Delta Air Lines hosted the Freddie Awards at its Flight Museum in Atlanta last week and extended an invitation to a handful of aviation bloggers for a reception the night before (also hosted by Gogo) at Volare Bistro in Haperville, just down the road from ATL.
Sandeep Dube, Vice President of Skymiles, was at the event but the star of my evening was Karen Zachary, the Managing Director of SkyMiles Global Program Development. I cannot tell you what the food at Volare was like, for I spent more than two hours talking to her and came away with a much greater respect for what Delta is doing while at the same time somber pessimism for the future of our beloved airline loyalty programs.
Zachary has decades of industry experience in a variety of roles. She spent 25 years at Continental Airlines before coming to Delta in 2008 in Network Planning. In 2010, she became Director of Latin America Pricing & Revenue Management before becoming Director of SkyMiles International Partnerships in 2012. Last April, she assumed her current position.
Working in operations, revenue management, and alliance partnerships has given her a unique perspective on managing SkyMiles and she has played an instrumental role in all of the changes that we love…and the ones we hate.
What I loved about talking to Zachary was her candor and her oft brutal honesty. No, I do not have an inside scoop of when Skymiles may be going to a purely revenue based redemption model, but Delta does not either…and that date may never occur, though I continue to believe we must prepare for it.
Delta will continue to be an industry innovator and Delta will do whatever it feels is best to bolster its bottom line. With the best product in the sky (at least among U.S. carriers), it has the luxury of not holding on to an unnecessarily generous loyalty scheme and it will dynamically engage in cost-benefit analyses that will drive any changes to loyalty. That was the message and not a very surprising message either.
But what was surprising was the sober-minded clarity in which it was communicated. Delta is not looking to cut back wherever it can for a few dollars here and a few dollars there — it is seeking to create the most efficient and profitable airline, of which its loyalty program is but one component. That may entail adding more benefits or it may entail further cutbacks. It will certainly mean rewarding high spenders more and budget travelers less. And I take Zachary at her word when she says that the point is not simply to scale back benefits.
What a refreshing contrast to the doublespeak coming from other loyalty programs — the garbage about “creating the BEST program for our members” or “great new ENHANCEMENTS” when they are devaluing award charts and chipping away at benefits. I would never call SkyMiles a consumer-friendly loyalty program, but I do not expect it to hide mountains of bad news behind molehills of good news.
Make no mistake: there was nothing comforting about the conversation. Even without specifics, it is abundantly clear that loyalty programs are on track to become stingier in the months and years ahead. With reduced competition and good economic times, the impetus for generous loyalty programs is eliminated and even as America’s legacy carriers remain wed to the credit card companies who buy their points, their interests–even in cutting back–may actually be mutual. That does not bode well for Award Expert, but I never expected that company to be viable for more than the next handful of years in its current form.
There were no apologies for the removal of Skymiles award charts but there was an apology for the website glitches that are causing awards to misprice. I think Zachary is filled with integrity — I came away convinced that Delta is not deliberately ripping off consumers through the website errors in the story below but that the new mentality is that “award charts are so 1980s” and that more dynamic pricing, even if not purely revenue-based lies in the future.
> Read More: Delta Defiantly Removes Online Skymiles Award Charts
Why the relegation of Korean Air to virtually pariah status (i.e. no mileage earnings)? “Because it made sense to do so.” Why the elimination of stopovers on awards? “Because it cost too much.” What refreshing candor.
I call Zachary the “Most Powerful Woman in the Airline Loyalty Business” in my title for a reason. When Delta acts, others follow — has that not been the constant story of United Airlines? Flush with cash and frankly having no need for a loyalty program (that is my opinion – not one expressed by Zachary or anyone at Delta) it is inevitable that we will see further cutbacks from the “good old days” when airlines had to court flyers through generous loyalty benefits.
It is surprising to me that Delta does not run on its record even more. It has a great fleet, a great group of pilots and friendly FAs and ground staff, great operational reliability, great equipment, a great route map, great partners, great service, and great onboard amenities. Unlike United and American, I really do believe it could survive — and even thrive — with no loyalty program. The thing is — and a saving grace for us price-savvy consumers — is that loyalty programs are still quite profitable and severing that deal with American Express is probably not worth the benefits that would be forfeited.
The great mystery to me continues to be why airlines reward spending (mostly to corporate flyers who are stuck flying their respective airline anyway) rather than discretionary flyers at the margin who will spend a bit extra to be loyal to one airline and fill seats that would otherwise go empty but have no incentive when their frequent loyalty and frugalness translates to no recognizable elite benefit. But I can only conceptualize this from a theoretical construct – not based upon looking at raw loyalty/spending numbers. The trend of rewarding “loyalty” based on spending will squeeze me and many others out of the game for now, but we must accept this reality and learn to adapt to it.
Zachary was a breath of fresh air — earnest, charming, and scary…in a good way. She is the most powerful woman in the airline loyalty business and as Delta rolls out more changes to Skymiles and others follow, you can give her credit for being one of the great innovators.
Our selfie. Karen Zachary, center, with Ben from One Mile at a Time