Window or aisle? Delta seat blocks lead to highest yields

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Delta will continue blocking middle seats through April 30.
Delta will continue blocking middle seats through April 30.

During the pandemic, Delta Air Lines has seen its fare premium grow relative to full-service rivals American and United.

Now, with Delta's recent decision to extend its middle seat block through April, the Atlanta-based carrier appears to be doubling down on the idea that burnishing its claim as the high-end U.S. airline brand now will pay dividends when the Covid-19 pandemic finally ends.

"I think, from all the research we've done, from all the data that we see, our brand has never been stronger, and demand for our products and services has never been stronger on a relative basis. And we're planning on capitalizing on that on the back end of this," Delta CEO Ed Bastian said during the airline's fourth quarter earnings call in January. 

Delta, which has long worked to position itself as the U.S. premium airline brand, entered the pandemic with higher average yields -- the average fare per passenger mile flown -- than American and United. Delta's 2019 yield was 17.79 cents per passenger mile compared with 17.41 cents at American and 16.55 cents at United.

That lead increased substantially in 2020. For the year, yield at Delta dipped just 1%, to 17.55 cents. By comparison, United's yield decreased 3.4%, to 15.98 cents. Yield at American plunged 9.2%, to 15.81 cents.

Middle seat blocking was an important factor in Delta's improvement relative to both airlines, said Gary Leff, author of the View From the Wing blog. Though Delta was joined in that practice by Southwest, Alaska and JetBlue for most 2020, United and American chose not to take that step.

Leff said customers have responded to the spacing Delta has maintained on planes, as well as other health safety efforts, and are willing to pay extra for it. Delta also has grown its yield differential because middle seats are often discounted, therefore driving yield down. 

Beyond the middle seat factor, American saw its yield plunge as it made a strategic choice to fly more than United and Delta in 2020 in an effort to gain market share and take advantage of the low marginal operational costs that resulted from cheap jet fuel and federal payroll support.

United's yield, said Leff, was hit particularly hard by the deep collapse of international travel, since it is more invested in international premium seats than Delta and American.

Still, middle seat blocking remains a key to Delta's current branding strategy. As JetBlue, Southwest and Alaska have done away with the practice over the past few months, seat blocking has become a growing differentiator for Delta.

"We want our customers to have complete confidence when traveling with Delta, and they continue to tell us that more space provides more peace of mind," Bill Lentsch, the carrier's chief customer experience officer, said as Delta announced on Feb. 8 that it would extend seat blocking from at least March 31 until at least April 30.

Joe Brancatelli, editor of JoeSentMe, a subscription website for business travelers, said the approach Bastian is taking is a smart one.

"From a long-term perspective, he is winning gigantically," Brancatelli said in a Feb. 9 interview. "He's yielding hundreds of millions of dollars in good PR."

As an example, Brancatelli noted that later that day he would be going on a Chicago radio station to talk about the seat blocking extension. 

Still, the policy isn't without drawbacks. Southwest reported in October that blocking middle seats had cost it $40 million over the previous two months, and it expected that figure to be closer to $50 million in November, as Thanksgiving increased traffic. 

Brancatelli said marginal costs like that are worth it.

"I'd rather be Delta than American and United, because at least at the moment, they're admired," he said.

It remains to be seen whether Delta can translate the branding benefits it is currently enjoying into long-term relative improvements in yield and share of premium traffic compared with competitors.

Leff noted that Delta's normally reliable operation melted down over the holidays, when the carrier was forced to cancel approximately 1,000 flights around Thanksgiving and Christmas. Weather was a factor in the Christmas cancellations, but those holiday problems overall were driven by operational miscalculations as Delta recalibrates into a smaller airline with fewer active pilots. Delta's cancellation rate was second worst among the 10 mainline U.S. carriers in November, down from second best a year earlier, according to DOT data.

"If they are not able to deliver on the reliability piece, I'm not sure the other stuff will matter," Leff said. 

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