SkyMiles makes a lot of money from Delta
First and foremost, Delta makes a lot of money from Skymills. Originally launched back in 1981, today’s program has more than 100 million members, and last year, selling miles generated approximately $ 6.1 billion.
SkyMiles essentially sells miles to Delta Air Lines and other SkyTeam partners to deliver to those customers. On the non-flying side, American Express (AMEX), the Delta’s co-branded credit card issuer, pays miles with every $ 1 spent on SkyMiles AMEX cards. Other partners include Hilton and Lyft, who in some instances give members miles. In total, these sales generated $ 6.1 billion in 2019. As a redemption, SkyMiles paid Miles for an award seat using Delta, costing approximately $ 3.6 billion.
SkyMiles’ largest partner is American Express. The two companies have formed a partnership since 1996 and have a credit card contract through 2029. Delta Air Lines represented 8% AMEX billing and 22% cardmember debt in 2019.
In return, AMEX contributed approximately $ 4.1 billion to Delta. This was up from $ 3.4 billion in 2018, and significantly more than the $ 1.2 billion the company gave to the airline in 2009. Sales directly to members of SkyMiles, a small piece of cash sales earned by the program.
SkyMiles works to help keep travelers loyal
Frequent flyer programs increase airline loyalty, and SkyMiles has worked for Delta. In 2019, members of SkyMiles received 60% of Delta’s ticket revenue. In addition, the ticket revenue premium was approximately 1.5x for medal members compared to non-SkyMile members. This means that Delta’s elite members spent more on air travel in 2019 than non-elite, non-SkyMile members. More than that, the average tenure for Medallion members is 16 years.
Delta’s strategy with SkyMiles is to attract younger passengers, giving the airline a lifetime pipeline of premium revenue. From 2015 to 2019, Delta’s acquisitions, i.e. new SkyMiles members, increased by 138% from 2015 to 2019.
Therefore, in order for customers to take advantage of the program, they must keep Flying Delta or its partners. Or, they have to spend on co-branded credit cards. In addition, the elite status also helps travelers to spend with the Delta and earn some extra perks.
Furthermore, it appears that Delta’s SkyMiles members are very happy with the airline. For one, the carrier realized a 45% increase in Medallion Member Net Promoter Score from 2016 to 2019.
People are using skymills in delta
Miles can be used for various purposes. But, SkyMiles had 97% redemption delta in 2019. This gives the airline incredible flexibility. It can manage costs by modifying its inventory level and price.
SkyMiles are dynamic in price. This means that the program can adjust the redemption value (in terms of the number of miles required) based on the demand for a given day. Therefore, taking into account the strength or weakness of demand in markets, seasonality and other factors, programs can regulate the value of these miles, which are, in essence, like a currency.
SkyMiles remains flexible
While the airline industry goes through its worst crisis in years, with Delta leading the SkyMills program to raise $ 6.5 billion, SkyMiles remains resilient as customers are still spending money on co-branded credit cards, meaning Is that they are still earning miles. And AMEX sales have continued and not declined at the same rate as air travel demand.
In the first half of 2020, American Express remains SkyMiles’ biggest buyer, with the airline having fewer purchases. Although current sales in the first half of 2020 are $ 2.5 billion.
Who are these SkyMills members?
SkyMiles members of the Delta are almost evenly divided into three different age categories. Passengers under 34 make up 30% of Delta’s SkyMiles members. 55+ passengers make up 33%. And, ultimately, passengers from 35–54 make up 37% of the airline’s frequent flight membership.
46% of members had a less than four-year program, meaning a significant number of newly acquired SkyMills members in recent times. The next largest share, quite impressively, 39%, are those with the program for over ten years, with a large percentage representing customers who have maintained loyalty with the airline. The final 15% is made up of people who have been members of SkyMiles for the past five to ten years.
In terms of income, 21% of the members earned less than $ 50,000 per year. 34%, the largest share, made $ 51,000 to $ 99,000 a year, 22% earned $ 100,000 to $ 149,000 a year, and 23% earned more than $ 150,000 a year.
Where are these SkyMills members?
68% of SkyMiles members live in non-hub cities, which is not surprising given Delta’s broad breadth of operations throughout the United States. Most of Delta’s operations allow travelers from around the world to roam through its centers.
In terms of Hubs, 8% of SkyMills members resided in the New York City-area (NYC), followed by 6% from Atlanta (ATL), 5% in Los Angeles (LAX), 4% in Minneapolis (MSP), Detroit ( 3% in DTW), and 2% in Salt Lake City (SLC), Seattle (SEA), and Boston (BOS). In some cities such as Detroit and Minneapolis, Delta’s SkyMiles members only came to the airline after their merger with Northwest Airlines.
What do you make of these fascinating SkyMile details? Did any of the figures surprise or interest you? Tell us in the comments!