Did Southwest Rapid Rewards Shoot Itself in the Foot?

Apr 21, 2015

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Today, TPG Senior Points & Miles Correspondent Jason Steele looks at the recent changes to Southwest Rapid Rewards to determine the overall effect on pricing and what it means for award travelers.

It stinks when a company devalues its points or miles, but the smell is truly rotten when the extent of that devaluation is unspecified, and can’t be clearly spelled out in an award chart. We saw this behavior back in February when Delta pulled its award charts altogether. Sadly, Southwest Airlines followed suit last Friday when it decoupled the value of its Rapid Rewards points from a fixed value.

What happened

When Southwest announced Rapid Rewards 2.0 a few years ago, members were assured that they could book flights in the Wanna Get Away fare class at a rate of 60 points per dollar (1.66 cents in value per point). that lasted about a year until Southwest changed it to 70 points per dollar (1.42 cents in value per point).

A few months ago, Southwest announced yet another innocuous sounding “program update” that took effect on April 17th, and the airline could not have been more vague about the changes. According the announcement “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.” Fans of the Rapid Rewards program (like me) were left scratching our heads and wondering how bad things would get.

Now that the 17th has come and gone, we have a clearer picture of what has changed.

Some better values, some worse ones

To my surprise, I found that some awards were actually offering more value per point than before. For example, Wanna Get Away fares on flights from Atlanta to Ft. Lauderdale on May 13 were pricing out at either $49 or $89,  with redemption costs of 2,273 or 4,877 Rapid Rewards points, respectively. That equals a stunning value of 1.7 – 1.9 cents per point (after subtracting the $5.60 security fee from the cash price of the ticket).

Price in points, resulting in 1.7- 1.9 cents per point in value.
Price in points, resulting in 1.7 – 1.9 cents per point in value for Wanna Get Away fares.

In other instances, I found redemption values of 1.7, 1.64, 1.49, 1.4, and 1.25 cents per point. In general, the value of points declined as the ticket price went up. This observation is consistent with how Southwest pricing works for Anytime and Business Select fares, where points are worth less as the dollar value of the fare rises.

So what we seem to have is a wider dynamic range of pricing, with the highest priced fares offering less value per point, while some of the least expensive fares returning even more value per point than before.

Looking forward

Clearly this change could work out in your favor, but I still don’t like it. The value of Rapid Rewards points is harder to figure in the current iteration, but even more worrisome is that Southwest might decide to make further adjustments in the near future. I was also dismayed at the timing of the change, which came just before the holiday schedule was released. When fares for Thanksgiving and Christmas are made public, I won’t be surprised if the redemption value is on the low side.

Southwest still has plenty going for it, like no change fees and the companion pass, but the truth is that nobody knows what value to expect from Rapid Rewards anymore, which is not how a loyalty program should work. For the moment, the theoretical floor seems to be at 100 points per dollar, a value of just one cent per point. Southwest currently allows you to redeem for gift cards at that rate, so imposing anything close to that for flights would be senseless, especially considering that fares purchased with gift cards earn points.

Bottom line

While the value of Rapid Rewards points may have gone up in some situations, trust in the Rapid Rewards program has definitely taken a hit. Plan to have a calculator at hand the next time you try to redeem for Southwest flights, since that’s the only way you’ll know what sort of value you’re getting.

What redemption values have you seen for Southwest flights since the recent change?

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.