nsx

Interviewed by Randy Petersen, Gary Kelly said:It's natural to fear change, and in this case change can only mean bad news for today's hyper-advantaged short-haul discount fare customers.

RR 2.0 will likely be a banked points program, with earning and/or redemption rates tuned to flight miles and/or fare. Long-haul and full fare customers will likely applaud the development, and Gary Kelly obviously wants to win more full fare customers. I want Southwest to win those customers, too, because that's the only way my discount fares can remain low.

Maybe someone can post links to earlier speculation on RR 2.0. Let the fun begin!

Firewind

nsx, as I recall, you have been dropping more hints in recent months than anyone, and although I over-inferred that you were involved in a beta, you said no, and I couldn't find the exact place where you said you had some substantial insight. Mod privilege? Or can I say that?

So, in the recent thread about the article (still?) to be written about the current RR, you did say you'd been involved in market research. I don't know how anyone else can/will say more at this point, unless it's one of The Regulars here, and I don't mean the official employees. If you can go further, could you be more specific about what it contained in addition to the things you hint at @1?

Thank you.

I would note that the dichotomy you describe is long haul vs. short haul, while the one Mr. Kelly hints at is business vs. leisure. Perhaps it's a "Johari Window"?

Beckles

When BS was first introduced my single biggest concern was the introduction of the quarter credit ... I still think we're going to see more come of that yet, though I think it will primarilly be related to partner earnings more so than from flying with WN.

The greatest change will come from the introduction of international airline partners. If WN gets a few compelling international airline partners, it will be a huge enhancement to the Rapid Rewards program.

cxn

I could see it go the way of Jet Blue where points are given out based on distance. Of course, that isnt always the best as sometimes I pay more for a 2 hour flight then a 7 hour flight.

While I dont like it, it seems the *best* option would be to do it based on both segments and cost.

As for BS fares, I paid it once and thought the extra .25 credits was not worth it. For 1 additoinal credit, yes.

dwebb

But it would probably tick off the constant short haul business passengers if based on miles...who can be a significant source of revenue too (intra-Texas/California). And WN has rolled back on the longer stages recently. I guess fare could work too...but right now I like RR the way it is. It's real easy to track, IMO.

JohnDunn

As a frequent flier who flies west coast routes I choose WN mainly due to frequency and I actually get something for my flights. If I fly AA or UA it's not even worth it, especially with UA going to the model where they are giving actual miles flown and not the 500 minimum.

BNA-WNFan

A friend sent this to me based off a survey she received. The end is kind of mangled, I couldn't figure out how to paste a chart:


New Rapid Rewards Program Now we would like to get your opinion of potential changes to Southwest Airlines' Rapid Rewards Program. This is only hypothetical. It is not a definite change.

Please read the concept below. The next page will allow you to explore further aspects of the program.


Southwest Airlines Rapid Rewards Program

With this program, you would get reward points based on the dollars you spend for travel on Southwest Airlines and the fare type you purchase. (For example, for a $99 flight you could get between approximately 400 and 600 points.) You would also get points for purchases through Southwest's travel and financial partners. Points would not expire as long as you have any type of account activity in the past 18 months.

To redeem reward travel, you could purchase any available fare on Southwest Airlines using your points. The points required for free travel would be directly related to the fare available for the flight, and seats for reward travel would not be limited like they are on other airlines. If you book further in advance, you would have more fare options that require fewer points, just like booking far in advance might enable you to get a lower fare. (For example, it could cost between approximately 4,000 and 6,000 points to redeem a reward for a flight valued at $99, depending on the fares available at the time you book your flight.)

Also, if you get a minimum of 16,000 points or fly a minimum of 15 roundtrips on Southwest Airlines within a 12-month period, you would reach an Elite Status level and be rewarded with special perks when flying Southwest Airlines. Among other amenities, you would receive reserved boarding privileges and get more points every time you fly. (For example, as an Elite Member, you would most likely receive an A boarding pass and get at least 25% bonus points.)



Requirements & Benefits

Those who fly frequently would get bonus points and other benefits.

Cruisers Club
Requirements:
Get 16,000 qualifying points by flying on Southwest Airlines, or fly 15 roundtrips (30 one-ways) within a 12-month period
Bonus Points:
25% bonus points when flying Southwest
Other Benefits:
Automatic priority check-in before your flight to ensure an early boarding group – most likely an A Priority position on standby list (behind Jet-Setters Club and Ascenders Club Members) Priority or Express security lane in airports, where available Express check-in lane at the ticket counter, where available Exclusive phone line when calling Southwest Reservations or Customer Relations 15% discount on points required to redeem reward travel to international destinations

Jet-Setters Club
Requirements:
Get 32,000 qualifying points by flying on Southwest Airlines, or fly 30 roundtrips (60 one-ways) within a 12-month period
Bonus Points:
50% bonus points when flying Southwest
Other Benefits:
All Cruisers Club benefits plus: Priority position on standby list (behind Ascenders Club Members) Free drinks onboard 50% discount on broadband Internet connectivity in-flight 25% discount on points required to redeem reward travel to international destinations

Ascender's Club
Requirements:
Get 42,000 qualifying points by flying on Southwest Airlines, or fly 40 roundtrips (80 one-ways) within a 12-month period
Bonus Points:
100% bonus points when flying Southwest
Other Benefits:
All Cruisers Club and Jet Setters Club benefits plus: Highest priority position on standby list Free broadband Internet connectivity in-flight No blackout dates when redeeming points on Southwest Airlines 30% discount on points required to redeem reward travel to international destinations


Below is a list of 5 flights that you flew with Southwest Airlines with the fare type you selected.

Please review the flights and then select the fare type on the right that you would have purchased for that flight (one-way) had the new Southwest Airlines frequent flyer program you read about been in place.

An approximate $ fare amount that would have been available for that one way flight is shown along with the number of points you would have received .

Note: If you want to know the descriptions of each fare type, click on the fare type.
i60
5 One Way Flights Reallocate 5 One Way Flights
Fare Type Would Have Purchased
Origin Destination Fare Type Date Refundable Fare
Everyday Fare
Discount Fare

BURBANK NASHVILLE Everyday 28-Sep-07 $291.85
1751 points
$169.7
848 points
N/A

NEW ORLEANS NASHVILLE Discount 17-Sep-07 $96.95
582 points
$60.51
303 points
$55.71
223 points

NASHVILLE NEW ORLEANS Discount 13-Sep-07 $96.59
580 points
$60.34
302 points
$54.96
220 points

LOS ANGELES NASHVILLE Everyday 17-Aug-07 $283.12
1699 points
$169.37
847 points
N/A

NASHVILLE LOS ANGELES Discount 12-Aug-07 $283.67
1702 points
$169.67
848 points
$125.61
502 points

Beckles

I hope the marketing geniuses doing that research for WN realize that almost no one is going to pay more for a ticket just to get a few extra points.

auggie doggie

Let's see...there's a website called Flyertalk...where people get together and talk about some of the CRAZY things they do for a few more frequent flyer miles. Don't underestimate the psychological power of "points."

nsx

I saw a similar survey. Redemption prices would vary by flight, presumably proportionately to the paid fare. There would be blackout dates but not capacity controls. Maximum redemption price example in this survey was nearly 13k points one-way. Minimum redemption price was less than 2k points, presumably corresponding to one of those $39 fares. Today's fuel prices could force significant changes in these hypothetical numbers.

Earning rate (points per dollar spent) would vary slightly by fare class.

My reaction to this particular trial balloon:

1. The Elite level benefits are outstanding (especially the free Internet!) and will do a great job of motivating people to reach these levels. Once they reach the first tier, Southwest will capture these customers for good!

2. The points scale is un-Southwest: confusing at best. If it's going to be money-based, just use the dollar amount of the fare and then apply any fare class percentage bonus and elite level percentage bonus.

3. The reward ratio (value of free trips divided by price of paid trips) for short-haul discount fare customers will apparently drop to 20% or less. That's still reasonably generous. especially relative to legacy carriers who have dropped their 500-mile minimums. But it's a huge step down from the giveaway days of double credit and no capacity controls. I realize that even today's generosity to short-haul flyers is not sustainable, but weren't those days glorious?

4. The idea of tying the redemption point requirements to the dollar cost of the award trip is double-edged. On the plus side, it makes perfect sense that a trip that is more expensive in dollars should be more expensive in points. However, redemption by dollar value puts Southwest's program at a serious disadvantage relative to other airlines' programs, especially for elite members who typically see better capacity-controlled award availability. Redeeming miles for aspirational trips whose cash price is out of reach is one of the major attractions of frequent flier programs. A discrepancy between cash price and miles "price" makes the frequent flier game worth playing, without costing the airline revenue because the member would not have bought that seat at the cash price.

5. Tying the redemption point requirements to the dollar cost of the award trip creates a problem when you want to adjust your travel date at the last minute. This has always been easy to do with Southwest awards. I'd hate to lose this advantage.

6. With banked points closely linked to the dollar price of trips you can redeem for, it becomes harder for Congress and the IRS to ignore the program for tax purposes. The program described looks more similar to a cash rebate than to a traditional frequent flyer program. I hope Southwest has carefully considered this aspect!

7. I hope that Southwest retains fixed redemption levels for capacity controlled seats as a redemption option. Price-based redemption as an additional opportunity would be seen as an enhancement rather than a take-away.

Firewind

Thank you very much, BNA-WNFan.

A hallmark of everything Southwest does - not only RR - is the KISS principle. This would catapult Southwest past the competition in complexity.

Giving benefit of the doubt, it may be that, like much good market research (looking for levers to fine tune), there's much more detail here than what we would see in the final packaged product. (If, in fact, this is the elephant whose trunk we have hold of.)

But if the guts are exposed, as herein, a different new elite than intended would certainly be identified: The people willing to spend a tremendous amount of time delving into the value of every transaction with Southwest and its partners. Conversely, it would certainly weed out many current participants who don't have either the time or acumen to calculate it time and again.

And, with an eye on the prize, how is it going to attract more business customers?

nsx

Actually, if one FTer can figure it out, we all will know.

As to attracting business customers, the idea is simple: reward customers based on how much profit they represent. Maintain good value for full-fare customers while legacy carriers trash their own FF programs for these same customers. Simple.

jtaft

As someone who is required to use the lowest fare class for both business and leisure travel, this appears to be quite a devaluation, especially for those like me that travel occasionally but not often. I refer to the class of passengers that earn a few Awards every year but don't travel enough to get the CP or get onto the A-list. The big hit will be the dollar valuation. I've adjusted my patterns of travel to use SWA and its partners exclusively because doing so has resulted in my obtaining enough Awards to be able to take a few vacations I otherwise couldn't. Now there will be no incentive for me to do so as SWA, like every other airline, will have put the real benefit of the program - free flights - outside my reach.

As described in posts above the program is likely to be good for SWA's bottom line but they will have, IMHO, lost all real distinction from the legacies.

Firewind

One of the main reasons I added the editorial note in my comment above was to note that my observation was independent of this, which seemed the same at first glance.

ctuttle

Although I have always liked the simplicity of Southwest's program, they have changed it quite a bit over the years. I think back fondly of the days you could take your award to the airport and board the plane if there was a seat on the plane. You could also physically give the award to someone and they could easily convert it to an award. However those days are long, long gone.

One positive side to these proposals is the elimination of capacity controls, and I would take it a step further and why not do away with blackout dates, if you are changing the program to basically a rebate on money spent on Southwest (and partners) to be used on goods or services on Southwest (and partners).

This proposed new system is in keeping with Southwest's keeping it simple policy, as it appears the redemption part is still easy, the complexity is in the accural of the points, and you could play the complexity to your advantage, like many already do with other programs here in Flyertalk.

By basing the cost of the award in points by the value of the ticket in both earning and spending Southwest might actually pick up added revenue for people anxious to get a "free" ticket. You might also pick a less desirable flight to get it for fewer points. I would hope that by eliminiating capacity control Southwest would be returning to the "if there is a seat on the plane, you can get it with an award ticket" way of thinking. If that is the case. having the cost of the ticket determine how many points you get for a trip is much easier to swallow. People who buy 16 one way $29 commuter flights to get a free transcontinental flight are going to have a much different opinion however.

One question I would have is what happens if you cancel your award travel. This has always been a huge advantage to Southwest where there are no fees to redeposit unused awards. Under the new plan would they allow you to redeposit at no fee any ticket you don't use?

What about a compromise to allow you to purchase with points, say up to a $500 non-expiring Southwest gift card that could be used to purchase tickets for the blackout periods. Naturally there would be a premium for this option, but this would be an option smiled upon by the "whales", or business travelers that Southwest is seeking. Since Southwest can't offer upgrades to first class, offering a way to make sure you get a free ticket when you need it (or want to send it to a son/daughter/parent for an emergency) might be the tipping point to send you to Southwest.

I think the writing is on the wall, there are going to be changes, and the price of the ticket is going to enter into the equasion. It must. It would not surprise me to see other airlines stop giving frequent flyer points for their lowest of the low discount tickets. Many are doing this now by not giving points toward elite status (which many seek more than the award miles) on deeply discounted fares.

On Delta you now have to pay a fuel surcharge on award travel. When you add ticketing fees for booking the ticket on the phone, and extra fees if you don't do it 21 days in advance, it is no longer a "free" ticket.

The programs are going to change in the future, that is a given, the only thing now to be decided is just how bad the changes are going to be for the traveler.

It will be interesting to see the frequent flyer programs of say, 2010 when there are only maybe three major airlines still in business due to mergers and forced liquidation. With so few airlines will the frequent flyer program go the way of green stamps at the grocery store and gas station of an earlier era?