Earlier this month, Southwest Airlines revealed that it would change just about everything that makes it unique and stand out from the competition. This includes everything from charging for checked bags, to adding expiration dates to flight credits, to introducing basic economy.
At the time, Southwest also revealed that it would change how it prices award tickets, when redeeming Rapid Rewards points. These changes appear to be live now, so let’s cover all the details.
In this post:
Southwest Rapid Rewards introduces dynamic award pricing
Southwest Rapid Rewards is a revenue based frequent flyer program, which is to say that the number of points required for an award flight is based on how much a ticket would cost in cash. Up until now, each Rapid Rewards point has gotten you roughly the same value toward a ticket (somewhere around 1.3-1.4 cents per point).
While there’s minor variability, this means that a $200 flight has generally required twice as many points as a $100 flight. If you’re going to have a revenue based frequent flyer program, then arguably that’s the logical and fair way to do it.
However, the airline has now changed that. A couple of weeks ago, Southwest announced that Rapid Rewards is “introducing variable redemption rates across higher-demand and lower-demand flights.” While this can of course continue to evolve, we’re now starting to see this variable pricing in action.
To start, let’s discuss the logic of this. Airlines want award redemptions to displace as few revenue passengers as possible. Presumably the goal is to incentivize passengers to redeem points for seats that would otherwise go out empty and/or at a very low fare, while discouraging redemptions for seats that would go out full and/or at high fares. Think of it like saver award availability vs. standard award availability.
Of course Rapid Rewards members have already been paying dearly when redeeming points for expensive tickets, since the points requirements reflect the cost. Still, I imagine the goal here is to take that to the extreme. So if you want to redeem points for a high fare ticket or for the last seat on a flight, points will potentially be worth significantly less than before.
So, how bad are the changes? Randomly, I searched a one-way Los Angeles (LAX) to Honolulu (HNL) ticket for right before Memorial Day Weekend, which I’d assume would be a high demand period. Cash fares range from $452 to $582 per person.
Meanwhile if redeeming Rapid Rewards points, redemption rates range from 40,000 to 52,000 points per person, plus $5.60 in taxes and fees.
In other words, you can redeem 40,000 points in lieu of paying $446 in airfare, which gets you around 1.1 cents per Rapid Rewards point. Ouch! That’s significantly less than the previous 1.3-1.4 cents of value you’d get.
I then also searched a one-way San Francisco (SFO) to Los Angeles (LAX) ticket for early November, which I’d assume would be a lower demand period. Cash fares range from $105 to $195 per person.
Meanwhile if redeeming Rapid Rewards points, redemption rates range from 6,500 to 17,000 points per person, plus $5.60 in taxes and fees.
This is where it gets really interesting, if you ask me. If you are willing to book a Wanna Get Away fare, you can actually get good value. You’re paying 6,500 points in lieu of paying $99 in airfare, which gets you a little over 1.5 cents of value per point, more value than you’d typically get before.
However, if you want to redeem for a Business Select fare, you’d pay 17,000 points in lieu of $189 in airfare, which gets you 1.1 cents of airfare.
So we’ll see how this evolves, but it seems to me like the base redemption value of Rapid Rewards points is now 1.1 cents of value per point, and then some low demand flights in the lower fare classes offer more value than that. However, even on those flights, Business Select fares continue to require more points.
Is Southwest killing the Rapid Rewards golden goose?
I know I say this often, but it can’t be emphasized enough. Here in the United States, airlines make very little money directly from transporting passengers. Even at the most profitable airlines, like Delta and United, the cost per air seat mile is very close to the revenue per air seat mile (and sometimes cost is higher than revenue). Instead, much of the profits come from the loyalty programs.
For full service, global carriers, loyalty programs are quite appealing to consumers, as they want elite status that scores them first class upgrades, award tickets for their summer vacation to Europe or winter break in Hawaii, and lounge access.
Historically, Southwest has punched above its weight when it comes to loyalty program revenue, for an airline that has no first class, no lounges, no long haul flights, and no major partnerships for redemptions. I’d say this primarily comes down to Southwest’s massive route network, plus it being an airline that people actually want to fly, thanks to its great service and customer friendly policies. There’s a huge halo effect to that.
With all the changes Southwest is making, including making points less valuable and eliminating all the policies that customers love, will the Rapid Rewards program suffer?
Rapid Rewards has often relied on goodwill and love of the brand for engagement, because most consumers are better off just using a cash back card, rather than a Southwest credit card. The exception is if you’re going for Companion Pass, which is a great deal. Speaking of which… I wonder when that will be “enhanced.”
Will consumers now look at the airline more critically, and consider their options?
Bottom line
Southwest has made major changes to its Rapid Rewards award pricing. Rapid Rewards is a revenue based program, and up until recently, each point got you roughly the same amount of value toward the revenue cost of a ticket.
With these changes, Southwest Rapid Rewards points have more of a variable value. Obviously the goal is to disincentivize redemptions for seats that the airline could sell at a high cost. With these changes having been loaded, it would appear that award tickets in most situations will get you around 1.1 cents of value per point, and in some cases you’ll find significantly better value redemptions than that, but only for the lower fare types.
What do you make of this change to Southwest Rapid Rewards?
The days of WN's marketing savvy ( ie, brainwashing) are rapidly declining. More and more people have realized that WN fares are just as bad or worse than the big 3 even before the Elliott tyranny .... "If ya can't beat 'em, might as well join 'em" on the continual descent to the bottom ...
I think we are witnessing the beginning of the fall of Southwest. I am certain, in 5 years, they'll be filing for chapter11. They are becoming just like every other Tom, Dick, and Harry. Getting rid of everything that made them unique and well liked.
When you add the devaluation of the points to horrible the long long long lay overs ..plus no more free bags!!!! It makes you really think if you want to take this trip at all...I can go to JFK..but for a 76-year-old woman its quite a chore!!
I for one will not sit at a 3 hour Hold over and pay for my bags. If I can fly from JFK non-stop from New York...
When you add the devaluation of the points to horrible the long long long lay overs ..plus no more free bags!!!! It makes you really think if you want to take this trip at all...I can go to JFK..but for a 76-year-old woman its quite a chore!!
I for one will not sit at a 3 hour Hold over and pay for my bags. If I can fly from JFK non-stop from New York to Denver I will have to do so. Going from Riverhead New York to Laguardia in a car. Or a uber for me is a 175.00 $$$..nope
Shelping from Riverhead to Ronkoncoma to jamaica on to the shuttle make for a very long day
I guess everything goes its own way.Southwest.I'm very disappointed
Good night, sweet prince.
But did the ticket price not come down? since it no longer include free checked bag?
Southwest is now Frontier.
Is it now a better deal to redeem through the UR Portal if you have the reserve card?
Better than before yes. Prolly not better than xfers to Hyatt. Don't sleep on UR xfer bonuses esp to AC & BA.
It has always been the case that for low cost flights the redemption rates in dynamic systems appear better, because the fixed per-segment taxes and fees represent a higher portion of the ticket price. It seems they haven’t killed that yet.
Just requalified for companion pass a month ago, I forget the first year I earned it. During these years I've watched everything good about Southwest decline. Even your picture of the pretzel snacks is from a bygone era. Flying with them, at least after they gut companion pass (which most certainly will happen sooner than later, it's just too generous a benefit... They'll likely end the credit card points count option), will become unnecessary. They'll...
Just requalified for companion pass a month ago, I forget the first year I earned it. During these years I've watched everything good about Southwest decline. Even your picture of the pretzel snacks is from a bygone era. Flying with them, at least after they gut companion pass (which most certainly will happen sooner than later, it's just too generous a benefit... They'll likely end the credit card points count option), will become unnecessary. They'll lose business as flying really morphs into best value for cash tickets wins
WN will continue to have customers because a large portion of their market base are not knowledgable travelers. These are the folks that think the WN of the 1980s is the WN of today - always has the lowest fares. The sort of passengers that only look at WN and no other airline because WN has the only non-stop from Bumfuck to Nowheresville. This blog is an echo chamber of fairly savvy people when it...
WN will continue to have customers because a large portion of their market base are not knowledgable travelers. These are the folks that think the WN of the 1980s is the WN of today - always has the lowest fares. The sort of passengers that only look at WN and no other airline because WN has the only non-stop from Bumfuck to Nowheresville. This blog is an echo chamber of fairly savvy people when it comes to traveling. That is not who WN is flying. WN is flying Ma and Pa Kettle to see their new grandbaby in the Midwest for the first time. Or the one-vacation-a-year family of 5 to the Outer Banks. And they'll continue to do so despite these cuts because their passengers simply don't know better.
You should check out the r/SouthwestAirlines subreddit, lots of p'o'ed customers there.
Frankly your elitism and ignorance are showing, along with your ass. Southwest dominates a lot of markets like intra-TX and CA where the majors are also-rans, and/or forcing unneeded connections compared to nonstop. A lot of business customers need nonstops and couldn't care less about upgrades on a 60-90 minute flight, it's dilettante blog readers who don't mind wasting time connecting for that...
You should check out the r/SouthwestAirlines subreddit, lots of p'o'ed customers there.
Frankly your elitism and ignorance are showing, along with your ass. Southwest dominates a lot of markets like intra-TX and CA where the majors are also-rans, and/or forcing unneeded connections compared to nonstop. A lot of business customers need nonstops and couldn't care less about upgrades on a 60-90 minute flight, it's dilettante blog readers who don't mind wasting time connecting for that off chance at scoring an F upgrade, so they can get slop that cost the airline $3 as "first class food".
It isn't that Southwest won't have customers. Spirit has customers, Didn't keep them out of bankruptcy. The question of whether or not Southwest has can succeed after turning itself into Spirit with heart logos and high labor costs due to unionization is what's at stake here.
This is one of the best comments ive read on this blog EVER
One of the best usernames, "Tim Bunn's Toupee" lol
Southwest will survive as long as they keep one thing.
Passengers that have a modicum of basic manners.
Southwest despite its brand image, and even 20 years ago when it was legitimately cheap, never attracted the hordes of low class, ill mannered people who are onboard every Frontier flight nowadays.
I will not fly Frontier any longer. Although 99% of Frontier passengers are just fine, Frontier flights each carry over 200 pax. That means there’s...
Southwest will survive as long as they keep one thing.
Passengers that have a modicum of basic manners.
Southwest despite its brand image, and even 20 years ago when it was legitimately cheap, never attracted the hordes of low class, ill mannered people who are onboard every Frontier flight nowadays.
I will not fly Frontier any longer. Although 99% of Frontier passengers are just fine, Frontier flights each carry over 200 pax. That means there’s an expectation on each flight of 2 problematic pax. Believe me, those 2 pax will find a way to find each other and cause a scene. That is why I will not fly Frontier any longer.
When I say problematic, I don’t mean they’re not going to make partner at a law firm of Skadden caliber. I mean they wouldn’t get hired to be the janitor at Skadden, due to their manners. And by the way the janitors at One Manhattan West are personable and would never cause the kind of scene which every Frontier flight has greater than 50-50 odds of having.
Partners at Skadden don't fly Southwest, least of all have deep understandings of the behaviors of pax on Frontier.
If you worked at Wachtell Lipton or Williams & Connolly, I might value your opinion. But Skadden (i.e., the Walmart of big law)? Lol no.
What?
Arps, I gotta hand it to ya...you've really committed to the bit.
To everyone else, clearly the character of 'Arps' is an exaggerated caricature of posh lawyers. If you didn't realize it before, read the paragraph that starts with this:
"When I say problematic, I don’t mean they’re not going to make partner at a law firm of Skadden caliber."
Clearly that's satire. Andy Kaufman would appreciate. At least 'Arps' is funny, as opposed to the Tim Dunn types.
Also worth noting - the new RR program is based on round numbers. The days of 5,383 points for BWI-ATL have been replaced by 6,000 (or 16,000!)
The other Rapid lRewards variable is how Awards will adjust with the new Basic fare.
#1, Will there be the same flexibility and no fee re-deposit? The revenue Basic fare we'll have a 180 day expiration of the credits.
#2, Will prices drop significantly - it appears that Basic replacing Wanna Get Away is designed to compete with ELCCs more aggressively. For example, presently in Denver, Southwest typically aligns fares to United Economy and ignores Frontier.