Bloomberg

Delta Creates a Class Higher Than First Class

(Bloomberg) -- Last year, Delta Air Lines Inc. unveiled a unique experiment in upgrades. It gave its very frequent flyers a chance to book a seat most can only dream of—on a private jet. For a few hundred dollars more, the dream could become reality.

The carrier later backed away from the offer and is now transforming it into the ultimate frequent flier point spend.

Delta briefly offered $300-$800 paid upgrades to private jets last summer, a viable option when a customer’s travel plans aligned with the smaller aircraft’s journey. The trouble with making this work was logistics, said David Sneed, chief operating officer at Delta Private Jets.

The private aviation business works on short lead times because movers and shakers summon a jet with little notice. It’s a good business when there’s a paying customer, but it also means that the aircraft operator rarely has much of a heads-up when a plane will be flying back empty—typically 10 hours or less. Those were the legs Delta Private Jets had sought to match with Delta passengers heading to the same destination. Most people—even road warriors—need a tad more notice. On top of that, the upgrades were a heavy lift for staff to coordinate.

Delta has a very small window when it knows it has an empty leg, which constitute about 30 percent of overall private-jet flying time, Sneed said. “We might not know until 10 p.m. the night before” that an empty flight will exist, he said.

But Delta has a new twist on how to move passengers to its private jet subsidiary: Get time on private jets by cashing in miles. Delta’s SkyMiles members can spend 2.5 million miles for a $25,000 jet card, which is equivalent to just over four hours in a smaller “light” private jet. Customers will be able to fly solo or with as many people as there are seats on the jet. Larger mileage increments can also be used for longer flights or larger aircraft.

Delta said the program will include all of the roughly 5,000 airports at which DPJ now flies.

A balance of millions of miles may strike some as enormous, but it’s not a crazy amount for many business folks who fly virtually nonstop. Delta has thousands of SkyMiles members with balances above 1 million miles, said Karen Zachary, the program’s managing director. The potential customer audience also includes those with points that can be transferred to SkyMiles, such as American Express Membership Rewards points or those from Starwood’s Preferred Guest program.

The SkyMiles link also provides Delta with another unique way to lure people to cash in miles, which airlines must count as a balance sheet liability. “This is really an enhancement to the SkyMiles program,” Zachary said. “We’ve worked hard on trying to make miles more useful.”

Delta Private Jets, which is based at Delta’s former Cincinnati hub airport in Hebron, Ky., is a wholly owned subsidiary of Delta. The world’s second-largest carrier acquired the company in 1999 with its acquisition of Comair Inc., the former regional airline that had begun the charter business in the 1980s. For those who actually pay to fly privately, Delta’s regular private-jet cards start with a minimum $100,000 deposit, with hourly rates that are guaranteed for two years. The deposits are not refundable. Jet-card buyers also receive the highest level of status, diamond medallion, in Delta’s frequent flier program.

The airline expects to relaunch the paid upgrade game once it has developed mobile app technology that can coordinate empty legs and passenger itineraries. Delta flew only two passengers, a couple from Cincinnati, on one private-jet upgrade flight in August 2015 before concluding that more robust technology was required, said Sneed, who is also a Delta 767 pilot. “Quite frankly, what we need is a mobile app that is real time, that can speak between the DPJ system and the Delta system,” he said.

To contact the authors of this story: Justin Bachman in Dallas at [email protected] Michael Sasso in Atlanta at [email protected] To contact the editor responsible for this story: David Rovella at [email protected]

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