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23.08.2024 - 22:57 / skift.com / Ed Bastian / Delta Air Lines / Delta Ceo / Robert Isom / United Airlines
As earnings season draws to a close, we’re taking a closer look at the most lucrative arm of many major U.S. airlines: loyalty programs.
Despite profitability softening and fears of domestic overcapacity, loyalty revenue showed no sign of slowing down in the second quarter. In fact, it’s on track to hit record numbers. To help make sense of it all, we’ve examined the performance of each of the U.S. ‘Big Three’ carriers.
When Delta announced sweeping changes to its SkyMiles program in September 2023, the social media backlash was colossal. The changes increased the thresholds for earning status in 2025 and curbed access to Delta’s lounges. This led to concerns among some analysts that membership and revenues could drop as members voted with their feet. Instead, the program has continued to thrive.
In the second quarter, loyalty revenue rose 8% year-on-year to $1.81 billion, cementing the program’s continued success in attracting and retaining members. Delta clocked $1.9 billion from its lucrative deal with American Express in the quarter, up 9% from the previous year.
The result bodes well for its goal of generating $7 billion in revenue from cards alone this year. If realized, this would be a new company record. While impressive, the Atlanta-based firm has an even bigger target in its sights.
Delta CEO Ed Bastian said during the earnings call that he wants to see a “long-term remuneration goal” of $10 billion from the program. For context, almost one in three active Delta SkyMiles flyers already carry a co-branded Amex card.
The Delta numbers appear strong, with SkyMiles representing 12% of revenue last year. It’s a high number, but a lower figure than peers including American and Alaska Airlines. At the more extreme end of the scale, Southwest’s Rapid Rewards program and Chase-issued credit card brought in 22% of the low-cost carrier’s revenue in 2023.
As travel demand begins to soften from its post-pandemic peak, Delta is likely to lean more heavily on its loyalty arm to push profitability, justifying expenditure into new premium airport lounges and onboard amenities.
American’s second quarter performance was in the spotlight for all the wrong reasons. The airline’s profitability was the weakest of the U.S. Big Three and paints a gloomy picture ahead of a crucial renegotiation with credit card partners.
Despite the melancholy mood music, loyalty remains a relative strength for the airline. It’ll be hoping to build momentum in this area as it talks with Citi and Barclays about an even more lucrative new deal.
Although American did not share exact figures, CEO Robert Isom said loyalty revenues rose 8% year-on-year in the second quarter. This mirrored earnings growth at Delta.
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