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Delta is about to offer one of the coolest upgrades yet—to very few flyers

Written by on July 28, 2015

Bloomberg –

Delta Air Lines is cooking up what may be one of the most appealing flight upgrades yet: one that allows you to bag a commercial flight altogether and board a private jet.

The new upgrade program, targeted at what Delta calls “high-value customers,” will cost $300 to $800, depending on destination. Beginning as soon as this week, passengers who have achieved elite or “medallion” status in Delta’s SkyMiles frequent-flyer program will be eligible for the upgrade offers. But officials stress that the initial number of private jet flights will be small and focused mainly at Delta’s East Coast hubs.

“This is truly a groundbreaking new approach from both industry standpoints,” said James Murray, vice president of operations at Delta Private Jets (DPJ). “Nobody else can do what we’re talking about doing.”

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Delta’s decision to merge some of its commercial traffic with its 66-aircraft private jet unit shows the airline’s relentless focus on finding new revenue or squeezing more from existing customers, which is why carriers now appear to nickel-and-dime passengers for everything from snacks to movies once free of charge. Corporate travelers, who are less price-conscious because they book travel on their company’s credit card, represent the most attractive business for most large network carriers. The move reflects the airline industry’s keen focus on differentiating air travel and showering their most profitable customers with ever-higher levels of perks and amenities. For example, Delta, like most of its rivals, already drives lucrative passengers from one flight to another in luxury cars, allowing them to bypass the airport terminal gauntlet. (Delta uses Porsches, United goes with Mercedes, and American chose Cadillac.) Chauffeuring customers to a private jet is a logical brand extension.

The upgrades could also help Delta quell one of the thorniest—and costliest—problems in private aviation, known as “empty legs,” or the need to reposition a jet without having a customer headed to that particular location. These inefficient flights account for roughly a third of all private jet flights, despite years of effort by the industry to minimize them. The advent of greater tracking data and new software analytics tools is likely to help private jet operators reduce their empty legs even further, said Erik Snell, president of Delta Private Jets.

Initially, only Delta’s top customers—those at the highest “Diamond Medallion” level, which is met when people spend $15,000 at Delta and travel at least 125,000 miles or 140 flight segments per year—were going to be invited to purchase the upgrades. But the company has spent several months tweaking its model and decided to expand the pool of potential customers by opening it to people at the lowest elite tier, those who travel 25,000 miles or 30 segments annually, and who spend $3,000. Most of the upgrades will involve travel scheduled the next day, although Delta Private Jets said it would have some flights that offer travelers as much as 48 hours’ notice.

Earlier this year, Delta Private Jets filed for a patent on the scheme of how to transfer passengers from a commercial carrier to a private jet operator. DPJ, a wholly owned subsidiary that calls itself the fourth-largest U.S. operator of private jet flights, has received regulatory approval to fly Delta passengers on 160 domestic routes, although it plans to begin mainly with flights among Atlanta, New York, and Cincinnati/Northern Kentucky International Airport, near the unit’s Erlanger (Ky.) headquarters. 

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Over time, Delta Private Jets officials said the program might expand, potentially deploying part of the private jet fleet toward regular upgrades on certain routes, complementing Delta’s commercial service. And depending on passenger reception, Delta may begin marketing the option of a private jet upgrade as commonly as it touts airport lounges, first class, and other amenities for the most lucrative travelers. Still, “Delta operates a whole lot more flights than we have [private] airplanes,” Murray said, which means an upgrade to a private jet is likely to remain a niche offering.

Yet, the “empty legs” problem of a vacant cabin won’t ever be eliminated. That’s one reason executives at the Delta unit were keen to see if they could match up routes with their mainline parent and harvest some of Delta’s most profitable customers—many of whom might not have flown privately before but could afford to.

Across the private jet industry, a trip averages about $5,500 per hour, DPJ officials said. At an initial $300-$800 per flight, some Delta customers will find the upgrade an inexpensive way to sample the swank romance of private aviation. “The hope is that once someone flies private, and they don’t have to go through TSA, and they have the experience, then they may determine that they want to fly private more often,” said Cyril Turner, Delta Private Jets’ chief executive officer. Financially, the goal is “not necessarily to break even but to at least get some type of income” from the empty flights, Turner said in a June interview.

The project has not been without hiccups. Delta Private Jets had hoped to launch the upgrades in early June but quickly found a need to tweak the initial $800 flat fee and to brief corporate travel managers about the initiative.

Logistically, the operation faces a variety of hurdles beyond jet scheduling. Some corporate travel managers may not love the idea of employees spending more money at the last minute, or now having to devise a travel policy on who pays for it. The company also had to receive Department of Transportation approval for its plans; it is allowed to fly commercial passengers four days per week, Tuesday-Friday, and must submit for review new cities it wants to add. The upgrade program, for now, will include only domestic flights. (And miles junkies, take note: There’s no bonus in the upgrade, just the usual mileage accrual one would get taking the regular Delta flight.)

DPJ offers some of its charter-jet customers a 10-hour guarantee, meaning that it will make a plane available anywhere in its network with that much notice. That provision complicates the ability to match a jet with Delta’s scheduled routes; some of the private jet fleet repositioning happens overnight, when Delta has few domestic flights. “If we lock up an airplane two days out, we can put ourselves in a potential bind as far as covering” the regular business, Murray said. In other cases, he said, “sometimes we have trips booked for specific airplanes and so we know exactly what that airplane is going to be doing in three days.”

DPJ has been testing and revising its model in earnest since May. The company had a customer—who later changed his travel plans—booked for a June 12 flight from Atlanta to Cincinnati on an eight-passenger Cessna Citation X. The first flight is now expected to occur as early as July 29, although company officials said the timing remains uncertain.

“As it stands right now,” said Murray, “there’s only a very small subset of the population that can afford to fly privately on a routine basis.”

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