Prof. Howard Weiss developed the POM and Excel OM software that we provide free with our text
To use one of Delta Airline’s more than 50 Sky Club airport lounges, a client can either purchase access from Delta, or use Delta SkyMiles, or gain access by owning an American Express (Amex) Platinum credit card. One of the Platinum card’s main selling point is its extensive lounge coverage for multiple airlines. During COVID, while there was less travel and thus less miles being accumulated due to travel, customers were charging more than usual to their Amex cards, enabling them to get elite status with Delta. It also allowed SkyMiles to rollover from one year to the next during COVID. This led to Delta’s lounges becoming overcrowded. And it turns out Delta does not have enough capacity on its special phone lines to afford its elite customers a pleasant experience.
This capacity issue caused Delta to make changes effective in 2025 that will make it harder to access Sky Clubs, and thus reduce the crowding. Delta has raised the price of club membership for those purchasing access to the lounges, restricted membership to SkyMiles elite members, and placed a limit on how long one can stay in the lounge prior to a flight.
The Forecasting chapter in your Heizer/Render/Munson textbook discusses demand management and notes that Disney limits its “FastPass+” reservations, which is similar to Delta limiting its elite status members. But Disney can impose different limits on a daily or weekly basis based on the demand forecast, whereas Delta’s limits will be implemented over the long term. The Capacity Planning chapter (Supp. 7) notes that demand can be reduced by raising prices, which is identical to Delta’s actions of both raising the number of miles required for elite status benefits and raising prices to belong to SkyClub.
Needless to say this has caused a great deal of backlash from Delta customers. Surveys show that 81% of consumers say loyalty programs are important to their decision on which product or service to purchase. In addition, at the big five U.S. carriers, the share of revenue generated by loyalty programs increased from 12% in 2019 to 16% in 2021. Thus, Delta cannot afford to lose these customers.
Classroom discussion questions:
1. Why doesn’t Delta simply hire more staff for the lounges and the phone lines?
2. What factor besides loyalty programs would drive customers to a certain airline?