Southwest has announced its long anticipated (and feared here on FT) overhaul of Rapid Rewards. The new program will begin on March 1, 2011.
Commentary by nsx
One of FlyerTalk's most popular topics is exploiting program earning opportunities in order to achieve a high effective rebate, the ratio of redemption value to purchased ticket price. People like me have been earning effective rebates approaching 40%: purchasing 16 tickets at $50 each and earning a standard award usable in lieu of a $300 round trip. There is no way that low-fare customers merit this level of incentive.
Elimination of extraordinary effective rebate ratios makes RR 2.0 much less interesting to FlyerTalkers than programs that still offer such opportunities. However given the ever-increasing difficulty of redeeming capacity-controlled awards on legacy carriers, even FlyerTalkers (the most complexity-tolerant of all customers) may decide that they prefer a program that delivers what it promises without any drama.
I believe that Southwest has very precisely identified and attacked the crucial weakness of legacy programs: the bait and switch nature of tightly capacity controlled awards. Rapid Rewards 2.0 is a perfect fit with Southwest's brand as a no-gimmicks airline. The program may not be the most generous, but it is simple and completely free of any hidden catches. Unlike mysterious capacity controls, price-based redemption provides us an excellent ability to predict ability to redeem for free travel.
In summary, although the new program is significantly less rewarding than Rapid Rewards 1.0 for short-haul discount fare customers, it is financially sustainable and it is customer-friendly enough that we will learn to love it.
This new program is horrific and I am very surprised at the positive spin from most posters.
I am scared to death that this will creep over to the legacies. A 40% return is nothing! An example with DL during a common promotion. There are no tricks.
BNA-ATL-SFO
$218 ai RT
5,150 RDM
5,150 Status Bonus RDM
10000 bonus RDM
Total 20,300 RDM
Amex gift cards 11,000/$100
Return in cash $185 or 85%
Return in Miles @ $0.02/mile $406 or 186%
These are the FTer returns that are now on the endangered species list.
PS. Even a no-status member would see a 139% return on mileage. Amex gift card redemption rates are higher for no-status/no credit card members.