Southwest Rolls Out New, Straightforward Rapid Rewards Program

I never thought this day would come. Southwest has been talking about rolling out a new Rapid Rewards program since, I believe, the airline first took flight in the 70′s. And today, the airline is finally doing it, effective March 1. It’s a dollar-based program that is very straightforward. That part I like . . . a lot. It also, however, has a lot more tiers than I would expect for an airline that likes to say it’s an airline for everyone. And there’s also little thing about the Southwest credit card that really bugs me. But overall, it’s a good move.

Let’s start with the basics:

Southwest New Rapid Rewards Structure

Southwest is leveraging its three different fare categories by assigning different earn rates depending upon the category. That’s perfect. Without this, someone who spends $300 on a 500 mile flight will get the same number of points as on a 2,000 mile flight. But now, that $300 fare will be in a higher category for the short haul so it will earn more points. It also gives more reason for people to buy up to the higher fare categories, depending upon the difference in fare.

But where this is really differentiated is in the redemption. We’ve seen Virgin America and JetBlue put out similar programs but they’ve never been so clear on how they calculate redemption points. In this case, it’s 10 times the earn rate in each category. Makes sense. Let’s do some math.

Let’s say I was thinking about buying a $99 Wanna Get Away fare from LA to Denver. If I pay for it, I’ll earn six times that amount, or 594 points, when I fly. Let’s, however, now say that I want to redeem points instead. It will cost sixty times that, or 5,940 points. So far so good. If I decided to buy an Anytime fare for $251, it would earn me 10 times the points. You get more when you buy a higher fare. But the same thing goes for redemption. It would cost 100 times for that.

Why would you redeem for an Anytime fare? Well, when you redeem points, it’s treated like a fare in that category. Let’s say two weeks later you need to change your flight. If it’s more expensive, you’ll have to pay the “fare” difference in points. If only Anytime fares are available, that means the flight is probably pretty full or it’s last minute, so it makes sense to charge a point premium for that as well.

What if you don’t have enough points? While you can’t pay with cash plus points, you can buy points for $50 for 2,000 points and then $25 for each additional 1,000. So you can use your award whenever you want on any fare, as long as you’re willing to buy those additional points (which admittedly, cost more than the value you’ll receive but are good for top-ups).

So what don’t I like about this? This is an airline that has long been proud of its egalitarian model. But it has moved away from that significantly over the last few years, and this continues that trend. Southwest has long had its companion pass for its most frequent fliers and that will stay. A couple years ago it introduced the A-List and now there’s another tier, A-List Preferred. Here’s what you get:

Rapid Rewards Elite Status

I’m not really sure why the A-List Preferred matters here. Yeah you get bonus points and free wifi, but that’s a pretty small recognition of so much flying. (I do love free wifi as a benefit in general, however.) It seems like they need to beef this up further if they really want to make it relevant, but that gets further into this tiered structure that Southwest has always eschewed. Also, not sure why they didn’t try to fold the companion pass earning into the standard format here instead of just keeping it as a legacy standalone. But it does seem that Southwest is convinced it needs elite tiers and is strengthening them over previous offers. The old A-List only gave priority check-in/security and an earning bonus. That’s not bad, just different.

The only part that really does bother me is the new redemption options beyond Southwest flights. You can now redeem points to fly on a bunch of other airlines internationally as well as car rentals, hotels, etc. Only one problem. Southwest will only let you do this if you have a Southwest credit card from Chase. The technology for this is being outsourced, so I assume it’s just the same thing Chase offers its own reward cardholders. My assumption is that Southwest had to make this work economically to make it possible, and that meant giving Chase this sweet deal which will only encourage new signups. But I still don’t like it. Forget about the people who don’t want a Southwest credit card, but what about those who simply can’t qualify for a card? This is not very egalitarian at all.

Now let’s talk transition. The new program starts on March 1. If you have award tickets already earned, you can still use those with no change in the program. If you have credits, you’ll be able to convert points from the new system to old credits to finish it off and earn one last award. The price is 1,200 points per credit. Also, Southwest is now changing from earning during a rolling 12 month period to a calendar year instead. So if you have a companion pass or an A-List membership that expires before the end of the year, it will now be extended to the end of 2011. If it expires in 2012, it will now be good through the end of that year.

Overall, I like what they’ve done here. The earning and redeeming is very simple and sensible. The increased tiering of the program bugs me as someone who has been flying Southwest since Rapid Rewards was the Company Club, but I understand why they’re doing it. It’s all about catering to the top travelers, even though that’s historically a very un-Southwesty thing to do. The only thing I don’t like is the credit card requirement for non-Southwest redemption, but overall, they’ve done a really good job here.

38 Responses to Southwest Rolls Out New, Straightforward Rapid Rewards Program

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  2. Chris says:

    Not sure yet what to think about these changes. I am a A-List member who has earned a companion pass the past 8 years. I doubt I will get the Chase credit card, just hope they still have Rapid Rewards Bonus offers.

    Chris

  3. Wouldn’t it just be easier all around to just give one point for every dollar spent?

    I guess they are basing this (6/10/12pts) system on the fact that all businesses think the American people are stupid and will spend more money “…so I can get 12pts instead of 6″.

  4. Gary says:

    I get why they’ve done this, but the new program is less rewarding than the old so naturally I don’t *like* it. And 3 earning tiers and 3 redemption tiers, with different points multipliers for each, hardly strikes me as simple. Maybe I’m just not good at math.

    • Neil S says:

      Agree. Same as when jetBlue relaunched their program. It’s nearly impossible to figure out how many points I get for flying or need for flying.

  5. Sanjeev M says:

    I wish they had just given you rewards like 5% of whatever you paid. So if you paid $200, you get $10 to use (maybe after a certain waiting time period). This way if you have $10 in “Southwest Money” or whatever, you would be more inclined to use it on things like EarlyBird, etc, which costs less to Southwest than actually redeeming for a full ticket.

    But what they are releasing seems to be much better than before. I wish all airlines had a tier like Frontier’s Ascent, 15,000 miles or equivalent with some benefits but not all of them like Summit (25,000 miles).

    Now if Southwest had a lounge…… :)

    • Sanjeev, if you stay in the same fare class, they are giving 1% of what you spent back in fare dollars, they’re just calling them points for conversion between fare classes. If you go outside of your fare class there is then the 12/10/6 adjustment ratio. For a business traveler who books business select for business but travels in leisure at “Wanna get away” (these fare class names are too damn folksy for my taste.) it’s like getting 2% back on your business travel.

      • Sanjeev M says:

        That makes sense. Thanks for the explanation.

        I’m still not sure though if you can use those points on extras like early bird without using points for the whole ticket (basically cash + points)? E.g. so does EarlyBird check in cost 10 * 10 = 100 points? Maybe I missed that in the FAQ. Should go and check that. Thanks!

      • Robert S says:

        I think it’s a roughly 10% “rebate” of fare dollars, not 1%. Fly 10 short cheap ($60) flights and you earn around 3,600 points. Redeem for a single short cheap ($60) flight and it will cost you around 3,600 points. Varying, of course, for the three different types of fares.

  6. Ron says:

    My employer has a contract with Swabiz that gives double Rapid Rewards credits (two credits per one-way fare flown instead of one). What’s going to happen to such deals under the new program?

  7. James says:

    naa, the companion pass is the only thing that still makes fooling with SW miles/points worth it. If it weren’t for that, you are better off to get a 2% pay-you-back credit card and forget it.

  8. Laura says:

    Sucks sucks sucks! I am in San Francisco and I routinely go to LA for meetings. They aren’t fun trips because I am forced to do them in one day and the flights are always full BUT Southwest used to reward me for using them rather than Virgin or American Airlines since I would get credit for a round trip. I understand that maybe its not “fair” when comparing that flight to a NY to LA but that is what set Southwest Airlines apart. The rewards was simple, easily rewarding, and fruitful. Not only can I wrap my head around the different tiers but now there is no reward difference with me flying American Airlines for business over Southwest. I’m still going to fly with Southwest but now I know I will never rack up enough points in a year for rewards. :(

  9. Dan says:

    Not happy about this at all. The only reason I even have the Chase card is because of the awesome rewards program. Now, it’ll be harder for me to earn free flights (read spend more money). Honestly, I’ve been a SW fan for years, but this really makes it hard to justify having the Chase card and dealing with the cattle cars. I’m switching to Virgin where they have Wi-Fi as a fleet-wide standard and much more comfortable seating. Sorry, SW, it’s been great.

  10. Jon says:

    I agree with the “don’t like it” comments on here. For those of us that use SWA for intra-California travel, we are losing.

    I’ve been a loyal SWA customer and RR member for many years for a variety of reasons. One of those was getting two credits for a round trip. Using the new system, it will take me three round trips to accomplish the same thing using the $59 one way Wanna Get Away fares we see between CA cities.

    Old system, 2 credits for the round trip or the equivalent of 2400 points on the new system.

    New system, $59 x 6 = 354 points each way or 708 points round trip. (2400 points/708 point per round trip equals 3.39 round trips)

    Bottom line, what I used to get for $120 is now going to cost $400. How is that better?

    I get that this is a business decision by SWA and it levels the playing field for all passengers regardless of how many miles the flight is, but I’m going to miss the benefits of those short distance trips. I agree with those that will opt for Virgin America when it makes sense, since there is no longer incentive to fly SWA on the same route.

    • MeanMeosh says:

      I’ve been doing the math, and while this is a devaluation, I don’t think it’s as severe as you think it is, at least not all of the time. An example using your numbers:

      Right now, you need 16 RR credits (8 roundtrips) to get 1 free flight.

      In the new system, 8 roundtrips = 59 each way * 6 * 16 segments = 5,664 points earned

      To get that same flight free = 118 total fare * 60 = 7,080 points needed. You would have to fly 10 roundtrips to get that ticket (59*6*20 = 7,080).

      Essentially, the conversion value = 5,664/7,080 = 80%. So, all things equal, your points are devalued by 20%.

      Now, the big problem here is, under the old system, if all you flew was SFO-LAX, you didn’t have to use SFO-LAX as your free flight. You could have gone to Boston instead. That route currently goes for $278 roundtrip (random weekend in February), which is 278 * 60 = 16,680 points needed. In this case, your devaluation is 66% (5,664/16,680 = 34% of the original value of your free ticket for 8 roundtrips). This would actually get you back to your 3-for-1 argument, as it really would take 24 SFO-LAX roundtrips to get you one SFO-BOS.

      On the flip side, if you did SFO-BOS as your business trip 8 times, for a total of 16,680 points, then cashed in a free trip from SFO-LAS for the weekend (158 fare *60 = 9,480 points), your points would actually increase in value by 76%.

      My biggest problem is that the new system gets away from one of WN’s core values, which is simplicity. Under the old RR system, 8 roundtrips = 1 free flight, always. Now, it might, or it might not, or it might even get you more than one, depending on your flying habits and how you redeem your points. Like someone else said, I understand why they’re doing this, but it seems to me they’re running a real risk of permanently shooing away their old bread-and-butter short haul fliers, who really feel like they’re getting screwed (check out the comments on the story on the Dallas Morning News and you’ll see what I mean). And to some extent, they’re right, depending on how they used to use their rewards.

      I also wonder how they’re going to treat “upsells” like Early Bird Check-in. Do you get an extra 60 points for those $10?

  11. Scott says:

    On the newrapidrewards.com site, here out the Chase RR card will change 2 points per dollar spent with “Southwest and Southwest Rapid Reward Partners” 1 point per dollar spent all other. 3000 points on the anniversary of the account. for the “Plus” level account. For the “Premier” level account it double the points of the “Plus” level account.

    Source: RR Partner tab of the newrapidrewards.com page.

  12. KPO'M says:

    Overall, it appears to work out roughly even for me. One thing I haven’t found out is how drink coupons will be earned. It used to be 4 per every “free flight” earned.

  13. Manu says:

    I’m dissappointed about the changes… one thing that bothers me is when a company tries to spin a change as something that is good and better for its customers. This is clearly not better for the majority of Southwest’s customers, who I think are usually the shorter flight, regional and business flyers. Now this large core of customers will see this reward program diluted.

    Like many I exclusively look at Southwest for my business and personal travel within the US. Most are the shorter range flights (less than 2 hours of flight time). I probably fly Southwest about 30 to 40 times a year. I think this is the core of Southwest customers.

    One of the things I liked was being able to use my reward travel on last minute (less than one week away) reservations. Now I won;t be able to do this without having a significant increase in my cost to my points balance. In addition, the points needed will also be more the further away you fly, since fares for longer flights are higher, and thus the points needed for rewards is much larger as well.

    This is completely different than most of other airlines (with assigned seating) where you pay the same point price within the US. It doesn’t matter if you are going NY to SF, or NY to DC. The points needed is the same. With this new Rapid Rewards program, the points for the longer flight is much larger. I personally saw a great advantage and perceived much value on the credits system that was used… as of Mar. 1. it seems to me this program will take a big hit for the worse.

    Believe me when i say I love Southwest, but these changes are very dissappointing to me. I would probably have felt less bad if the new program hadn’t been presented to me as “Exciting Enhancements”… something I think they are not.

    Southwest will be taking a big hit for these changes, IMHO. They will need to start marketing alos through Travelocity and Expedia, since I don’t think that only distributing thorugh their own website will work any longer. A huge part of the value is gone

  14. CF says:

    It’s very true that this isn’t as simple as the previous program, but that program was too simple to achieve Southwest’s goals. A lot of people are complaining that they won’t be able to get as much themselves as they did before, but that’s really part of the point. Plenty of people are out there trying to game frequent flier programs so they can get max value. (Some days I think that’s really why FlyerTalk exists.) There’s nothing wrong with that, but there’s no reason that Southwest and others shouldn’t try to close some of those loopholes.

    For some people, the ability to actually burn on short haul flights without wasting a full award will be very welcome. Others won’t be as happy, but I personally think that most threats to leave Southwest are hollow. And if not, then Southwest might not miss them that much.

    No offense, Jon, but if you’re a frequent Southwest customer who only buys $59 fares, that’s not necessarily a customer that Southwest wants to work hard to keep. I know it sounds callous, but Southwest and other airlines have no trouble filling their seats, so if they lose someone who always buys $59 fares and this program attracts someone who buys $99 fares, then they’re in better shape.

    This program certainly does reward people for spending more and buying higher fare classes. Those are the people you want to reward. Frequent flier programs reward the wrong behavior a lot, and I think this one is actually going to reward the behavior that should be rewarded.

    I can understand why some people don’t like this, of course, but it still seems like the right move for the airline being where it is now.

    • MeanMeosh says:

      Cranky, I understand what you’re saying, but with all due respect, I think there’s a real potential for unintended consequences here. Let’s put aside the issue of frequent low fare/short haul travelers hoarding rewards and then using them on high fare/long haul routes like HOU-MIA during spring break. Whether you want to keep that type of customer is certainly a debatable point. But look at the larger issue – WN has always differentiated itself by being, well, different. Maybe some of its policies were quirky or didn’t make a ton of business sense, but that quirkiness has attracted a loyal following. Now, Southwest has basically changed its rewards program to be more like a legacy carrier – the more you pay, or the more you fly on longer routes, the better rewards you get. Does it make business sense to do this? Sure. When you combine that with the other changes that make WN look more and more like a legacy, such as flying into busier airports, eliminating the ability to transfer unused ticket credits, tiered loyalty levels, etc., you’re going to get a lot of folks saying “gee, the quirks I love are going away and you’re starting to look at lot like AA, why shouldn’t I fly them instead?” And I’d venture that not all of those loyal followers are ones that only buy $59 short hauls.

      Now, WN does still have a major advantage over competitors, and that’s with the overall level of service, but they’re going to have to double down on that and really try to sell it as a differentiator. Let’s see if they can do it.

      • CF says:

        Southwest is a different airline than it was back in the day, that’s for sure. But today, it is riding high on the halo that people assume it has low fares. It rarely has the “lowest” fares around, but the reputation of never screwing you goes a long way. Combine that with frequent flights and a reputation for service and you’ve got something. Add in no bag fees and no change fees, and Southwest can continue to be a customer favorite. I honestly doubt this change to RR will do anything negative. It might be positive in attracting biz customers.

  15. Manu says:

    CF, you make good points from the other side, but your point was not how it was sold. It was sold as “exciting enhencements”… for the vast majority of SWA customers, these are not exciting nor enhancing. Saying that they are is duplicitous.

    The RR program was what created brand loyalty for Southwest. I cause many customers to use them exclusively. I don’t believe this will be the case any longer.

    And I disagree with your thought that SWA should tell a customer like Jon goodbye… Jon is primarily the kind of loyal customer that made SWA what it is today. Jon will leave, but there will not be another $99 customer replacing him. Mark my words.

    These changes are a monumental mistake…

    • CF says:

      I do agree with you there for sure. Airlines (and companies in general) turn on the spin machine too high. This is a big change and it’s not going to be great for everyone. I can understand why Southwest wouldn’t want to come out and just say that, but sometimes the syrupy proclamations go overboard.

      Let’s talk more about Jon. I’m not saying they should say goodbye to him. They will keep putting those $59 fares out there (though not as often as in year’s past) and they want people like Jon to keeping buying them. But if he really is buying only $59 tickets and will stop flying them because the reward levels are dropping then he’s probably a highly unprofitable customer. So even if they lose Jon and gain another customer paying $59, they’re still ultimately better off because they aren’t giving away free tickets to that customer as often.

      • Manu says:

        Jon, you are correct, and I agree with what you say. What you explain is the company’s perspective. Perhaps the marketing of a major change like this should be presented in a less “syrupy” way and although dissappointed, I think people may have been a bit more understanding.

        After I wrote my original comment, I re-read yours, and you are right, you didn’t state that they wanted to get rid of customers like Jon. I see your point, as any company, they prefer to have a customer who will spend a little more than always the lowest prize.

        One of the things I liked about the RR awards was the ability to change my award ticket’s flight time or schedule (lets say from 8 am to 5 pm flight), if I needed, as I got close to my flight and the schedule got better. From what I can tell, that will no longer be possible, since the fares will be much higher on short notice, which will basically make it something that can’t be done without making a large additional payout in points. This is even different and worse than the way it works with other airline rewards programs. It is things like this that has really turned me off on this new rr program.

        On another note, thanks for having this site… and giving us the ability to have a forum to discuss this.

  16. Jim says:

    I don’t see how this would really benefit anyone. Under the old system, you flew 8 times and then got one free. Under the new system, assuming each ticket price is the same, you need to fly 10 times to get one free. Of course, if the ticket price is not the same, you lose the ability to buy cheap tickets and redeem for expensive tickets like you could before. I can really think of very few cases where people will benefit from this. One example would be someone who flies with an anytime fare and then redeems for a cheap fare. The only thing that excites me is the removal of the 2-year expiration on credits.

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  18. JJG says:

    I understand how this is in the company’s best interest. Still, this absolutely kills tha ability to use a Reward Ticket for near peak holiday travel. I know those seats were limited but if you got one you were golden. We’re using 3 Reward tickets to justify a Spring Break cruise. No way if we had to pay for airfare via RR credit or actual cash. Was I ‘jobbing’ the system? I guess.

  19. Robert S says:

    Cranky, I agree with you that it’s rather mean to require the Chase credit card to qualify for some of the benefits. After getting lots of SWA Chase card offers in the mail over the last year I finally applied… and was declined (for my first denial ever). So even as an A-List and CP holder I don’t get to share in the “other redemption options” part of the new program.

    There’s one other thing that bugs me. Every other airline allows last minute redemptions when seats are open (some for a fee, and some like United and Delta have removed their last minute award fees.) The new RR program will almost always have very high point prices for last minute bookings. That’s sure to turn off some people who burn miles when vacation opportunities open up at the last minute. These are also the people who use up otherwise wasted seat space, since capacity controls ensure that last minute bookings are only possible on flights that are extremely unlikely to go out full. Anyway, I’m just sayin’ that it would have been more competitive for the new RR to include a “short notice limited seat cheap redemption” option, just to keep up with the Unitedses.

    • CF says:

      On the last minute redemptions, I wonder if we won’t see some kind of promo being offered during low times where you can redeem for half price or something. It’s a lever that they can pull if they find it’s not working. The structure of the new program seems sound to me, but they can probably tweak pieces of it as it goes along if it’s not performing as planned. Last minute redemption might end up being one of those areas.

  20. srj says:

    The company publicly stated that this is a money making proposition for them. Hence, the consumer is loosing. I was a loyal SW flier for years but my loyalty has ended. Will probably switch to Alaska

  21. Ron says:

    I agree the whole points and multipliers thing is confusing. Here’s another way to look at it.

    For wanna get away fares, you earn 6 reward cents per fare dollar you pay. For anytime fares you earn 10 reward cents per fare dollar, and business select gets you 12 reward cents per dollar.

    You can redeem your reward dollars for anytime fare at a 1:1 ratio. When redeeming your reward dollars for a wanna get away fare you get a 40% discount off the already discounted fare, whereas buying a business select fare with reward dollars extracts a 20% premium above and beyond the higher fare.

    Now doesn’t this sound a lot simpler than the points and multipliers system? The two are mathematically equivalent. Just framing the issue in terms of dollars and cents instead of earning and redemption points makes the whole thing much easier to understand. Additionally, the way I presented it sets the anytime fare as the basic unit of calculation, emphasizing the discount of wanna get away and the premium of business select.

    Of course, my way of looking at things doesn’t change the fact that many people are losing value under the new system and are therefore unhappy. Nor the fact that wanna get away fares disappear 7 days before a flight, making last-minute redemptions expensive and taking away one good way for the airline to dispose of unsold inventory. But it does make the new system a bit clearer, and I think Southwest would be wise to call a dollar a dollar.

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  23. Pablo says:

    DISAPPOINTED: SW joins the other airlines in scamming the public. The new “improved” rewards program is crap in a number of ways. The worst way is the way they market it. No strings attached. No blackout dates. Well no but…SW has jiggered seat availability . Suddenly any flight you may have cared to book (even if one month in advance) is unavailable. Surprise….few if any direct flights. Surprise… flights rarely available during hours you may have cared to get onto a plane. Surprise…the new points system actually costs you more with SW using a number of tricks that push you the traveler to buy higher price tickets to accumulate high numbers of points. I will soon get rid of my Rapid Rewards Visa card. Southwest has become a run of the mill airline. I don’t care to support them.

  24. Judy says:

    Only an industry hack could consider this program straightforward.

  25. I am SO lucky that Virgin Airlines is now flying out of PHL and that the United/USairways/Continental group can now beat prices, because Southwest has now lost my business for good. I signed up for their credit card right before the ridiculous rewards program conversion. In the process I never saw my ?flight segment? old award system arrive. All I could ever find was reference to their damn ?points? After CHASE the credit card company finally told me where to find the ?flight segment? aka ?old? awards I did only to see that they expire in a month. I explained to southwest that I found their redesign quite confusing etc only to get an auto response that POLICY IS POLICY I am SO disappointed and always expected more for Southwest. Sad to see them acting like other airlines, which will now be getting a lot more of my business

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