Things Delta told the SEC about its SkyMiles program | Hacker News Reader

Things Delta told the SEC about its SkyMiles program

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115 pointsdonohoe73 comments

Except, Delta (and every airline) can arbitrarily control the redemption rate (speed) of their currency being used, and the conversion rate. And have been devaluing that currency steadily over the years. Don't hoard FF miles, it's a losing game.

Yup, and unfortunately with covid, it's very very difficult to use miles :)

You can stop mile inflation by redeeming them for dollar-denominated delta gift cards. They never expire.

Airberlin issued Amazon gift cards back in the day. They were essentially as good as cash. In an unrelated story, airberlin went bankrupt shortly afterwards...

The dollar is losing 8% a year of purchasing power at the moment.

I wonder what the percentage loss was from previous points devaluation.

If dollar purchasing power is down 8%, but the points devaluation is 50%, then turning the points into coupons makes a lot of sense.

It already has devalued 8% (well, 7.5%). There aren't official numbers for what it is doing currently; it's an observation of history, technically speaking. Most economists believe this was the peak and that 2022 will bring significant declines closer to the Fed's target. And if not, the expectation is that the Fed will take action.

> Most economists believe this was the peak and that 2022 will bring significant declines closer to the Fed's target. And if not, the expectation is that the Fed will take action.

The Fed already started taking action to reel in QE, and is pretty universally expected to hike rates in mid-March (right about the time QE stops on the current schedule.) The disagreements now seem to be about whether it is most likely to be a quarter- or half-percentage-point hike.

Even if the drivers of inflation policy exogenous to monetary policy remain at the same level, this should cut inflation.

FWIW, I've typically gotten the best mileage redemptions by redeeming for a partner airline's flight. They usually have their own award charts that don't devalue at the same rate.

yes but they control the conversion ratio to dollar gift cards. what do you think happens when significant percent of holders start demanding the giftcards?

miles are a losing game for consumer.

Usually though, that conversion rate is a pretty bad deal, at least compared to redeeming it for premium class air tickets.

This is why I always, always tell people to burn and churn those miles and points as they accrue them.

Airline and hotel partners will NEVER make miles more valuable, they only get less valuable over time.

Miles and points don’t earn interest. Use them.

I thought it was well known that free miles are a scam. You'll end up flying the same airline just to get more miles when if you just chose the best fare you'd save way more than what you earn in miles. Even if you don't chose by fare, you also end up limiting your options. You want to arrive at 5pm but the airline you've signed up for only arrives at 9pm but you talk yourself into it "for the miles" etc...

Your error is assuming people care about spending more money. Most people serious about collecting sky miles are spending someone else's money to build up their personal miles balance. And this is precisely what makes skylines so valuable to airlines.

Not every program is like this. Most are though, so I agree in principal. But rarely there are programs that don’t have restrictions and are direct point to cent conversion

Airline and hotel partners will NEVER make miles more valuable

I don't think "NEVER" is accurate. It's just very very very very rare.

I looked up awards flights on the airline I have miles with at the beginning of COVID, and it was offering crazy discounts just to get people in seats. North America to Japan for something like 10,000 points and ~$200 in fees.

I only use them for upgrades because I worry that, when overbooked, airlines are more likely to bump people on cheap tickets. I have no idea if this is true.

Wendover Productions has a video on how airlines are banks now. Their Loyalty Programs are worth several times more than the Airlines and flying is basically a secondary business for them.

How Airlines Quietly Became Banks

https://www.youtube.com/watch?v=ggUduBmvQ_4

Airlines have historically been cash poor. It's extremely difficult to make an airline profitable, and demand fluctuates wildly due to weather, oil prices, world conflicts, etc.

"If you want to be a millionaire, start with a billion dollars and launch a new airline." - Richard Branson

edit at the bottom, my question has a simple answer: no

That seems like an interesting topic. Wasn't Wendower Productions just reading Wikipedia articles over stock footage and blueprint graphs? Or am I mistaking that with some other channel(s)?

edit: Well that was easy to search for, it was Real Engineering channel.

Clearly my Google Fu isn't as strong as yours. Could you share a link about Real Engineering?

Seems like you have an axe to grind here, care to elaborate a bit?

This is particularly obvious on American Airlines. EVERY flight I took last year had the FA's telling how this one special flight qualified for a very rare offer... to open a credit card and get some base miles for free. I feel bad for them having to hawk this stupid credit card constantly, though I bet they get some kind of extra bonus for suckering people into signing up.

The credit card bonus to the customer can be upwards of $400 or more - so it’s clearly worth it to the credit card company and they make it worth the airline’s while also.

The FA’s do get around $100 as a bonus when they sign up on a flight.

How soon until this happens with Starbucks and gift cards?

Here you go: https://www.youtube.com/watch?v=mr039xnco-8

Numbers for context:

$30B revenue, $16B current assets in 2021.

$4.8B profit on $47B revenue in 2019.

So, we're talking about a debt of 20% of one-year revenue? Substantial, but not a huge deal, and given the redemption speed not too concerning. Comparing to a personal budget, it's like buying a car with a loan - not even an expensive one, if US medial salary is ~60K, then it'd be a 12K car. If I learned somebody making 60K has a 12K car loan, I wouldn't be too worried, if they can afford the payments. And this one is basically negative interest, since they can devalue miles with time (some even have expiration dates!)

This isn't unusual - maybe the quantum is (though I have no idea if "$7.6B worth of travel" is large or small in whatever context the article is trying to make), but airmiles are awarded now with the expectation that the airline must fulfill them later. Maybe 30k miles gets you a 1 way trip now, normally valued at $200. In the future, they could devalue the miles and a 1 way trip costs 35k miles.

Either way, they must be accounted for so yes it's normal to see this on a balance sheet. Is it alarming if you're an investor? Perhaps only if you think there will be a "run on miles" where nobody buys tickets suddenly and they all use miles to fly instead. But the airline will never allow that, plus these are all magic tokens any way, so not sure what the relevance of this in the article is.

A run on the miles is easily stopped by a simple ”I’m sorry sir, but currently there are no award-redemption eligible seats available for those dates”

Exactly right - 2 years of pandemic and I had completely forgotten that this was a thing!

Yeah, you could just as well say "the world owes Warren Buffett 100B in goods and services". Yes, Delta owes it in a sense but it's really just a statement of how many outstanding points there are.

They already limit the number of point-only seat sales and upgrades on most flights, my various United point schemes will get me "upgrade waitlisted" on flights with 20 empty seats left in first/business until sometimes the day of departure as they try to get cash payments instead. Maybe it's better if you're in the magical invite-only programs but even at 1K, their top regular-people loyalty tier (which is something like 15000 USD in flights each year) it's gotten pretty bad.

How many point-only seats they'll sell seems more variable but I've seen the rates jump from like 35k miles to 75k miles for the same seats for no apparent reason on flights.

I’ve always wanted someone to calculate inflation in frequent flyer miles

https://thepointsguy.com/guide/monthly-valuations/

Given the strategy that they won't be redeemed + infinite lifetime and potentially some barriers to convert/transfer, that liabiltiy will keep balooning. I wonder if they are assuming a write-off.

You devalue the currency like a central bank.

The SEC should start suing and penalizing airlines for the scam that airmiles is, before even getting started with crypto.

Scam? It’s a business travel incentive to continue traveling on the same airline even if it’s more expensive.

> 10% of flying is paid for with SkyMiles

I think I live under a rock. I've never paid for a flight with miles and I'm one of the only people I know who uses credit cards at all.

The majority of the miles I’ve earned have been through my employer flying me places, not my credit cards. I would guess a good portion of flights come from those who fly frequently and therefore have miles to fly on their own with.

Fortunately Delta can fix this with a single ”Dear members”-email. The skymiles-to-travel conversion rate is completely arbitrary, and points can be devalued simply by adjusting the amounts needed for various services

We're pleased to announce these exciting new options for redeeming your skymiles!

Tangentially related: I just got a letter from my Visa card supplier here in Switzerland saying they've changed the Priority Pass (airport lounges) benefit to be unlimited. Previously it was only four free visits per year. I thought for sure they would make it worse when I opened it, but I guess last year was a great time to re-negotiate group discounts for travel.

Credit card signup bonuses are also getting more aggressive in general.

Many of them are at or near record all time highs.

What’s the best one you know of right now?

Depends on what you're looking for, cash back, hotel or airline miles. Here's a great list of the best sign up bonuses right now.

https://www.doctorofcredit.com/best-current-credit-card-sign...

The Capital One mastercard, $200 cash, no fee, minimal payments for 1.5 year at 0% (ideal to take advantage of inflation), various warranties thrown in for rentals etc

https://money.slickdeals.net/credit-score/capital-one-quicks...

There’s way better out there.

Citi’s Premier just had a $800 signup bonus for a $95 annual fee. Easy money. Lots of these out there.

I could only find references to gift cards, not cash bonus.

Funny thing is I considered citi recently, but figured out it wasn't worth it. I ended up with capital one.

Now if you can recommend Visa cards with cash signup bonus, I'm still looking for one :)

Citi’s ThankYou points can be redeemed for statement credit or bank deposit. With the right mix of cards it comes back at one cent per point.

The Resy Amex Gold and Platinum offers are really nice: https://resy.com/amex-offers . Same as the regular midgrade Amex offers (between $750 and $2500 worth of points, depending on card and what you value MR points at), but also, 10x points on restaurants on the Platinum for the first six months (up to $25k spend), and 20% back on restaurants on the Gold for the first year (up to $1250 spend).

Are they more aggressive in a dollar converted reward or just the # of points?

Number of points.

Since the best value is usually transferring points into airlines, they let others be the bad guy.

Dollar converted reward. I regularly get 12-15 new credit cards a year and communities of people doing that (churners) are well attuned to the tricks used to reduce the real value.

It’s a race to the bottom with increasing fees and awards. That business needs to be regulated or better disrupted.

I don't see what you are talking about in Europe.

I think chase sapphire reserve was the peak at $1,500 bonus (assuming you were already going to travel) in exchange a $450 fee, but that was offset by $100 global entry credit and a few other benefits, so it was close to $1,500 free for many people I know. I know my wife and I got it, and it was basically $3k for free.

It was so costly that Chase had to list mention it specifically in their 10-K and I believe all the other banks looked and it and said no way are we spending that much.

I wish that happened here in the UK

Maybe.

Remember everyone gets it, so the lounge may be full of screaming kids and mooches pillaging napkins and ketchup!

It already is, except they are adults. My experience in United lounges the past year, barely worth free, not worth paying for. Bad coffee, even the on demand espresso capucino maker is crap. Lots of packaged food with signs you have to eat it in the lounge, not intended to take with you. Very little real food. Not a fan.

About the best benefit is if you need customer service to find new flights, no line for that at least. Hilarious you need a lounge pass to get no wait customer service and clean restrooms.

> My experience in United lounges the past year, barely worth free, not worth paying for.

What United lounges have you been to?

The ones I've been to, for example Newark, have free unlimited restaurant-quality table service, and unlimited premium alcohol, including unlimited Champagne. To be honest I usually look for longer layovers because it's a bit of a treat in there. I love working on their glowing mock-marble bar tops with unlimited iced Champs.

And that's just the basic business-class lounge. I once had the fortune to be in United's Global First lounge in SF, and that was something more again.

https://itstravelseason.com/airlines/united-polaris-lounge-f...

The basic United lounge is called "United Club", it's a much worse offering than the Polaris lounge you are referring to.

The customer service desk really is the only thing about that worth it anymore for travel within the US, at least, and "worth it" has been questionable. Lounge access at some international airports is much, much nicer, but only worth it if those are places you're flying.

The United affiliate lounges in much of east Asia make United's own look even more embarrassing unless you're in one of the international first/business ones. Although when the Chicago Polaris lounge was new I got stuck there on a super delayed flight and managed to kill a bottle of Yamazaki whiskey almost by myself, which probably wasn't great for my health and against policy but I slept like a baby on the way to Germany when we finally departed.

Or all the lounges stop accepting Priority Pass members when you're actually traveling. The first year I had it it was great, the second year, I traveled like 5 times and every lounge wasn't allowing Priority Pass members.

If you dont mind, could you mention which vendor you use for this card, i am using one from a local cantonal bank which is good but doesnt have lounges in.

Thanks

I think they probably did that because Priority Pass has so few lounges that even accept it anymore.

And I have found that even lounges that PP claims to work with are very quick to tell you that the lounge is full so they can reserve space for their actual business class and first class passengers.

I've been turned away more than once from a club that was supposedly at capacity when more than half the tables are empty.

So I figure priority pass thought, why not offer unlimited? No one can use it anyway.

Or, as AA calls it “Hey! Want some magazines?”

Not even necessary anymore, Delta no longer publishes an award chart so they have flexibility to charge any point amount they wish for any flight!

How many passenger miles does Delta per day / year?

74 billion per year in FY2020. Was approaching 250 billion/year pre-covid:

https://www.statista.com/statistics/221076/revenue-of-passen...

Probably fine. I would imagine most sky miles are accumulated by business travelers not paying for it, and very sparsely used for the occasional personal trip.

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