Southwest Airlines Rapid Rewards Points Devaluation April 17, 2015

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Southwest Airlines sent out an email yesterday about updates (read devaluation) coming to the program on April 17, 2015.

Southwest Airlines Devaluation

Few years ago, Southwest moved away from fixed earnings and awards by giving points entirely for the price paid + multiplier for higher fare classes and simultaneously starting to price awards dynamically based on the price and the fare type.

You can access Southwest’s web page for this announcement here.

Now, seems that the airline wants to lower the outstanding liability that it has on its books for the unredeemed Rapid Rewards points by changing the number of points required for award flights.

The problem is that Southwest is not up front about how many points are needed future for awards. It merely states that:

We created Rapid Rewards® because we think you deserve to actually feel rewarded. And, from time to time we must make some updates to our program. 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. And don’t forget that when fares go on sale, so do the points needed for redeeming for a reward flight on those fares.

Currently a Rapid Rewards point is worth 1.43 cents each when used towards Wanna Getaway fares, 1 cent when used for Anytime Fares and 0.83 cents towards Business Select Fares.

Southwest changed the number of points required for Wanna Getaway fares last time on March 31, 2014 (read more here), by devaluing the value of a point by 14.29%

Conclusion

When awards are priced dynamically based on the price of the flight, there shouldn’t be need to adjust the number of points required as they rise with the airfares.

Seems that Southwest likes to take a one time accounting gain by lowering the liability of the outstanding Rapid Rewards points

Why doesn’t Southwest come clean and announce the number of points required for awards come April 17, 2015? Shouldn’t be too difficult, right?

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