Southwest Rapid Rewards awards more points per dollar on expensive fare types than on cheaper fares. And redeeming points for expensive fare types costs more points per dollar than cheaper fares. It isn’t just a revenue-based system, it’s a logarithmic revenue-based system.
In theory a revenue-based program shouldn’t need to devalue. More expensive tickets automatically cost more points. As ticket prices rise so do award prices. And the scarcest seats already cost more in Southwest’s system not just because of their higher cash price but because the value per point redeeming for those points is reduced. Yet they’ve devalued multiple times anyway.
Could we be seeing an increase in the value of points?
Normally Southwest charges 72 to 80 points per dollar of base fare when redeeming an award. The original redemption rate before devaluations was 60 points per dollar, and we haven’t seen that in about four years.
However nsx reports that there are certain flights currently pricing at just 60 points per dollar again.
Tonight I booked some flights which were attractively priced in points, 2330 and 2379 points. Then I went to book a flight for cash. I discovered that the 2330 SFO-LAX flights priced out at $49 as normal but the 2379 OAK-LAX flights (a points price I’ve never encountered before) were pricing at $57. Checking the fare basis, 2379 is a 60 points per base fare dollar conversion ratio.
Folks, we have not seen 60 points per dollar since the early years of the points program.
..I surmise that flights very early and very late in the day in some markets are being offered at 60 points per dollar. I found them for LAX-OAK but not for LAX-SFO. Currently SFO has lower fares than OAK, so that makes some sense.
Here’s a search for Los Angeles – Oakland with fares at $57 one-way.
These flights cost 2886 points.
The last flight of the day is also $57 one-way.
It costs just 2379 points.
A $57 ticket equates to a $40 base fare.
2886 is the standard 72 points per dollar in base fare. 2379 points equates to 60 points per dollar in base fare.
Note of course that the pricing of Southwest reward tickets is based on a number of points per dollar of base fare, and on award tickets you do not pay the 7.5% federal excise tax, passenger facility charges, and segment taxes. So the ‘savings’ you get, and value per point, compared to the cost of a paid ticket is greater.
60 points per dollar is a 17% discount off the ‘standard’ 72 points per dollar pricing.
I have been tracking all my flights for the past 4 years and I never really saw it go up to that 72 to 80 ppd. Yes occasionally here or there I will see flights that high, but on average it never really left that 60 range.
Points Per Dollar:
2014: 53 (based off of 20 flights)
2015: 61 (based off of 17 flights)
2016: 63 (based off of 24 flights)
2017: 61 (based off of 14 flights)
@Mike your valuations are including tax, 72-80 refers to value against base fare
Nope, I backed the tax out of all my valuations.
Southwest is my favorite domestic (and “international light”) airline. Glad to see some Southwest points redemptions back to the 60 points per $1 ratio. Hopefully, this is a sign of things to come!
BASE FARE is IRRELEVANT in calculating redemption values. (Bear with me for a moment.)
According to Southwest’s website:
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Fares include:
Excise Taxes, including:
7.5% of Base Fare for domestic travel within the Continental United States.
U.S. International Transportation Tax of $18.00 each way for travel between the Continental United States and foreign countries, including Puerto Rico.
Federal segment fee of $4.10 that will be imposed on each flight segment. Flight segment is defined as a takeoff and a landing.
Government-imposed September 11th Security Fee of $5.60 per one-way trip.
Airport assessed Passenger Facility Charges (PFCs) of up to $18.
Points Redemptions do not include:
Government-imposed September 11th Security Fee of $5.60 per one-way trip.
/\/\/\/\/\/\/\/\/\/\/\/\/\/\/\
My daughter recently used her points to fly SEA-OAK on Southwest. The fare itself would have been $211.98 had she paid cash. Since, when you use points on WN, all you pay is the $5.60 Security Fee, subtract that $5.60 from the $211.98, and THAT is the monies covered by the points — in this case, that comes to $206.38. Since her ticket cost her 13, 983 RR points¹ (plus $5.60), her redemption value came to 1.476¢ per point.
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¹ Let me hasten to point out that this was a last minute booking, and flights between SEA-OAK can cost as few as 3,670 points, or $68.98. At that level, the value would have come to 1.73¢ ($68.98 – $5.60 = $63.38. $63.38 / 3,670 = $0.01726975, or 1.73¢).
@Jason Brandt Lewis – base fare is HOW SOUTHWEST CALCULATES the number of points an award will cost, it is not ‘irrelevant’
@Gary —> Of course it is! It doesn’t matter how Southwest — or any airline — calculates the number of points an award will cost. What matters is how much *I* have to spend — either in cash or in points — to get that seat, and how much cash I saved (i.e.: stays in my pocket) by using those points.
If I’m flying on Virgin America between SFO-LAX, the seats are advertised as $49/each way. Now, in fact, the net cost for the round trip is $96.40. That’s a $63.26 base fare, and $33.14 in various taxes. But if I opt to pay in Elevate points, it’s going to cost me 3,322 points + $11.20 (the 9/11 $5.60 security fee X 2). Using points doesn’t save me (in terms of out-of-pocket cash payments) the $63.26 base fare, period. Nor does it save me the entire $96.40. It saves me $84.80. That means the redemption value comes to 2.55¢/point.
If I have to pay 70,000 miles + $85.66 to fly round-trip SFO-CDG in Economy on Delta, versus $785.16 net out the door (or, rather, on my credit card), it’s irrelevant that the Base Fare is only $659, and that the taxes are $126.16. My out-of-pocket cost is going to be either $785.16 or $85.66. If I opt to use points and spend $85.66, I did NOT have to pay out in cash a total of $699.50. Ergo, those 70,000 points I had to fork over covered NOT the base fare of $659.00, but $699.50 — $40.50 MORE than the base fare, in this example.
In the above example of the Southwest flight, the number of points involved covered all of the excise taxes, the Federal segment fee, etc., etc. All my daughter had to pay was the $5.60 9/11 security fee.
@Jason Base fare is indeed irrelevant as you calculate the value of a specific ticket, and I would suggest that you actually (should) get more value than you calculate out of points due to the unique flexibility that Southwest points tickets have.
However, base fare has been the determining factor for awards for years, so it is the best metric by which to compare today’s rates with yesterday’s rates.
For the past 11 years I have averaged 80 flights per year with Southwest. Since they began the revenue based rewards program, I have not seen any appreciable difference in earning rates…thankfully. At least 95% of the time, my earning rates have been in a narrow band between 59 and 62 points per dollar, excluding the excise taxes. The only time it is different (i.e., worse) is for peak travel periods, especially holiday weekends, and to a lesser extent Fridays and Sundays. I’m not sure where you are getting the 72-80 points per dollar unless you are only looking at peak travel days. Despite the fact that I believe the “miles” at some of the legacy carriers with international operations and business/first class options are more valuable, I like that Southwest points are a reliable option for an overall better travel experience.
@Kenny (and @Gary) — OF COURSE the Base Fare is relevant . . . to the airlines — specifically those airlines which imply some sort of arcane, mystical formulations to calculate how many points/miles us consumers will have to fork over to acquire an “award.” But without intentionally trying to be selfish, it really IS all about me. The only question that’s relevant to me is, “How much am *I* going to have to pay — in cash, in points, or in some combination of the two — for a ticket between Airport ABC and Airport XYZ?”
Yes, absolutely, if I were in Gary’s shoes — or any other blogger — and was writing about the topic more broadly, then I too would want to understand and to explain to my readers how these calculations are made, what the basis is for them, etc., etc. But I am not. I am but a poor consumer. And I average the point valuations provided by Gary, TPG, and others to come with MY base. If I can beat that valuation, I’ll seriously look at acquiring the ticket on points; if not, I’ll pay cash.
My wife and I are off to Spain next week, by way of New York. (That is, we’re flying SFO-JFK and staying over for a few days before spending two weeks in Spain.) In the FWIW Dept., we’re flying VX first class SFO-JFK, and JetBlue’s Mint JFK-SFO. Both tickets were acquired on points. Given all of the free points we received from Alaska (credit card bonus, bonus for linking our VX and AS accounts, the 30% bonus we received for transferring points to AS, etc.), it really only cost me 7,692 points* + $11.20 for the two FC one-way tickets, versus an all-cash price of $2,398. That’s a redemption value of 31.0¢ /point. (Even calculating the tickets based on all the points — 50,000 — it still works out to 4.8¢/point, significantly better than the 1.9¢ valuation AS MP points are generally given.) Same thing with JetBlue: I had to spend 100,000 TrueBlue points, but considering they gave me 75,000 points for free because of what was in my VX Elevate account, and gave my wife a pretty sizable chunk as well, we really only spent* 1,591 points + the $11.20. At the time, paying for two Mint seats would have cost me $1,720. So the redemption value I received was 1.7¢/point (if I had to spent 100k), or — to my way of thinking — $1.074/point. Either way, I beat the “posted” value of 1.25¢.
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* When I say, “we only spent” or “it only cost,” those point totals refer solely to the number of points EARNED through spend, whether that spend in on flights or through credit card(s). That is, my redemption values are calculated as follows: (total number of points) minus (points we received as a non-spend bonus, as described above) equals (total “earned” points spent). Then, I take (total cash price of the same seats on the same flight at the time I make the booking) minus (whatever cash I have to spend; in each case here, it’s $11.20) equals (net cash saved). (Net cash saved) divided by (number of points) equals (cost per point).
Damn auto-correct strikes again. The word “imply” in the first paragraph above should have been “employ.” Sorry about that . . .
Pretty sure I’ve seen 60c plenty of times in the past couple years
Gah, this 60 72 80 ppd stuff hurts my brain. Can’t we just walk in cpm instead, like we do with every other program? That helps me figure out my opportunity cost with UR.
For example, I just got a ticket AUS-DCA for 6416 points. Cash option was $109.98. Take out the $5.60 copay, and you get 10438/6416 = 1.63cpm. Pretty decent.
Ever since the switch to revenue-based rewards I have found Southwest points vary from 1.5 to 1.7 cents in value.