'll get 0.72-1.04 cents in value per SkyMile (assuming you value BusinessElite the same as economy – a silly assumption but we're being conservative).

      However, we've already established that you'll get at least 1 cent in value from a Pay with Miles redemption, so let's say a conservative range in value is 1 cent to 2.17 cents per Skymile, and tentatively put the value of 1 SkyMile at 1.585 cents.

       

      What is the Value of the SkyMiles Program?

      There are three ways to get value from the SkyMiles program as a traveller: elite benefits, earning for flight activity, and earning for co-branded credit card activity.

      The value you put on elite benefits is going to depend on your own personality: I love being upgraded to first class, I love free checked bags (including insanely oversized fencing bags), and I love having competent agents I can get on the phone any time who are willing to go the extra mile to help me. That's tough to monetize, so let's set it aside for now.

      Earning for flight activity is easy: since we've figured out the value of 1 SkyMile, we just need to calculate what rebate value SkyMiles provide on the cost of paid travel. I'll use my own earning activity as an example:

      So far this year I've spent $1,514 on the fare portion of my Delta flights, and earned 25,182 Medallion Qualification Miles. Now, some taxes and fees are excluded from MQD calculations, so let's add a 25% buffer on that cost number, bringing it to $1,893 (being conservative). That means I've paid about 7.5 cents per MQM this year. As a Platinum Medallion, however, I've earned 100% bonus redeemable SkyMiles on every flight flown this year, making my total earned SkyMile haul 50,364. In other words, I paid about 3.76 cents per SkyMile, giving me a rebate value of about 42%: thanks to SkyMiles I earn 42% of the paid value of my tickets back in future travel.

      Finally, you can get value from the SkyMiles program by using their Platinum or Reserve co-branded credit cards. How much value? Well, at the Platinum card's $25,000 and $50,000 bonus thresholds, your overall earning is 1.4 SkyMiles per dollar, or 2.22 cents per dollar (about the same as the BarclayCard Arrival World MasterCard). The Reserve card earns slightly more at its $30,000 and $60,000 bonus thresholds, 1.5 SkyMiles per dollar or 2.38 cents per dollar.

      But as the old infomercials used to say, that's not all, because if you're hitting those spend thresholds, you should be doing so in order to secure Platinum or Diamond Medallion status, where you'll have the option of choosing 20,000 or 25,000 bonus SkyMiles as your Choice Benefit, giving you an additional $317 and $396 in value, without setting foot on a plane or spending an additional dollar.

       "Should" you fly Delta?

      Anyone who tells you what airline "smart" or "stupid" people fly without breaking down the analysis along all three of these axes is either deliberately lying to you or doesn't know what they're talking about. The redemption value, earning rate, and value you put on elite benefits depends entirely on your own travel and earning behavior. There is no one size fits all answer to those questions.

      Personally, next year is going to be my transition year away from Platinum Medallion on Delta. There's no way I'll fly enough paid tickets to make it worth the mileage runs I'd need to secure Platinum status, which is when you are able to make unlimited free award changes and redeposits (and secure that lucrative Choice Benefit). At the end of next year I'll status match to Alaska MVP Gold, and start crediting my Delta and Alaska flights to my Mileage Plan account instead. I'll be sad to lose my first class upgrades, but the Alaska miles are so much more valuable that without high-level elite status on Delta, it's worth it for me to make the switch.