Questioning Delta loyalty

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Over the past two years, Delta has been killing off its loyal following one paper cut at a time:

Things have been so painful that Rapid Travel Chai, who has been earning Delta’s top level Diamond status through flying, has jumped ship to United.  Many others have (probably wisely) declared their free agency and have given up on pursuing loyalty with any program.  That frees them up to always seek the best flight and best price when they travel, regardless of the servicing airline.

What about me?

I live about a half hour drive from the Detroit airport, which is a Delta hub.  With a handful of exceptions, if I want to fly anywhere direct, I have to fly Delta.  And, honestly, I find the experience of flying Delta to be pretty good.  Wi-fi is available on most flights.  Their on-time percentage is good.  And, I’ve experienced 100% success in being routed through the TSA Pre line since they began beta testing it about two years ago.  And, of course, it doesn’t hurt to have high level elite status for early boarding and upgrades.

The Detroit airport has two modern terminals.  The McNamara terminal is all Delta (and a few partners).  The North terminal is the everyone else terminal (American Airlines, United, US Airways, Southwest, etc.).  Even though the North terminal is very nice, it isn’t yet equipped with TSA Pre.  And, the only lounge is Lufthansa’s where even an Amex Platinum card doesn’t grant you admittance (and, its not all that great anyway).

So, part of the reason I like flying Delta is simply because I prefer flying from the McNamara terminal.  However, once the North terminal adds TSA-PRE, most of that preference will go away.

Of course, I could give up my elite status, but still fly Delta when it’s convenient.  Thanks to Global Entry, I would still go through TSA Pre.  And, as long as I hold an Amex Platinum card, I could still enter the Delta SkyClub lounges.  And, if I keep one of my Delta credit cards, I would still get relatively early boarding for those times where I need to ensure available overhead space for my bags; and in the rare instance where I want to check my bag, that would be covered too.

Abandoning status sounds perfect, right?  Then there’s the question of redeeming miles…

Redeeming miles

Delta’s award chart offers three prices for each award: Low, Medium, and High.  I always try to redeem miles at the low level to get the most value from my miles, but low level awards can be extremely difficult to find.  With high level elite status, though, I’ve been able to make it work time and again.  As you move up in the elite tiers, more low level award space becomes available.  And, once you reach Platinum status (which requires 75,000 Medallion Qualifying Miles per year), all award changes are free.  This is terrifically helpful because when I see a low level award that I might like, I snag it just in case. 

Platinum status helps, not just in finding award space, but also in maximizing value from awards.  I’ve written before about options for taking advantage of Delta’s flexible award routing rules to get extra value from your miles.  For examples, please see “Fighting Delta’s devaluation,” “Delta SkyMiles: Value from domestic flights,” and “Delta: two one-way awards for 12,500 miles.”  The tough thing about booking these awards is that they require a lot of up front planning.  If your dates of travel are not yet finalized, you might not be able to take advantage of these tricks.  If you have Platinum or Diamond status, though, you can make changes for free.  I regularly add a free one-way to the end (or beginning) of an award even if I’m not quite sure when I’ll fly.  Once my plans firm up, I look for award availability and then call the Platinum desk to make the necessary changes at no cost.

Opportunity cost

In order to maintain high level elite status with Delta, I spend $110,000 per year on my Delta credit cards (see “Mileage running, from home“).  In exchange, I earn 160,000 SkyMiles and 50,000 Medallion Qualifying miles (MQMs).  If I were to spend $110K on a 2% cash back card instead, I would earn $2,200 cash back.  Even better, if I used a Barclay Arrival card I would earn $2420 towards travel thanks to its 10% rebate in points on travel redemptions.  The cost to manufacture $110K in spend is irrelevant since it would be the same amount with either card.  The fact is that I would be $2200 to $2420 ahead with these cards vs. Delta cards.  But, I would also have 160,000 fewer Delta SkyMiles.  So, the question really is, am I getting significantly more than $2420 in value from those miles?  If not, I should stop playing this loyalty game.

Note that I didn’t include the card annual fees in this analysis because I think that the Delta card fees, while very high, pay for themselves due to benefits such as companion tickets and more.

When I look back at awards I’ve booked in the past couple of years, I see domestic coach round-trip flights booked at 25K miles, first class round-trip flights booked at 45K miles, hybrid trips with coach one way and first class the other for 35K miles, and business class trips to Europe booked at 100K miles (soon to be 125K).  So, let’s estimate the value of each type of award.  I’ve inflated values a bit to account for the fact that I usually get an extra half trip out of each award thanks to flexible routing rules:

  • Coach round trip 25K award. Estimated value: $400.  Value of miles = $400/ 25K = 1.6 cents per mile.
  • First class round trip 45K award. Estimated value: $750.  Value of miles = $750 / 45K = 1.7 cents per mile.
  • Hybrid coach/first 35K award.  Estimated value: $600.  Value of miles = $600 / 35K = 1.7 cents per mile.
  • Business class to Europe 100K award. Estimated value: $2000.  Value of miles = $2000 / 100K = 2 cents per mile.
  • Business class to Europe 125K award.  Estimated value: $2000.  Value of miles = $2000 / 125K = 1.6 cents per mile.

As you can see above, I tried to keep the estimated value of each award quite conservative so as not to overestimate the value of the miles used.  Even so, the estimated value ranges from 1.6 cents per mile to 2 cents per mile.  That means that the value I get from 160,000 Delta SkyMiles should range from $2,560 to $3,200.  That range is higher than I would get from a 2%-ish card, but not by a very large margin.

Refundable ticket premium

The award values I estimated above don’t count a very important aspect: as a Platinum elite member, I can cancel the tickets any time (up to 72 hours before the flight).  So, the tickets I buy with miles are essentially fully refundable tickets and are therefore worth a premium.  Some people I know don’t value refund-ability very highly, but I do.  I have many times scrapped plans within a few weeks of a trip for one reason or another.  So, for me, I think it is fair to value Delta awards 25% higher thanks to this feature.  Given that, 160K miles is, to me, worth $3200 to $4000 in travel.  That’s a very nice premium over what I would get with a 2%-ish cash back card.

Category bonuses

The analysis / rambling above shows that, for me, manufacturing $110K of spend on Delta cards makes sense when compared to spending the same amount on a 2% cash back card.  However, if I spend $110K on Delta cards at merchants where I could have earned a nice category bonus with other cards, then the conclusion goes out the window.  For example, if I earn 2X Ultimate Rewards, $110K of spend would result in 220K points which are easily worth more than 160K SkyMiles + elite status.  Or, if I earn 3X FlexPerks points, I would get a total of 330,000 points.  With a conservative value of 1.5 cents each towards flights, that would equal nearly $5,000 in travel.  Or, if I earn 5X ThankYou points, I would get a total of 550,000 points.  At a value of approximately 1.3 cents each towards flights, that would equal over $7,000 in travel!

Elite perks

While many elite benefits are mimicked simply by carrying the right credit card, there are still some benefits I would miss if I gave up my status.  Probably top of list are the free upgrades to Economy Comfort and the occasional free upgrades to First.  Free “have one on us” snacks and drinks are nice too.  Also, I know it’s irrational, but I simply like the feeling of being Platinum elite.  And so, yes, I’m still willing to go an extra mile or two to keep my status.

Conclusion

Continuing my Delta loyalty through high spend makes sense only if I can accomplish that spend in a way that does not impact my ability to earn category bonuses with other cards.  Even then, it is very likely that Delta will continue to devalue their SkyMiles program over time.  So, in the long run, this is probably a losing game. 

I’ll see this year though by completing my spend targets as previously planned.  At the end of the year, though, I’ll have to re-evaluate this approach.  It might then be time for me to give up on Delta loyalty or at least to map out a different strategy.  If, in the meantime, Delta makes more negative program changes, my decision will be much easier.

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