Generally speaking there are two types of airline frequent flyer programs on the redemption side:
- There are revenue based frequent flyer programs, whereby the number of points required for a free ticket is directly related to how much that ticket would cost in cash; these programs generally don’t have blackout dates
- There are frequent flyer programs with awards charts, whereby the number of points required is pre-determined, and it doesn’t matter how much a paid ticket would cost; these programs generally have blackout dates, and also have different award tiers
Revenue based vs. award charts?
For the leisure traveler, I tend to think a revenue based frequent flyer program is a great option. There’s no learning curve, since each point gets you a set amount towards the cost of a ticket. In other words, there’s typically no wrong way to redeem. They won’t be outrageously lucrative, but you also won’t get screwed.
That being said, if you’re like me and put the effort into learning the programs, there’s so much more value you can get out of programs with award charts.
For example, you can can redeem ~92,000 Singapore Airlines KrisFlyer miles for Suites Class between Los Angeles and Singapore, a ticket which would otherwise cost $10,000+ one-way if paying cash. You could never get that kind of value through a revenue based frequent flyer program. On the opposite extreme, though, you can also get horrible value out of these types of programs.
Programs devaluations are unjustifiable for revenue based frequent flyer programs
I’m sure some will disagree with me, but personally I think award chart devaluations are unjustifiable for revenue based frequent flyer programs.
For example, Southwest Rapid Rewards is a revenue based frequent flyer program, and last April they devalued their redemption rates. When redeeming points, they went from requiring 60 points per dollar of airfare to requiring 70 points per dollar.
That basically means that each Rapid Rewards point went from getting you ~1.67 cents towards the cost of airfare to getting you ~1.43 cents towards the cost of airfare.
Usually when airlines devalue award charts, the argument is that the cost of airfare is increasing, so the number of points required should increase as well. But with a revenue based program, that argument doesn’t hold up. The increased cost is already accounted for — when airfare is more expensive, so are the redemption costs.
So how can they justify devaluing how many cents worth of airfare each point gets you?
Is Southwest about to radically alter their program?
Yesterday Southwest published some “Rapid Rewards News for [their] valued Members.”
When it’s phrased that way you know the changes aren’t going to be positive. The update basically boils down to the following (bolding mine):
We created Rapid Rewards® because we think you deserve to actually feel rewarded. And, from time to time we must make some updates to our program. Beginning April 17, 2015, the number of Rapid Rewards Points needed to redeem for certain flights will vary based on destination, time, day of travel, demand, fare class, and other factors. However, there are still many flights which will stay at the current redemption rate. And don’t forget that when fares go on sale, so do the points needed for redeeming for a reward flight on those fares.
Is this the future of devalued loyalty programs? The number of Rapid Rewards points required for a redemption already varies based on factors like “destination, time, day of travel, demand, fare class, etc.” Because all of that is reflected in the price of a ticket, which is what the number of points required is based on.
But it seems they want to make the program less generous, presumably by making each point worth less for peak flights.
Southwest really has come a long way from their glory days. While there are still plenty of great things about them, their commitment to transparency and doing business differently than the competition has certainly changed. It’s interesting that they’re releasing this “news” without actually revealing all the information about the changes.
What do you make of this Southwest Rapid Rewards announcement?