Southwest currently has a purely fixed-value rewards program. For every dollar of the base fare, you have to redeem 70 Rapid Rewards to get your ticket (plus you pay a $5.60 per direction government tax on each redemption.)

That’s about to get worse, much worse in my opinion.

Current Rapid Rewards Scheme

Let’s look at an example. Here are the pries for tickets from Los Angeles to Tampa this March. They vary greatly by day from $207 to $334 to $607.

Screen Shot 2015-02-13 at 1.18.54 PM

If you select a day with $211 fares, not all fares that day are $211. Fares vary by flight.Screen Shot 2015-02-13 at 1.19.14 PM

You can select the $211 fare and find it is $188 in base fare plus taxes.
Screen Shot 2015-02-13 at 1.19.37 PM

Now you can go back and look at the exact same calendar for Tampa to Los Angeles in points instead of cash. Now all those $207, $210, and $211 fare days show 12,242 points. The more expensive days require more points.

Screen Shot 2015-02-13 at 1.20.20 PM

The exact same flight that costs $211 costs 12,242 points.

Screen Shot 2015-02-13 at 1.20.07 PMIf you divide that 12,242 by 70, the supposed number of points needed per dollar, you get about $175, which is less than the listed base fare. Southwest often charges fewer points than the base fare times 70. Let’s not look into that too closely. 😉

So that’s the current system. Every “Wanna Get Away” fare can be purchased with points at a fixed rate. No blackouts, no exceptions. The points are worth around 1.4 cents each. Most miles and points are worth more, but I still love the Rapid Rewards system for its simplicity and diversity.

Diversity is a key part of your miles strategy. If every program in which you collect miles is the same–it has a region-based award chart and capacity-controlled award space–you won’t get as much value as a mixture of region-based award charts (United, Delta, American), distance-based charts (British Airways), and fixed-value (Southwest, Arrival.) The diversity allows you to always have the right type of miles for the job, and fixed-value points specifically are usually the best option for domestic economy redemptions.

In return for “giving up” the ability to make tricky high-value routings and to redeem for aspirational awards with fixed-value points, I expect fixed-value points to be fixed value–worth the same for every flight with no blackouts.

That’s what’s changing with Southwest.

The New Rapid Rewards

Southwest released updates this week effective April 17:

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.

Whoa, whoa, whoa! That eviscerates the entire nature of Rapid Rewards. Rapid Rewards redemptions currently vary based on two factors: price of the ticket and which fare class you choose (until a few days before departure “Wanna Get Away” fares are available on 99% of flights, so this second factor is rarely important.)

Now an infinite list of factors has been added:

  • destination
  • time
  • day
  • demand
  • other factors

First, this strikes me as very disingenuous. All these factors are captured in the price of the ticket which correlates perfectly with the price of current Rapid Rewards awards.

Second, this undermines the whole “contract” I talked about in the last section. We give up our tricks and aspirational awards for certainty under a fixed-value regime. Now we get no tricks, no aspirational awards, and no certainty.

Third, the size of this devaluation comes down to how it works in practice. We’ll just have to see how many award prices Southwest jacks up. And you’ll have to do the math on each award to find out since Southwest doesn’t have an award chart.

Fourth, in the sense of waiting, this devaluation is like Delta’s recent devaluation. When programs have no award chart and no fixed-way of pricing awards, we are completely at their mercy for award prices and further stealth devaluations. I don’t like that.

Bottom Line

We’ll see how much award prices actually change on Southwest beginning April 17. No matter what happens initially, I’m still calling this a massive devaluation.

It is a massive devaluation of the simplicity of Southwest’s program, which Southwest rightly touts at every turn. It is a massive devaluation of the fixed-value program “contract.” It is a massive devaluation of our ability to trust Southwest. It is also a devaluation of the value of one Rapid Reward, the exact size of which we won’t know until April 17 and will be subject to change daily.

Hat Tip Travel Summary

 

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