Delta Steps Back Travel Demand Outlook to 'Steady'

12.10.2023 - 20:51 / skift.com / Spirit Airlines / Glen Hauenstein / Ed Bastian / Delta Air Lines / Edward Russell / United S.Airlines

Delta Air Lines hit a nerve with loyal fliers, arguably its most important customer bases, when it upended elite status qualification in its SkyMiles loyalty program last month. Customers provided the carrier with ample feedback of what CEO Ed Bastian described as a “360 [degree] view” of the controversial changes.

But one thing that Delta did not see? Any drop in bookings or usage of its lucrative co-branded credit card with American Express.

“We’re not seeing any change in trajectory, rather, on acquisitions or changes in spend levels,” Bastian said during Delta’s third-quarter earnings call on Thursday. “Everything continues to stay intact.”

The airline brought in $1.7 billion under its credit card deal with American Express in the third quarter. That represents 11% of Delta’s total revenue, $15.5 billion, for the period. Delta President Glen Hauenstein said Thursday that the carrier remains on track for $7 billion in total credit card-related revenue in 2023.

That hits at the crux of the issue: Delta changed its SkyMiles loyalty tiers to reflect what it values most — money. And, while the blowback from the changes has been loud, if the revenue has not changed the incentives for significantly rolling back the program updates is minimal.

“We need to go back and reassess the planned rollout for the new qualification levels,” Bastian said. He did not mention any further changes to, for example, access to its Sky Club lounges that the recent update restricted, particularly for credit card holders.

Delta plans to release the updated program requirements within “the coming days,” he said.

Here are four more highlights from Delta’s third-quarter call.

“Steady” was the word used most frequently by Delta executives to describe the travel demand outlook, particularly in the domestic U.S. market. On one hand, steady is not bad given the steep run up in demand post-Covid; that heady growth could not continue forever.

On the other hand, it’s definitely a slowdown from the “strong” and “robust” description of demand that executives gave in July. The focus comes as airlines catering to the low, price-sensitive end of the U.S. market, including Breeze Airways, Frontier Airlines, and Spirit Airlines, have said they see demand weakening.

Delta, to be clear, has positioned itself as the premium U.S. airline, something United Airlines is now trying to copy. That focus paid off for Delta in the third quarter, with premium passenger revenues growing faster than economy passenger revenues — 17% versus 12% year-over-year. Premium revenues made up 39% of Delta’s $13.1 billion in passenger revenues in the period; a percentage point higher than last year, and four-points higher than in 2019.

And not all travel demand is