Delta is the latest to jump on the buy-now, pay-later train with American Express’ Plan It offering. The airline hopes the functionality will help it attract — and keep — more cost-conscious younger travelers who have been leading the recovery.
Younger travelers are big business for airlines. No matter what one thinks of millennial, Gen Z, and younger cohorts, these generations make up more than half the U.S. population and are among those leading the air travel recovery.
Delta Air Lines has these demographic shifts firmly in its sights with its latest booking offering: a buy-now, pay-later function provided by American Express. The Plan It tool, which debuted Thursday on the Atlanta-based carrier’s website and its app, gives potential travelers three options to pay for their trips in installments over three to 24 months. American Express charges users a fixed fee based on the total for the purchase monthly for the duration.
The feature is the latest in the broader trend towards more trip flexibility for travelers. The largest change in this sphere was when airlines ended most change fees early in the Covid-19 pandemic. As American Express Head of Global Lending and Co-brand Anthony Cirri put it in an interview, “consumer travel needs have changed” and Plan It is the “next evolution” in this process.
Of course American Express, and Delta for that matter, are not the only ones offering buy-now, pay-later options for flights. Air Canada, Southwest Airlines, United Airlines, and others use the third-party vendor Uplift for the feature on their websites. The offerings not only provides travelers with additional flexibility but also help reduce what the industry calls “cart abandonment” — or when someone selects a flight but does not book the trip for whatever reason — rates.
Asked how Plan It differs from Uplift, Cirri said the charges are included in an existing customer’s bill, and do not require an additional credit check and new bill to monitor. And, as an added benefit, Delta travelers who use the option with a co-branded credit card receive all of the benefits of using such a card, whether it’s free checked bags or lounge access.
But Delta’s addition of Plan It is about more than just evolving consumer trends. It is also about capturing a larger chunk of the college-age and recent graduate travel segment — in other words Millennial and Gen Z flyers — for Delta, said the airline’s Senior Vice President of Customer Engagement and Loyalty Dwight James. Small- and medium-sized businesses are also expected to have interest in the feature.
“The key is catching these younger generation flyers such that they’re moving them into our ecosystem and they’re able to graduate with us, excuse the pun, over time,” he said.
Establishing relationships with more of these younger travelers that number more than 166 million Americans is a strategic initiative for Delta. During its investor day in December, executives spoke at length about this segment of the market and their success — at least in their own view — in capturing an increasing share of it.
“You can’t just be a premium [airline] and not participate in the commodity levels of the industry. No million miler starts as a 0-miler. They all start somewhere. And if you look at where price is more important, it tends to skew younger,” Delta President Glen Hauenstein said in December. Competing for these travelers gets “people in the front door with attractive prices,” and helps build brand loyalty.
Plan It plays right into getting more price-sensitive travelers “in the front door,” as Hauenstein put it. In addition to providing additional flexibility, the tool allows someone to spread the cost of an expensive airplane ticket — for example, for a pandemic-delayed vacation — out over multiple months, which can make the purchase accessible to more people.
And Delta’s loyalty program, SkyMiles, and its co-brand credit cards with American Express play a big role in forging these sticky relationships. In 2021, overall SkyMiles “acquisitions” — or new sign ups — were up 12 percent compared to 2019, and for its co-brand credit card they were up 11 percent, according to the airline.
The jump was even higher among younger travelers. Acquisitions of millennial and Gen Z travelers were up 30-40 percent last year compared to 2019, said James.
Other Ways to Woo Flyers
Buy-now, pay-later tools are not the only way airlines are trying to build new relationships with would-be travelers. On Wednesday, Alaska Airlines unveiled a new flight subscription offering in California that, while not specifically targeting Millennials and younger travelers, the airline hopes will help it build long-term relationships in the Golden State. Alaska already offers Uplift’s buy-now, pay-later optionality on its website.
Success for Plan It at Delta will be measured in dollars and cents. While Cirri and James both spoke at length about flexibility and relationship building, ultimately it comes down to make more money for both American Express and Delta. Though how this is measured may not be directly to how many bookings are made using the buy-now, pay-later feature but also in the new co-brand credit card SkyMiles sign ups it generates.
In 2019, Delta targeted $7 billion in annual revenues from its American Express relationship by 2023, or a 75 percent increase from the $4 billion the partnership generated that year. The airline splits revenues from the partnership into different business segments making it difficult to measure progress towards its pre-pandemic goal.
“The more we can make our program, our card benefits attractive to our customers, revenue is going to follow,” said James.