New restrictions for buddy pass travel
May 10, 2010
Delta is restricting all buddy pass travel to or from Accra, Ghana, and Dakar, Senegal, starting June 15, after a recent review showed a significant amount of lost revenue in some markets attributable to buddy pass use.
Revenue Management recently conducted a systemwide review of buddy pass use by market. The review showed the impact on passenger revenue in specific markets where there is particularly high buddy pass volume.
“The reality is that many passengers who use buddy passes would have otherwise purchased a confirmed ticket at a higher fare,” said Tom Bach, s.v.p.-Revenue Management, and Rob Kight, v.p.-Compensation, Benefits and Services, in a memo to all employees. “Essentially, in many markets Delta is competing with the buddy pass program to sell seats and retain profitability. In some extreme cases, we’re even losing pricing power because many revenue passengers will not pay more than what they could for a buddy fare. This has to be corrected.”
The study showed that buddy pass use typically accounts for 1% or less of the total revenue passenger traffic in a given market. Some markets have virtually no buddy pass riders and others, usually popular tourist destinations, may reach as much as 2% to 3%. Markets with buddy pass use at 5% or more create a significant problem with revenue dilution, the memo said.
Displaced revenue in these markets, such as Accra and Dakar, is estimated at more than $1.5 million each year, according to the study.
For travel to Accra, the study showed that revenue passengers can get a roundtrip buddy pass for about $500 instead of the peak season fares of $1,500 to $1,900 for coach or $3,800 for BusinessElite.
“This is a direct hit to Delta’s bottom line and a direct hit to the amount we pay in profit sharing,” the memo said.
Employees and retirees who have buddy passes listed for travel to or from Accra or Dakar on or after June 15 should contact their buddies to change their listings. The embargoes will be in place for at least one year or until the revenue impact has recovered in these markets, the memo said.
Employees and retirees, and their eligible pass riders, are not affected by the new buddy pass embargo and may continue to use their travel privileges to these cities.
Delta will continue to have systemwide buddy pass embargoes on peak travel dates and market-specific buddy pass embargoes during special events. Additionally, new international stations will continue to have a buddy pass embargo during the first year of operation to allow frontline agents to familiarize themselves with Delta’s policies and procedures.