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Southwest Airlines announced a cryptic but fundamental change to Rapid Rewards today.
Currently, you can get $1 in Wanna Get Away airfare for every 70 points you use, on any flight that has Wanna Get Away fares available. So for example, if you have 10,000 points, they are worth $143 in airfare.
Today’s announcement is that starting April 17 the number of points you need for a dollar in airfare will constantly change based on a host of factors.
So 10,000 points won’t always be worth $143.
Sometimes they’ll get you $100 in airfare, others $143, others $125, or anything in between. And it doesn’t look like you’ll get more value than you do now, but that might be possible for some low demand times.
So expect this to be an overall devaluation in what your Southwest points are worth. At minimum, it’s a debasing of the value.
In some ways this is an even bigger change than Delta’s elimination of award price charts, since the cornerstone of Southwest’s program has been to let you know exactly what your points to dollar conversion rate is at all times.
Now there is no transparency at all, a risky move for a program that’s consistently ranked highest in customer satisfaction thanks in part to a simple and transparent program. But it is very similar to how JetBlue has handled its TrueBlue program for years, and it manages to deliver decent value to members.
What should you do if you have Southwest points?
The good news is Southwest is still not charging any change or cancellation fees.
So you can use points and refund them at any time.
That means the best strategy here is to use all your points to book flights you might want before price change on April 17.
Right now you can book for dates as far out as August 7 on Southwest.com, so you can book your summer vacation at the current, known point value. And starting February 19, you can book for dates as far out as October 30.
If you end up not being able to take the flights, you can cancel them and refund your points at no cost to you.
Why is Southwest doing this?
We think one of the reasons this is happening is that Southwest is now an international airline.
Before last year, Southwest was a domestic only airline and its points program gave extra value to members in part because there were no Southwest flights to popular non-U.S. vacation destinations like Mexico and the Caribbean.
Now that it’s completely absorbed AirTran and has launched its own international routes, you can use your points to get to more places.
It would have been nice to get 1.4 cents per point in value for all Southwest flights to beach destinations, but that wasn’t sustainable. Caribbean / Mexico destinations are rarely a good value with points because they are such popular redemptions, so Southwest needed a mechanism to adapt.
And Southwest now has a more robust reservation system that can handle more complicated pricing, which it will use to capture more value. With planes running fuller than ever at this point in the economic cycle, airlines are in a stronger position to make you pay up more points for your flights.
It’s hard to say whether you should stick with Southwest for your point earning on the ground until we see how they are handling pricing. Our sense is they can’t change the value proposition too drastically – there will be plenty of flights with good value – but the lack of certainty is a loss.
Southwest and Chase have already stopped marketing the intro bonus on their cards as offering ‘free flights’, and now just mention the number of points you earn, rather than the value they can provide.
You might find earning 2% cash value from your spending with an any-airline program like Barclaycard Arrival or Capital One Venture may be more useful.
And you will never again hear an announcement about a ‘devaluation’ of Southwest points, because there is no longer any set value for the points.
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