Declining Value of Skymiles

I don't plan on this turning into a site focusing on loyalty points—there are a lot of those already—but I've perhaps a little late come to the apparent realization of most of the travelling Internet: Delta's loyalty currency isn't very valuable.

Frequent Flyer programs have a currency, generally known as points or miles, but often with some program-specific name as well (Delta's is known as Skymiles). These currencies can be redeemed from the program for free or discounted flights, and fall into two redemption models: chart based and revenue based. The former provides consistent redemption costs, regardless of cash prices1. The latter provides for a more-or-less stable redemption value of the program currency, i.e. a $300 cash (revenue) ticket will generally cost three times the cost in program currency as a $100 cash ticket, but half as many points as a $600 cash ticket. This is generally true, and some programs are more strict in the precision of their currency peg than others, while most have some float, for instance JetBlue (B6) offers around 1¢/mile on its business-class mint seats, while its economy seats are usually between 1.2-1.5¢/mile2.

Delta had, until 2015, a published award chart. For the past few years, there has not been an official award chart, and Delta has been deflating the value (inflating the price of tickets booked with Skymiles). It's no secret that Delta wants to instil the perception that one Skymile is equivalent to one US cent (in fact, being able to guarantee this exchange rate is touted as a benefit of co-branded Delta credit cards).

Despite having moved towards a revenue-based redemption program, Skymiles actually still offers redemptions that resemble an award chart. Delta's redemptions just have many more latitudes in-between saver (discount) and everyday (standard) rates. Delta's levels are also generally higher than their domestic competitors (United and American). This is all background in case you've never looked at Frequent Flier programs; for those of you who have, you're already aware of this, and the general reputation people have for Skymiles as the least valuable currency among the three programs.

I've continued to collect Skymiles, though. The first and foremost reason being because I prefer actually flying Delta than any other domestic airline. The other reason is, despite a lot of bad redemption values, I've continued to find some good (albeit not great) opportunities. When I was running numbers last year, there were transcon (domestic coast-to-coast) flights redeeming for solidly around 1.5¢ in business class (Delta One). Flights to London's busiest airport Heathrow (LHR), were regularly over 2¢, with some great values for last-minute fares (where cash prices were highest) redeeming at 4¢3. Delta One to Nice (2¢, via CDG) and Tokyo (3¢) were even better. All of these worked with future travel plans, and using a conservative estimate of 2¢ per Skymile, meant that the Delta Reserve credit card returned 3% if you were able to spend exactly $30k or $60k during the calendar year.

Unfortunately, running the numbers this week is returning higher minimum redemption rates than I've seen previously, driving down redemption values to about 1.4-1.5¢ to Nice and Tokyo. At about 2.1% back, I don't see any benefit to collecting Skymiles from the co-branded credit card compared to a 2% cashback card (or a card earning 1.5x a more valuable currency, like the Chase Freedom Unlimited Visa or the American Express Everyday Plus, whose currencies are both convertible to several programs which can easily find redemptions north of 2¢/point).

After running lots of routes from the north-east, the only redemptions that look to return around 2¢/Skymile right now are DeltaOne flights to LHR, which seem to have held value (although in-close awards seem to have gone up, losing their flexibility). The BOS->LHR, NYC->LHR routes are very competitive, with each of the alliances hoping to capture some of the frequent transatlantic business markets. This is keeping fares competitive (I'm seeing cheaper fares to Dublin and London than I am to San Francisco), and while 2¢/mile is still a nice redemption, it doesn't allow for the same savings as I'd hoped for 3¢/mile to Tokyo, which has comparatively insane (over $7,000/ticket in business) prices.

  1. mostly, as award charts often have saver levels which have some indirect correspondence with price

  2. this is abnormal in frequent flier programs, where usually the value increases with the class of service, e.g. business class should offer a greater value than economy when looking at the redemption value

  3. other airlines, like United, charge a fee for last-minute award tickets, but Delta does not