Southwest making changes to its frequent-flyer program

By Richard N. Velotta

Thursday, Jan. 6, 2011 | 2:31 a.m.

Southwest Airlines is converting its popular Rapid Rewards loyalty program to a points-based system with accrual based on how much money a customer spends for a ticket.

The Dallas-based airline, the busiest at Las Vegas’ McCarran International Airport, is unveiling the new system today with the conversion scheduled to occur March 1.

Customers won’t lose credits they’ve accrued when the conversion takes place because Southwest will automatically convert credits to points.

Information on the new system is available at newrapidrewards.com.

“We’re looking at this as an extension of currency,” said Southwest CEO Gary Kelley in an embargoed media briefing Wednesday morning.

Under the new system, customers will accrue points whenever they buy a ticket on the airline’s website with higher multiples for higher levels of Southwest’s three-tiered pricing. For the airline’s “Wanna Get Away” fares — the least expensive tickets Southwest sells — customers will earn six points for every dollar spent.

For the second-tier “Anytime” tickets, customers earn 10 points per dollar spent. For the highest priced “Business Select” level, customers will get 12 points per dollar spent.

Southwest will continue to award points on transactions — one point for every dollar spent — with some of its partners, which include hotels and car-rental agencies.

When redeeming points for flights, 60 points equal a dollar, so a $100 fare would cost 6,000 points.

Southwest is making other changes that will surely meet with customer approval.

Unlike the existing system in which credits have to be accrued over a 24-month span to cash in for an award that has to be used within a year, point totals under the new system won’t expire as long as a customer makes a purchase at least once every two years.

Southwest also is bringing back its no-blackout policy. Any available seat on any flight will be available for purchase with points.

Southwest also announced that it is setting up a redemption system that will enable customers to purchase other travel through a third-party vendor.

Among the products customers will be able to buy with their Southwest points are tickets for international and Hawaii travel on other airlines, cruises, golf and spa packages.

The company said customers can redeem points for trips to more than 800 destinations, stays at 70,000 hotels worldwide and for gift cards with 45 vendors.

Redemptions for international travel and special packages will be tied to Southwest’s branded Rapid Rewards Visa card. The company and its bank partner, Chase Bank U.S.A., offer the card with a $60 annual fee. There are no plans to change that.

Customers won’t be able to mix points with cash on their transactions, but under the new system, customers will be able to buy points at a rate of $25 per 1,000 points with a minimum purchase of 2,000 points. That will enable customers who are close to meeting a transaction goal to buy enough points to do it.

Southwest’s most loyal customers also will get bonus points for transactions under the new system, which the airline has dubbed “Rapid Rewards 2.0.”

Rapid Rewards customers who qualify for “A-List” status — those who have purchased and flown 32 one-way trips within a year — will get a 25 percent point bonus on all transactions. A-List customers also will have a dedicated telephone line for inquiries and will have free access to inflight WiFi service that Southwest is in the process of installing on its planes.

Not everybody is likely to be excited with all the changes in the program.

Las Vegans who have accrued credits with short jaunts to Reno or Los Angeles under the program and collected 16 credits to earn a free round-trip flight and redeemed them for a big cross-country trip will find that their points won’t take them as far.

For example, it currently costs $149 for a round-trip flight to Reno on a “Wanna Get Away” fare. Under the current system, that would earn two credits — one-eighth of the way toward earning a free round-trip flight. Under the new system, that ticket would earn 894 points. After eight round trips to Reno, a customer would accrue 14,304 points.

But the cost of buying a ticket from Las Vegas to Orlando, for example, would be $343 for a “Wanna Get Away” ticket. At the redemption rate of 60 points per dollar, it would take 20,580 points to buy that Orlando ticket.

That means it would take 23 one-way trips between Las Vegas and Reno instead of 16 to get a ticket to fly to Orlando.

When Southwest transitions its program to Rapid Rewards 2.0, it will convert existing credits at a rate of 1,200 points per credit. For example, a customer with 14 existing credits under the current system will get 16,800 points.

Until March 1, Rapid Rewards card-holders will be able to accrue and use credits as they have.

“We want to give our customers the opportunity to absorb the changes and be prepared for the cutover on March 1,” said Ryan Green, Southwest’s senior director of customer loyalty and partnerships, in Wednesday’s briefing. “We think this provides more value and less hassle for our customers, and it’s completely transparent.”

Green said the most common frustration customers shared with the airline was over capacity restrictions and blackouts. The new system remedies that dilemma — at a price.

Southwest, like most airlines, price tickets based on supply and demand, so tickets during high-demand periods — such as around Thanksgiving and Christmas — cost more than they do in low-demand periods like midweek.