Southwest Airlines filed its annual 10-K with the SEC and it contains disclosures about the carrier’s Rapid Rewards frequent flyer program – related to how much travel is being done with miles, and what that tells us about how they’re recovering from disastrous service during the holidays.
The striking thing about Southwest’s frequent flyer program is that more passengers are traveling on points than with any other airline. In 2022,
- Members redeemed 9.2 million flight awards.
- This amounted to 15% of revenue passenger miles flown.
More than 1/7th of all travel on Southwest Airlines was done on points. That’s actually down slightly from 2021, though that’s just because there was less paid travel in 2021. There were 8.1 million awards in 2021, over 1 million fewer, but as a percentage of total travel that was higher (17.3%) as (1) there was almost exclusively leisure travel, and (2) people were spending accumulated balances that they didn’t burn in 2020.
In 2020, after all, travel was heavily depressed. Still, passengers claimed 4.1 million flight awards representing 15.8% of all travel (revenue passenger miles flown).
This is roughly double the percentage of travel you’ll find on American, Delta, and United using points.
In total Southwest recognized $3.03 billion in revenue for redemptions in 2022, up from $2.1 billion in 2021. They still have $5.2 billion in liability on their books for points, and indeed that liability grew by approximately $400 million during the year.
The largest source of revenue for the program, and points on their books, is sales to Chase to reward co-brand credit card customers. They re-upped their card agreement at the end of 2021.
The airline suggests that Rapid Reward redemptions are on the rise in early 2023, which they point to as an ‘encouraging’ sign about customer willingness to book after the carrier’s holiday operational meltdown.
Unfortunately, considering the importance of the program to the airline’s bottom line, they don’t disclose basic facts like how many active members they have or how many elite members they have. But the data is still useful to see that they continue delivering free travel for members – and indeed, if you find yourself on a Southwest flight you can look at the row beside you and in front of you and wink knowing that someone sitting there is probably paying for their ticket with points.
“The airline suggests that Rapid Reward redemptions are on the rise in early 2023, which they point to as an ‘encouraging’ sign about customer willingness to book after the carrier’s holiday operational meltdown.”
If anything I would think this means the opposite: People are dumping their points faster than usual in order to avoid the airline in the future.
Gary, do you know if Companion Pass tickets are a significant percentage of tickets issues, and are they included in the 9.2 million reported?
This is simply because they don’t limit award seats. We don’t fly them as much as we used to because sometimes we don’t want to drive 2 hours to get to Tulsa but I always know I can use my RR points to get on any flight that has an open seat. That makes a huge difference.
For some airlines, a large percentage of their net profit is generated by their points/miles programs. Their credit card business units are their highest margin business units. Perhaps the airlines should be encouraging award flights over cash flights. (Said tongue-in-cheek but someone ought to do the math. Tim Dunn, any thoughts?)
Yes. Southwest does what works for them and the big 3 do what works for them. WN has a growing gauge problem with too many seats per flight as the MAX 7 continues to be delayed and the have to retire 300s and replace with MAX 8s which means more discounting and award seats
People are simply using up Southwest’s apology points.
Summer 2021 they had a major technology meltdown and then the 2022 Christmas diabolical.
Southwest points are not miles or points of other programs – they virtually pegged to dollars just like cash back program points. You can buy any flight at any moment plus the redemption rates differ so slightly for different flights so it does not make any sense to look to better redemption options. Try that with Hilton or Marriott, let alone SkyMiles
I think another factor not stated is that SW rewards points seem to be more reflective of actual cost to fly. Over the past year, although SW flights might have only been $50-100 less than American, American Airline’s points would be almost triple that of SWs for the same route and unless we had 50k+ American points, which we don’t, we can’t use them. SWs IMO has a much more usable points (8-18k points) system and is not unrealistic like AA.
I’m also curious how they calculate the companion pass seats. Are they included in “points balances”? For example, if I have 50k points, to me it’s actually worth 100k as I’ll use the points plus my companion pass to take 2 seats on a flight.
I think it’s great! I love SW, despite their problems and meltdowns. It happens to all airlines. I still think they are one of the best airlines in the market.
I often fly Southwest from Raleigh Durham to Tampa Florida. I’ve never had an issue with Southwest. I flew American to Saint Johns US Virgin Islands, then, when flying back, the plane was 1 1/2 hours late to the island, the plane in Miami had already left us. I spent the night and then got a flight out the next morning. I was never reimbursed for their problem. I prefer flying Southwest they are more predictable, and other than the fact I believe they have gone up on their points. I still like flying this airplane to Tampa, Florida from Raleigh Durham.
The Southwest hub nearest me is NOT at the most convenient airport for me. Yet, for 100% of my lesiure flights I check Southwest first. They are just BETTER at customer service than other airlines, and they have a better boarding procedure, and better deals, and better character. Over the decades, I’ve found enough good deals on Southwest that they’ve become a “first” consideration for me when choosing a flight. Even though I now have the same perks with Delta and American that I have with Southwest, I still feel more loyal to SW.
Perhaps my loyalty is influenced by the fact that in 4 years I will be living at a Southwest hub, again…so I keep them in my “friends” category, lol. But until then, I will still continue to fly Southwest when feasible. Got an upcoming SW trip in a few weeks, driving 5 hours to fly with them.
I look forward to any new software that helps them with scheduling & meltdowns & whatnot. But I hope whatever “modernization” SW puts into place doesn’t detract from the good down-home service they’ve always provided. I would hate for SW to turn into a Delta.
The last time I tried to schedule a flight on Delta, they wanted 130k of my miles for a flight to an airport that’s a 4-hr drive for me. Ummmm, NOOOOOO.
I love Southwest and will not gamble on another airline.
I flew 31,000 miles during the pandemic (paid for all my airfare) but did rack up some rapid reward points. Points aside, I have never had an unpleasant experience on Southwest. Not even one.
Before WGA+ was introduced, using points was the cleanest way to buy travel for others in your traveling party or for family and friends traveling on their own. Because if they had to cancel there were no TTC in their name. While my father was still alive, i almost always used points for his tickets to travel with me. He was XT and I was A list, so we always just boarded at A61 even on separate locators.
Despite the Christmas meltdown, which stranded my stepson at DIA for six hours before we found out the flight was canceled, I’ve had great experiences flying from Denver to New York, Seattle, Miami, LA, Belize City, and Salt Lake City. I put all of my business expenses on my Chase Southwest card and earned a companion pass last year. The points accrue quickly and with the companion pass my wife and I take several trips a year on Southwest only paying $5.60 per person in taxes for domestic flights. I only wish S.W. flew to Europe!
I agree with Daniel’s comment. I know this is the logic in our household: time to use those points but pursue status on other airlines. We were caught up in the holiday meltdown and ended up getting saved by United points. Southwest has a LOT to make up for in this double Companion Pass household…
No matter with their recent problems I will continue flying with Southwest Airlines this year, they are still the best airline there is. I wish them well for the future.