There has been much speculation and hand-wringing about Southwest’s Rapid Rewards program for over a year now since the company first intimated that they would be updating their frequent flyer program. That update was delayed a couple times but it has now been set; the new Rapid Rewards program will launch on March 1, 2011.
The program is a major change from the status quo (and probably not a good one for you).
Earning Points: Rather than earning based on segments or distance flown credits will accrue based on fare paid. This is similar to the TrueBlue program from JetBlue and the Elevate program from Virgin America, among others. Unlike the other two programs, however, the new Rapid Rewards will reward higher fares with increased earning rates. The lowest, Wanna Get Away fares will earn 6 points per dollar spent. Anytime fares will earn 10 points/dollar and Business Select fares will earn 12 points/dollar. Loyalty programs should reward the best customers more and this sliding scale certainly accomplishes that goal.
Redeeming Points: Similar to the earning options, redemption options will be dollar-based and variable based on the type of fare purchased. The 6/10/12 ratio for Wanna Get Away/Anytime/Business Select will remain but redemption will be at a 10x multiplier to earning. A $100 WGA fare will cost 6000 points to redeem ($100*10x*6 = 6,000). A $400 BS fare will be rather more expensive to redeem at the rate of 48,000 points ($400*10x*12 = 48,000). This is a significant change from the current program where last minute redemptions are, at most, only 2x the regular reward rates.
On the plus side there are no blackout dates or restrictions on the redemptions so every seat will be available. But those last few seats on the plane – or just those booked close to the day of travel – will be much more expensive.
In addition to redemption on Southwest it will be possible for folks who also hold a co-branded credit card to buy awards for international travel, hotels, cruises, rental cars and other travel benefits. Details on this program are not yet published so it is not clear just how valuable these points will be, but if precedent from other programs is followed they will not be a particularly useful option.
Point Expiration: Points will never expire so long as there is earning activity in the account in the previous 24 months. While redemption will not count as activity for the sake of extending the life of the points all partner activity will, so a hotel or rental car credit will keep those points alive. And the 24 month window is probably long enough to cover most folks who ever have a chance of really getting value from accumulating the points anyways.
Elite Status: With their A-List and Companion Pass programs Southwest has rewarded folks who fly a significant amount during any year. Those programs will remain, with the qualification requirements and benefits changing a bit.
- A-List qualification will be 25 one-way trips or 35,000 base points in a calendar year. Members who reach this status will earn 25% bonus points on top of their regular earning. They will also have priority on standby travel, Fly By priority security access and a dedicated phone number.
- A-List Preferred, a new level in the program, can be earned at 50 trips or 70,000 base points in a year. In addition to the A-List benefits members will earn 100% bonus points and also receive free in-flight internet access. The free WIFi is a unique benefit that Southwest will be offering.
- Companion Pass qualification is set at 100 trips or 110,000 points. Unlike the A-List and A-List plus it seems that the points qualification here is any points earnt, not just tier points that come from flying or CC spend. Just like today a Rapid Rewards member reaching that level will be able to designate a companion who can travel fare-free on the same itinerary for the year.
The base point qualification levels for these tiers seems high, expecting an average fare of over $230 each way for Wanna Get Away earning rates. A Business Select customer will almost certainly earn the status based on points rather than segments but not all that much faster than the person buying the cheapest fare. In the San Francisco – Los Angeles market, for example, it will take 18 one-way trips based on the current Business Select fare ($166) to reach A-List while only 25 trips at the $59 discount fare. Certainly there are other benefits to purchasing the Business Select fare but getting status significantly faster does not appear to be one of them in many markets.
What it all means
Clearly there is a lot to digest here and there are a lot of changes that will vary in value based on the type of customer you are. For the folks (like me) who travel on the cheapest available fares the changes are pretty horrible. The earning rates are limited and the redemption rates are magnified. At worst (earning only on WGA fares and redeeming on BS fares) the value hits about 5%. If you only every pay for BS fares and manage to redeem on WGA fares then those numbers switch around, making the value something like 20% which is rather respectable. And if you’re flying enough to hit A-List Plus (about $5,800 in spend on BS fares) you’ll be earning at a 2x rate due to the 100% bonus. That can drive the value up to 40% if you’re still able to redeem on the WGA fares. Most folks will never realize that high a rate and odds are it will be somewhere around the nominal 10% rate for most customers. Not horrible but not great. And, more to the point, much harder to game.
Compared to the new TrueBlue program the “Rapid Rewards 2.0” system seems more mature and developed. The existing partner infrastructure certainly helps in that but Southwest has also maintained their elite program and even improved it in a few ways. While JetBlue does reward increased spend over time in $500 increments Southwest starts at a slightly higher point value and provides the bonus on all spend, not just at the threshold points, once you hit the status level. Southwest also has established a number of other useful benefits for their elite members beyond just point earning (priority security & phone access and free WiFi are the main ones).
The folks who spend money with the airline are going to come out of this change doing quite well. It makes sense for the company to reward that. The key will be convincing the occasional traveler that there is still value in the program. The extended expiry policy will actually do that to some extent while the advertising of no black-out dates and last seat availability will make things appear good to many customers.