Breaks on fees to visit its elite airport lounges aim to lift loyalty and revenue. But some of Delta's frequent fliers are not amused.
Delta Air Lines' exclusive Sky Clubs recently got down to earth.
In an effort to lift revenue, Delta is discounting fees to its posh airport lounges that cater to its elite frequent fliers. Earlier this month, it offered one-day passes on Groupon for 50 percent off and five-visit passes for $89.
Regular customers usually pay annual fees of $450 for the club or $50 to get in for one day. Frequent fliers with Diamond Medallion status get free access to Delta Sky Club lounges worldwide.
"We think it's a great way to get customers to try our product," said Kelley Moore, general manager of Delta's Sky Clubs. "We know once a customer tries us ... they typically convert."
About 5,000 people purchased the Groupon deals this year. The most recent promotion ended earlier this month, but Delta said it will continue to offer discounted passes to its Sky Clubs.
Delta, the largest carrier at the Minneapolis-St. Paul International Airport, said the deals help attract younger, female fliers, a demographic the airline feels is missing from the mostly male, middle-aged crowd at the Sky Clubs.
But the discounts are causing a stir among Delta's most loyal fliers, who say the move will cheapen the experience at the lounges and diminish their hard-earned, frequent-flier status.
"The cheaper they make it for somebody to go in, the more it's like the regular concourse," said Rick King, a technology executive at Thomson Reuters. "If it's like the regular concourse, the benefits for me go down."
King, who gets in the lounges free with his Diamond Medallion status, worries that more visitors could make it harder to grab seats with his colleagues before his flights. Some fliers have complained that it's already too packed during peak flying times, with passengers having to wait in line for orange juice in the morning.
"It's like a Greyhound Bus depot. Way too crowded," said Edward Bertsch, a Minnesota IT security consultant. "The club to a certain extent should be a club. It shouldn't be a profit center for the rest of Delta."
The add-on strategy
Indeed, the Sky Club discounts are another way Delta is seeking to raise revenue as it tries to offset rising fuel costs. Delta made close to $200 million in revenue this year using so-called à la carte services, which can range from baggage fees to premier seating assignments. Delta hopes to increase that to $1 billion in 2013.
"Anything they can do to generate long-term revenue is going to be good for the airline," said Bob Herbst, founder of AirlineFinancials.com, an industry data and analysis website. Also, attracting passengers to lounges will strengthen the customers' loyalty to the company, Herbst said.
Delta has spent more than $25 million over the past two years to revamp its existing Sky Clubs and open new lounges.
At MSP, the main lounge was given a modern look. Conference rooms were removed to make way for sleek work spaces, with plenty of electrical sockets for tablets, smartphones and laptops. MSP's club also got a luxury bar that serves premium alcoholic drinks.
Moore doesn't think the Groupon discount will degrade the experience for regular Sky Club members. She said the Groupon deal is only offered at select Sky Clubs that have enough space for the new users.
"If you go to a luxury retailer or an exclusive brand and you happen to find something that's on sale, that's a great deal," Moore said. "You don't expect the store to give less service just because you bought something at a discount."
Moore said the expansion into Groupon aims to attract the website's loyal clientele of younger female shoppers. Delta said 54 percent of the Groupon buyers were women and 70 percent were ages 26 to 50.
Visits on the rise
Delta believes its efforts are working. More than 10 million people have visited its 53 Sky Clubs this year. Delta expects the visitor total to be 15 to 20 percent higher than last year.
Analysts said creating a comfortable lounge is key to keeping coveted business travelers, who make up the bulk of frequent fliers.
"They need it because that's the only place you can be productive during the waiting time," said Joe Brancatelli, editor of Joe Sent Me, a business travel website.
Brancatelli said airlines are looking not only to enhance the flight experience, but also to augment their offerings outside the plane with features such as the Sky Clubs.
"In the front of the plane, there isn't much more they can do for you," Brancatelli said. "The competition moves to the ground."
Delta did a pilot program with Groupon last year in which it sold Sky Club passes at a discount.
The test was so successful that the airline partnered with the online coupon site to continue offering discounts to its Sky Clubs.
Groupon didn't return calls seeking comment.
Rivals, too, have discounts
And Delta isn't the only carrier offering such discounts at MSP. United Airlines, which also has a club at the airport, was offering discounts in October on its one-day passes, letting walk-in passengers pay $19 instead of the usual $39.
And even if Delta's local Sky Club members are upset about the Groupon deals, they are unlikely to stop going or switch airlines. Delta carries nearly 80 percent of the passengers at MSP.
"You're already loyal because they fly where you want to go from here," King said.
Wendy Lee • 612-673-1712