Calm Down, The Southwest Devaluation Isn’t As Bad As It Seems
Hit the panic button! Southwest Rapid Rewards just did a massive devaluation. They are only worth 1.2 cents now? What! I was getting like 1.5 cents per redemption for them. I am done with Southwest, as soon as I burn my miles they are out of here!!
Well 1.2 cents is accurate, and not at all very accurate at the same time. For some reason some people like to base the valuations of Southwest points without including taxes and fees. We don’t base hotel points on the base rate minus resort fees and other taxes so why do people do it with Southwest? Your guess is as good as mine but it doesn’t make sense to me. The true value includes the taxes and fees since you still avoid that cost so of course it should be included.
In my recent Chase personal card rankings I pegged Southwest Rapid Rewards points at 1.4 cents, which was probably a little on the lower end. Well where do they sit now? Let’s take a look.
My Findings
I did 8 dummy one way bookings on a random date in May and here is what I found:
- Cheaper flights still bring the best return because the taxes and fees make up more of the cost. Super cheap flights, like $49, can get you over 1.7 cents per point.
- $100 flights will get you in the 1.4-1.6 cent per point range
- Expensive flights, $350-$450, will get you in the 1.32-1.36 range.
Overall the average across the flights, after adding up the fares and subtracting the $5.60 fee for each, I got an overall average of 1.394 cents per point.
Wait, that is right at 1.4 cents like you said on the rankings! Why yes, yes it is. While my valuation was on the low end before it is smack dab in the middle now.
The range that I saw was 1.33 cents per point – 1.72 cents per point. I am sure you could stretch a little bit either way with your findings but most of the time you will fall in the 1.4-1.5 range. Because no one is flying Southwest on a $400 one way flight now are they? Most people will be booking in the $100-$250 each way range which will get you this level of redemption.
Final Thoughts
Southwest did increase the cost of Rapid Rewards for flights to 83 points per cent from 78 points per cent and there was a devaluation. But on the actual redemption side I don’t think you will feel it all that much overall, especially on the cheaper flights. This was somewhat expected after they let people turn vouchers into points. This is about a 5%-6% devaluation overall. Over the next 12 months or so I would expect devaluations from many airlines and hotel programs so be prepared for that.
So calm down, and fly on. It isn’t as bad as you are seeing out there 😉.
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[…] them. The points you own today will be worth more now than they will in a year. Take the recent Southwest Airlines points devaluation, for example. While the points are not by any means “worthless” now, their value is […]
The no notice part is just wrong. Just because a company has done something inexcusable in the past doesn’t make it fine in the present.
You mention that Southwest is doing this because of the increased liability of more outstanding miles due in part to increased signup bonuses and other sales avenues. The flip side of that is that Southwest wins even more because that’s more miles that people or corporations paid for. In cash. Beforehand. Of course there will be plenty of spoilage in there as well, which is another reason for Southwest not to do this. Southwest doesn’t fly to my city so this doesn’t directly affect me but slice it how you like this is just wrong.
On a substantial tangent, I think that airline miles and hotel points redemption prices should be redeemable at the going rate for when they were earned rather than when redeemed. That would allow for devaluations while retaining value for prior earnings.
It is an interesting point about locking in values to when miles and points are earned but the IT required probably makes it a nonstarter. Your point about Southwest makes even more because people paid before hand – isn’t that all devaluations though? How is this any different than any other devaluation?
Lack of notice. I remember how pissed I was when AA killed off the Oneworld Explorer without notice and when Alaska doubled the price of Emirates awards without notice. If you provide notice you’re showing your customers that you don’t view them as an adversary. Devaluing is still an inherently customer-unfriendly move considering that the hotel or airline completely controls the value of the miles or points but it’s not a big middle finger to loyal customers.
The lack of notice is annoying. The only reason they would do it this way is so people couldn’t mass redeem at the higher level. I have long thought Southwest is still considered the friendly airline based on their stuff from decades ago and they are more in line with the other big boys now. But people still hold them in that high regard based on previous performance vs the reality of what they are now.
Hey Mark, sorry everyone is blasting you in the comments. Im just curious about your thoughts about the companion pass these. Is the effort worth getting it these days?
I don’t think this changes the companion pass much. If you know you will use it and can line it up for near two years of travel I think it still offers a lot of value. A lot depends on your home airport and if you fly Southwest with someone else often. I personally stopped chasing it since Southwest doesn’t have great coverage out of DTW but would get it in a heartbeat if I lived somewhere with a good route network etc.
If they ever did away with welcome offers counting towards the requirements…now that would be a big time devaluation 😉
Noted! I was debating if I should skip the Companion pass and get the new United Quest. However we live in the DC area and just and train ride to BWI airport so it still makes sense for us.
If flying out of BWI makes sense then I think the companion pass is a great tool for you for sure.
What you are not considering is that 1. Their loyalty program is revenue based, 2. It was an incredibly unfriendly move designed to screw their loyal customers, 3. They took CARES money.
Lucky at OMAAT explains it in more detail but when your points are worth a certain dollar amount, you don’t need to adjust how much your points are worth since your fare price is constantly fluctuating with the market. At least for award charts there’s some understanding that adjustments need to be made to keep up with inflation. Not so here. Award chart based programs also still offer sweet spots – they might become rarer but if you pick your spots, you can still get good value. Here you straight up lost 6%. (Since we talk about .5% difference in earning values on CCs, being major, not sure how this one is not so bad.)
Even if it is needed, a prior notice should have been given to let their customers a choice to redeem at the old rate. No notice means they are intending to not let you have the opportunity to react to the changes and get the value for your business that you were promised.
SW took CARES act money so we can’t even argue that they needed to do this to stay afloat.
Perhaps it is specifically because you aren’t at SW customer that your take is so weak – you aren’t affected. I think even TPG had a harsher take than you did. If they set off valuing the program at 78pt./1 cent, suddenly valuing it at 83pt./cent overnight is basically theft, you just lost 6% of what you owned for no reason.
I understand that it is revenue based and I do think they should have alerted people to the change. I will say this is how they have done devaluations in the past so the fact that they didn’t alert people isn’t surprising to me, it is actually to be expected. As a customer either you can swallow that or you can’t but this is who they are and have been.
I stated below that they will still adjust the program as they see their liability rise. To say they should keep the program the same because it is based on revenue is a simplistic view in my opinion. That would make sense if welcome offers had stayed at their old 30K levels and if they didn’t offer spending bonuses etc. and transfer at 1 to 1 from Chase which has increased their earning rates over the years. As they have made points easily accessible the market will dictate that they have to be worth less. It is inevitable. So either we have them make points harder to earn or when they make them easier to earn eventually they will be worth less. Unfortunately we can’t have it both ways.
The timing of it sucks because people are sitting on piles of points they haven’t been able to use and they didn’t give people the chance to cash them out at a higher rate for sure. I just don’t think 6% over a 2 year period is worth going nuts over and is below what others have done by a long shot.
Just because something has been done before doesn’t make it any more right or acceptable. Similarly, just because they are printing too many points shouldn’t mean we have to bear the repercussions.
I don’t even fly SW but I do read your site because I find that you guys generally give a pretty honest opinion of things and generally have a more consumer-centric angle (even though sometimes I don’t agree with the take such as with hotel compensations). So I was surprised that this is your take on SW and wanted to hear the logic, if I wanted “the corporate stuff happens, it’s not that bad, deal with it,” I wouldn’t be on this site.
Put it this way, if a hotel doesn’t offer you an elite perk like free breakfast or late checkout (or can’t honor your room selection) because they overbooked, do you just give them a bye or do you ask for compensation? If you go to the same hotel and it happens again, does it now make it acceptable because they did it before and you should know better? Do you just accept it and move on or are we going to see a post about how it’s unacceptable and what compensation you got?
Not asking you to rain down hellfire but in the case of the IHG devaluation, enough uproar was caused that they reversed course (at least for now). Giving companies byes and softball takes does no one any good.
My whole point of the article was to curb some of the hell fire that was rained down that I thought was not accurate and caused people to freak out more than they should. I was trying to be the calming voice more so than giving Southwest a pass.
When people see 1.2 cents per Rapid Rewards point in a headline they are going to freak because they were getting 1.4-1.6 cents a piece (not realizing this figure does not include taxes and fees). My point was it is not as bad as people think. Unfortunately people today read headlines, assume they know what is being said and make a snap judgement. I saw it in numerous Facebook Groups this morning so I wanted to get people to actually sit down and read what actually happened and realize it wasn’t as bad as they thought when seeing initial headlines.
I guess I failed at getting that across though so that is my bad.
Point will only decrease in value – the latest IHG change (backtrack doesn’t matter, they’ve tipped their hand) and this one from SW are just more indicators that earning in a specific point program instead of an MR, UR, etc…if a fool’s errand. I think the responsible thing for the points bloggers to do is to tell their readers that the co-branded cards are basically not worth getting period unless you really have a lot of interaction with that brand. Let’s take IHG – before the backtrack you still had articles on how to get ‘great value’ from the program and the credit cards. The problem is that the mental anguish you have to go through to find that value at a Holiday Inn in Detroit is absurd.
The real story should be how the cobranded card money machine killed it self by flooding the market with so many points that they had to keep devaluing. When do we start seeing 200K point sign up bonuses being the norm which sound great…when 1 one night at the holiday inn is 300K.
I think co-brand cards are worth getting for the welcome offer but the transferrable currency is where you should focus your spend. That is something we have always said. There are a few co-branded cards where it makes sense, like Hyatt for the free night and status or Surpass for the free night etc, but mostly transferrable currencies are the way to go. I don’t think anyone ever said to spend on the IHG card but I don’t read all the blogs so could be wrong there.
To say you shouldn’t sign up for a card because there may be a devaluation in the future is taking it too far imo as well. You would have missed out on a lot of good opportunity thinking that way.
Sorry have to go with Mark here. In my experience Southwest has the best loyalty program and best customer service and it’s not even close. Agents are unbelievably capable compared to every other company, not only airlines. For a few months I had status with AA and got almost the same service as I always get with Southwest! Points are super easy to use and go right back into your account when cancelling, that should work now with the other guys but hasn’t before and you had steep penalties for changing. Yes, I don’t like getting 6% less but still prefer 737s to CRJs any day!
@Andy Well said!
@Jason is correct…just absurd.
It’s ridiculous to devalue the points that is pegged to the airfare every few years. It’s been devalued by 28% since the program changed about 10 years ago (from 60X to 82X the fare). That’s on top of fares increasing.
Rapid rewards is becoming a joke.
I get that it is dollar based but all airlines and hotel programs have devalued over time. Southwest is no different. As they offer bigger bonuses and higher earning rates on their cards etc. they have to take from somewhere. If you want to go back to 30K bonuses and 1X earning on everything then you would have a higher rate but you probably come out on the short end of the stick overall imo. I will say with other airlines allowing free changes their program is not as valuable as it once was. And using Pay Yourself Back and paying for their flights is probably the way to go most of the time vs transferring now.
Stop being a shill for airlines. The least they could do is letting people first. No notice devaluation is a slap in the face for loyalty members. I know Southwest did this in 2018, but that doesnt mean they should be able to get away with the same disgusting practice. I thought you and this blog would be a traveler’s advocate, but it seems you’d rather abandon any principle and suck up to corporate overlords for some of that sweet affiliate money.
All airlines devalue and a 6% one is on the better end. No notice isn’t great for sure and I think they should give a heads up but they haven’t in the past either so you know this is the way they do business and decided to continue to play with them.
I am not Southwest fan as you would know if you read my other articles but people are making this a lot worse than it is. There are better avenues to book Southwest with points than their own program and it has been that way for a while. I would say focus on those avenues if you want to continue to fly Southwest.
The real funny thing Andy is if I said the world is ending I would be called a clickbait machine. If I simply tell it like it is I am called a corporate shill. Can’t please everyone I guess but I will continue to tell you the truth. 6% is nothing compared to what will be coming from other programs so if you are freaking out over this you might wanna get those blood pressure pills now!