Delta's change to SkyMiles fixes a business problem and hurts a lot of us

At a dinner 20 years ago, I confessed my feelings to a friend I hoped felt the same way. She replied, "Evan, if I wanted you as my boyfriend, you would be my boyfriend."

Her self-awareness, her clarity, made me admire her all the more.

Though it may seem strange, that's how I see Delta Air Lines' decision to restructure its SkyMiles loyalty program. Delta told customers it will require more than it previously did to reach higher status in the program. While the process is simpler, fewer people will measure up.

It's not the message many Delta SkyMiles holders wanted to hear. For some, it felt like rejection. They clearly know where they stand, however, and they can — and I suspect will — make new choices about air travel and credit card use.

Unless I start making and spending a lot more money or the Star Tribune puts me on a plane often (something it has never done), I'll not reach the higher levels in Delta's program. I appreciate knowing that.

Like all businesses in travel these days, Delta is coping with increased traffic that's lasted beyond the post-pandemic surge and even as interest rates and other costs for consumers climbed. The airline's Sky Clubs are jammed. Demand exceeds supply. From Delta's perspective then, it makes sense to raise the price of passenger rewards.

Next year a person will need to spend at least $6,000, instead of $3,000, on Delta tickets to reach its Silver status for 2025. One will need to spend $12,000, instead of $8,000, to reach Gold.

The even bigger change is that Delta will only count dollars spent, rather than the number flights or miles flown, toward the rewards in its SkyMiles program. That dollar count includes spending on the Delta-affiliated American Express Platinum card, which carries a $250 annual fee.

At first glance, Delta's changes appeared to me to be another sign of inflation — and a hidden one, since the government's Consumer Price Index tracks air fares and not the costs of customer loyalty programs.

Then, I talked to my friend and former colleague Scott McCartney, who for decades wrote the popular "Middle Seat" column in the Wall Street Journal and is now an aviation consultant. He explained that this is another step by Delta to fix a misalignment between it and its highest-spending customers, something that airlines tried for years to do.

"There's always been a fundamental problem in the airline business, which is they charge the highest prices to their best customers," McCartney said, referring to the business travelers who pay top dollar to fly flexibly and frequently. "It's taken awhile but they're figuring out more ways to reward people who end up spending a lot."

Delta joins American by choosing to tie rewards to spending alone, and United's program is moving that direction.

The people who lose out are those who fly cheaply, especially those who racked up miles on long flights at low fares. The winners will be those who pay the highest fares and, in Delta's case, use its premium Amex card on most of their spending.

"This is the real tenet, that our best customers are receiving truly premium experiences," Glen Hauenstein, Delta's president, said at an investment conference last Thursday, the day the changes were announced.

That makes sense. Businesses that undersatisfy their biggest-spending customers tend to lose them over time.

As air travel started to recover after the pandemic, Delta realized its most-profitable business customers were the last ones to return to the skies. It got more revenue from leisure passengers by creating tiers in its main cabin. It also offered more incentives to users of its Delta-branded Amex cards, like free Wi-Fi on its planes, that led millions to sign up for them.

Through the first half of the year, American Express paid Delta $3.4 billion for its customers' credit card usage. That's far more than Delta's overall profit of $1.5 billion in that same period. In other words, without the loyalty program and credit card affiliation, Delta lost money.

"Airlines are really loyalty programs that happen to fly airplanes," McCartney said.

In a bonus for the airlines, most people are drawn to their loyalty programs not by actually taking free flights — but by the prospect of them. People routinely hold on to points for years, then lose them when a deadline passes.

"It's all psychology," McCartney said. "It's always been the power of the possibility of free travel that motivated them."

For the affluent people who can climb to Delta's new harder-to-reach elite status, free flights are also not important. For them, having status with Delta is sufficient to choose it over other airlines.

Most of us, though, should stop seeking validation from businesses. We've never needed to ask about their feelings for us. We've always known what they want.