Reaching status with an airline loyalty program may feel more difficult in 2024, as airlines opt to incentivize passengers willing to spend more.
09.12.2023 - 06:49 / skift.com / Delta Skymiles / Glen Hauenstein / Ed Bastian / Delta Air Lines / Morgan Stanley
The spotlight is on Alaska Airlines and Hawaiian Airlines. But Delta Air Lines had some interesting things to say last week as well.
Chief executive Ed Bastian and president Glen Hauenstein delivered a presentation to investors at an event in New York City hosted by Morgan Stanley. Unusual for an airline, it was an event focused not on transportation companies or even industrial companies but rather consumer retailers — Delta presented alongside the likes of Walmart, Starbucks and Krispy Kreme Donuts.
Delta boasted that it’s now the country’s fifth largest e-commerce retailer behind only Amazon, Walmart, eBay, and Apple. Half of the airline’s sales, it added, are now sold directly to consumers rather than via third parties like Sabre or Expedia.
What’s more, Delta customers holding a SkyMiles-branded credit card, issued in tandem with American Express, use those cards to spend something close to $280 billion annually, which is roughly 1% of total U.S. GDP. Wow.
Alright, so Delta made its point about why it belongs at a conference on consumer spending. But what industry observers really want to know is the current state of Delta’s business.
Good news on that front: It reaffirmed the guidance it gave in mid-October, including the expectation of an operating profit margin between 9% and 11% for the current quarter. For all of 2023, operating margin should come in around 11.5%. That would represent a nice improvement from the 8% Delta earned in 2022, though a bit down from its 14% figure in 2019 (when its costs, including labor and fuel, were significantly lower).
Strong Demand: Bastian and Hauenstein say demand remains rock solid as its targeted customer base — U.S. households earning at least $100,000 a year — continue to prioritize spending on experiences over goods.
As Airline Weekly has described before, today’s Delta wants to sell BMWs, more so than Honda Civics. In other words, it’s chasing premium travelers. Thanksgiving travel delivered record revenues for Delta, and “Christmas is shaping up to be very, very strong to close the year,” Bastian said. And then, “we’re off to the races back in January.”
Corporate Travel Picking Up: Even corporate travel is picking up following a plateau earlier this fall. The Hollywood strike that affected business travel demand from Los Angeles is now over. Same for the autoworker strike affecting business demand from Detroit, one of Delta’s largest hubs. “We’ve seen a nice uptick in corporate travel year-over-year as we close out the year and head into ’24,” according to Bastian.
Executives said corporate volumes remain about 10% below pre-pandemic levels, but this is “more than offset” by “incredible growth in unmanaged business and small and medium-sized
Reaching status with an airline loyalty program may feel more difficult in 2024, as airlines opt to incentivize passengers willing to spend more.
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