Delta To Start Awarding SkyMiles Based On Spend (Not Flown Miles) January 1, 2015

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Delta is going to make a public announcement later today about the major changes coming to it’s SkyMiles program starting on January 1, 2015.

Edit: This post has been modified based on the new information received from Delta.

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I have previously written about the Evolution of the SkyMiles program (read more here) that was delayed, but apparently is now ready to go live.

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You can read more about this on WSJ’s Marketwatch here.

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Delta now has their website up for the changes expected in 2015 and you can access it here.

Here’s PDF from Delta explaining the changes:

Download (PDF, 1.41MB)

Earning Miles

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Delta now has mileage calculator up on their website that you can use to calculate the number of miles you earn for your tickets in 2015 and what they earn today. Be prepared for a surprise!

Under Delta’s new rules, scheduled to be announced on Wednesday, passengers with no elite status in SkyMiles will receive five miles for each dollar spent on tickets, excluding government taxes and fees. Those in the highest elite level will receive 11 miles per dollar spent. For fliers redeeming their miles, Delta will continue to award tickets by pricing them in miles, not in actual cash fares, offering different levels of availability as it does today.

The major change is that fliers will be awarded miles based on the ticket spend (before taxes and fees) and not based on the miles flown. The non-status flier will earn 5 SkyMiles per USD and it goes up to 11 miles for Diamond members. Delta AMEX cardholders will earn an additional 2 miles regardless of status level on all Delta flights purchased on those co-branded cards.

Each passenger will earn a maximum of 75,000 miles per reservation, inclusive of any Medallion mileage bonuses or class-of-service bonuses.

If Delta want’s to cater to high fliers, why cap the number of miles earned at 75,000 miles per ticket?

This is a huge blow for those that fly on economy tickets.

Let’s say that you have purchased a $300 return fare from Los Angeles to Orlando. You would now earn 4,438 base SkyMiles by taking the direct flights. Under the new program, you would only earn about 1300 SkyMiles (assuming that base is $260 before taxes/fees). This is a reduction of 71% on number of SkyMiles you would earn. Your base fare would need to be $888 in order for your earnings to be same. Have you ever paid more than $900 for a Los Angeles to Orlando return?

Maybe you have purchased a return ticket to Bangkok from New York for $1,800 on Delta. Currently the ticket would earn (JFK-LAX-NRT-BKK) 21,300 SkyMiles. Starting next year, you would only earn 8,250 SkyMiles for the same itinerary assuming that the base fare is $1,650. This is a reduction of 62% on number of SkyMiles earned.

Earning Miles On Partners

Flights marketed and ticketed by Delta’s partner airlines will earn miles based on a percentage of distance flown as determined by the fare class paid as published at delta.com/partnerairlines at the time of travel.

For itineraries ticketed by Delta’s partner airlines that contain both partner-marketed segments and Delta-marketed segments, the partner-marketed segments will earn miles based on a percentage of the distance flown as determined by the fare class paid as published at delta.com/partnerairlines at the time of travel, and the Delta-marketed segments will earn miles based on the total base fare and carrier-imposed surcharges prorated as a percentage of total distance flown.

and

Flights marketed and ticketed by Delta’s partner airlines will earn mileage based on a percentage of distance flown and fare class paid. More details will be announced later in 2014.

Seems that there are changed coming to number of miles earned on partner airlines that won’t be announced yet. It could be beneficial under new earning rules for Delta marketed and ticketed flights to be booked under marketing carrier code and on their ticket stock. Undoubtedly, Delta is already trying to have a fix to this “loophole”.

Using Miles

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Delta plans to introduce a system with up to five tiers of redemption choices so customers will have a wider variety of options, including one-way reward tickets and the ability to redeem tickets using both miles and cash, Mr. Robertson said. The new redemption levels will be disclosed in the fourth quarter. Delta intends to introduce functions next year that will allow customers to be able to use miles to purchase ancillary products such as seating in the roomier Economy Comfort coach seats.

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Delta will also announce one-way awards and even more award tiers. The number of tiers will go from three (low/medium/high) to FIVE.

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Delta makes a promise to fix their award calendar and have more award inventory at low level.

WHEN WILL THE 2015 AWARD CHARTS BE AVAILABLE?

They will be available later in 2014.

and

The following will apply to mileage redemptions for new Award Tickets booked on or after January 1, 2015:

Award Ticket prices published at delta.com/charts at the time of Award booking apply and are subject to change without notice. Partner-operated flights are subject to blackout dates and capacity controls. Partner airline benefits are subject to change and subject to terms and conditions of each partner.

Seems that Delta plans to further devalues their award chart later this year before going entirely to the fare based redemption program.

Conclusion

This is a huge blow for those that fly on economy tickets. Even those that fly on discounted business class fares as they will likely earn less under this program than previously.

Only those that purchase expensive short or long-haul fares may earn more under this new program.

Mr. Robertson said hundreds of customers in focus groups over the past three years indicated that the highest elite fliers felt under-rewarded. Customers also made it clear they wanted it to be easier to redeem miles and to have more lower-mileage award tickets available, he said. Delta has been rapped in recent years for having stingy awards ticket availability at the lowest mileage levels. He said the new program will improve award availability at the lowest levels.

The solution is to award less miles for all? Cutting the miles earned from flying is going to make these highest elite members feel more rewarded? I truly doubt it.

The problem is the number of miles sold to partners such as Amex. Cut the number of miles sold for third parties and start actually rewarding those that fly on your metal.

Sources tell me that Delta was initially planning to introduce a fare based redemption schedule at the time of this launch, but that has been now delayed. The number of SkyMiles required for award flights on Delta would have been completely dependent of the price of the flights.

It will be interesting to see how this will affect earning SkyMiles on partner airlines. If you fly on SkyTeam, Delta doesn’t get reported the dollar value of the segment, but rather the city pair and the fare class. Unless Delta changes how it awards miles for partners, you may soon earn more miles flying on partners.

Unless you are Delta flier in a captive market, I would have a serious look at AA’s or UA’s program. Both airlines belong to better alliances than Delta and still continue to award loyalty miles based on the miles flown instead of the dollar spend.

Here are the terms and conditions changes published on Delta.com:

Terms & Conditions

EARNING MILES:

The following will apply to miles (also known as redeemable miles) earned for flights flown on or after January 1, 2015, regardless of ticket purchase date.  Miles are earned toward Award Travel and non-air redemptions and differ from Medallion Qualification Miles (MQMs) earned toward Medallion status:

For Delta-marketed (flight numbers that include the “DL” airline code) or Delta-ticketed (featuring a ticket number beginning with “006”) flights, SkyMiles members will earn miles based on ticket price, at the rate of 5 miles per U.S. Dollar (USD) spent. Ticket price eligible for mileage accrual includes base fare and carrier-imposed surcharges, but excludes government-imposed taxes and fees. Members with earned Medallion status will earn an additional Medallion mileage bonus per USD spent based on their status at the time of travel. Silver Medallion members will earn 2 additional miles per USD (for a total of 7 miles per USD). Gold Medallion members will earn 3 additional miles per USD (for a total of 8 miles per USD). Platinum Medallion members will earn 4 additional miles per USD (for a total of 9 miles per USD). Diamond Medallion members will earn 6 additional miles per USD (for a total of 11 miles per USD). Members with complimentary Medallion status will not earn a Medallion mileage bonus, with the exception of Million Miler™ complimentary annual Medallion status and Choice Benefits gifted Medallion status.

Miles earned per segment will be calculated based on a prorated amount of the total ticket price eligible for mileage accrual and will not be subject to minimum mileage accrual.  Each passenger will earn a maximum of 75,000 miles per reservation, inclusive of any Medallion mileage bonuses or class-of-service bonuses.  Promotional mileage bonuses will not count toward the 75,000 maximum mileage accrual per person per reservation unless otherwise stated in the promotion’s terms and conditions.

For flights marketed or ticketed by Delta and purchased in a currency other than USD, the base fare and carrier-imposed surcharges will be converted to USD based on the IATA 5-day currency exchange rate at the time of ticketing. Then the appropriate mileage accrual rate per USD will be applied and miles credited to the member’s SkyMiles account once travel is complete. Additional base fare and carrier-imposed surcharges collected as a result of ticket reissue will be converted to USD, and the appropriate mileage accrual rate applied, based on the IATA 5-day currency exchange rate at the time of reissue.

Flights marketed and ticketed by Delta’s partner airlines will earn miles based on a percentage of distance flown as determined by the fare class paid as published at delta.com/partnerairlines at the time of travel.

For itineraries ticketed by Delta’s partner airlines that contain both partner-marketed segments and Delta-marketed segments, the partner-marketed segments will earn miles based on a percentage of the distance flown as determined by the fare class paid as published at delta.com/partnerairlines at the time of travel, and the Delta-marketed segments will earn miles based on the total base fare and carrier-imposed surcharges prorated as a percentage of total distance flown.

Certain tickets, including but not limited to bulk, consolidator, cruise, vacation packages (including Delta Vacations® packages), inclusive tour and other opaque fare products, will earn miles based on a percentage of distance flown as determined by the fare class paid as published at delta.com/exceptionfares at the time of travel.  If an exception fare (as described in the preceding sentence) is eligible for a Medallion mileage bonus, Silver Medallion members will earn a 40% bonus on miles awarded or distance flown (whichever is less), Gold Medallion members will earn a 60% bonus, Platinum Medallion members will earn an 80% bonus and Diamond Medallion members will earn a 120% bonus.

Award, Miles + Cash, Pay with Miles Economy Class, free, barter, pass travel and certain other tickets are not eligible for mileage accrual. BusinessElite®, First or Business Class tickets purchased through Pay with Miles will earn miles for the portion of the base fare and carrier-imposed surcharges remaining and paid in currency after miles are applied to the ticket total.

All other ancillary purchases or fees do not count toward earning miles, including but not limited to checked baggage fees, Economy Comfort™ and Preferred Seats purchases, Priority Boarding, Delta Sky Club memberships, Wi-Fi passes, in-flight food and beverage purchases, in-flight entertainment, unaccompanied minor fees, pet travel fees, Mileage Booster™ or mileage purchases, ticket change fees, Direct Ticketing Charges (DTC), same-day confirmed or standby fees, Administrative Service Charges (ASC), External Reissue Charges (ERC) and Standby Upgrades.

Mileage Comparison Calculator is illustrative for Delta-marketed flights only and actual mileage earned may vary.  Any calculations are estimates only, and Delta may without prior notice elect to use alternative methods when calculating mileage earned.  Calculations are based on a round-trip flight and are accurate for non-stop flights only. Mileage for Current SkyMiles Program (flights flown through December 31, 2014) does not include class-of-services bonuses. Mileage estimates for city area codes, such as “NYC” or “CHI”, are approximate and will vary from actual mileage earned for specific airports in that city area. Mileage Comparison Calculator results may be provided for markets that are not served by Delta. The number of miles shown in the Mileage Comparison Calculator does not include additional miles a Card Member may earn on the Delta SkyMiles Credit Card.

Miles on Delta Purchases with U.S. Delta SkyMiles Credit Cards from American Express:

This offer applies to qualifying Delta, Delta Connection® carrier and Delta Shuttle® flights taken with the purchase of a fare that is eligible for SkyMiles mileage credit. The total ticket price, including base fare, carrier-imposed surcharges and government-imposed taxes and fees is eligible to earn double miles. Offer applies to any Delta-branded purchase where Delta is the merchant of record via delta.com or in flight such as upgrades, miles, seat selection, Delta Sky Club membership or passes, pre-purchased meals, food, beverages and in-flight entertainment. Offer applies to Delta Vacations packages but not other all-inclusive packages. Delta SkyMiles Options Credit Card Members may earn a maximum of one additional mile per dollar spent on Delta purchases with the Card. Offer is subject to change without notice. Bonus miles will be posted to your Delta SkyMiles account 8 to 12 weeks after the end of each month.

Miles on Delta Purchases with International Delta SkyMiles Credit Cards:

For a list of Delta SkyMiles international credit cards, including associated card benefits, please visit delta.com/internationalcards.

REDEEMING MILES:

The following will apply to mileage redemptions for new Award Tickets booked on or after January 1, 2015:

Award Ticket prices published at delta.com/charts at the time of Award booking apply and are subject to change without notice. Partner-operated flights are subject to blackout dates and capacity controls. Partner airline benefits are subject to change and subject to terms and conditions of each partner.

Additional fare rules and restrictions may apply to One-Way Awards.

Miles + Cash Award Tickets may not be available in all markets, all cabins or to all customers.  Additional fare rules and restrictions may apply. Prices shown are illustrative only. Prices vary by market and are subject to change without notice. Cash portion of Miles + Cash Award Tickets is non-refundable and may be subject to additional taxes and fees. Miles + Cash Award Tickets are not eligible to earn miles, Medallion Qualification Miles (MQMs), Medallion Qualification Segments (MQSs) or Medallion Qualification Dollars (MQDs).

All delta.com designs shown are illustrative only.

Taxes and fees for Award Travel are the responsibility of the passenger and must be paid at the time the ticket is issued. The payment of any taxes, fees, and other government-, airport- or carrier-imposed charges is the responsibility of the passenger.

EARNING MEDALLION STATUS:

Medallion Qualification Miles (MQMs) earned toward Medallion status are based on distance flown and fare class paid as published at delta.com for Delta-marketed or partner-marketed flights. A minimum of 500 MQMs will be awarded per segment for Deltamarketed flights, even if distance flown is less than 500 miles.  Award, Miles + Cash, Pay with Miles Economy Class, free, barter, pass travel and other tickets not eligible for mileage accrual do not earn MQMs.

2For full terms and conditions for earning Medallion status, Medallion Qualification Dollars (MQDs) and the MQD Waiver, please visit delta.com/mqds.

MQD Waiver:  Effective January 1, 2014, if the Medallion Qualification Dollars (MQDs) threshold is not met for a qualification year, you can still qualify for Medallion status if you have earned the required Medallion Qualification Miles (MQMs) or Medallion Qualification Segments (MQSs) and make at least $25,000 in Eligible Purchases within that Qualification Year on your Eligible Card. A Qualification Year is from January 1 to December 31 of a given year. The close of the Qualification Year is December 31, without regard to the time of the year that the credit card account is opened. This means that for the first year of Card Membership, the Card Member’s Eligible Purchases period may be less than twelve months.

Eligible Purchases means purchases for goods and services minus returns and other credits. Eligible Purchases do not include fees, interest charges, balance transfers, cash advances, purchases of travelers’ checks, purchases or reloading of prepaid cards, or purchases of other cash equivalents.

Eligible Purchases made by Additional Card Members on the Basic Card Member’s Eligible Card will count toward the Eligible Purchase threshold. For purposes of calculating the Eligible Purchase threshold, Eligible Purchases will be combined across multiple Eligible Cards of the Basic Card Member if those Card accounts are linked to the same SkyMiles number. Eligible Cards are the following: Delta SkyMiles Options Credit Card, Delta SkyMiles Credit Card, Gold Delta SkyMiles Credit Card, Platinum Delta SkyMiles, Delta Reserve Credit Card, Delta SkyMiles Business Credit Card, Gold Delta SkyMiles Business Credit Card, Platinum Delta SkyMiles Business Credit Card and Delta Reserve for Business Credit Card from American Express.  This benefit extends to Basic Card Members only (Additional Card Members are not eligible). Offer terms and conditions subject to change.

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