Southwest Airlines introduced ‘Rapid Rewards 2.0’ — their revenue-based program — in 2011. After just two and a half years they devalued their points about 15%, reducing the maximum value you can get out of a point to 1.43 cents.
Then a mere year later they devalued again by introducing a sliding scale of value — sometimes you’d still get 1.43 cents a point in value on their cheapest fares, but sometimes you’d get less. That change went into effect April 17, 2015 after two months’ notice.
Now, a year later, they appear to have devalued again and this time they did it without any notice at all.
In mid-April they increased the number of points per dollar that you need for their cheapest tickets from 70 to 72, meaning that the most you can get out of a point dropped from 1.43 cents apiece down to 1.39 cents apiece.
That’s only about a 2.8% devaluation, so a far cry from the 15% what they gave the program in 2013. But it’s striking that Southwest didn’t even feel the need to its members they were doing it, or give them an opportunity to make use of their points at the value they were expecting to get when they were earning.
There are (3) reasons we usually think of a frequent flyer program devaluing. None of them apply in the case of Southwest.
- There are too many miles chasing too few award seats. They need to increase the price to balance supply and demand. But a revenue-based program has access to all of the seats on the plane, and those seats are paid for with fixed-value points.
- The price of tickets goes up. In this case, award pricing just keeps up with price inflation. But a revenue-based program like Southwest’s has this built in — more expensive tickets simply cost more points already.
- The economics of the program changes. Seats are costing the airlines more (such as a shift to more partner awards), or more rewards are being claimed at the rule-buster level and so the program increases the price of those. But the costs to Rapid Rewards are pretty constant since each point had a fixed value, and Southwest isn’t offering alliance partner redemption.
That leaves only “because they can” and it runs directly counter to the brand that the airline has sought to cultivate and maintain.
A revenue-based program does not ‘need’ to devalue, but Southwest proves over and over that one can. And in doing so they simply declare the value of their currency to be lower.
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