More value from Southwest points

For a long time I’ve told people that Southwest points are worth 1.67 cents per point towards “Wanna Get Away” fares.  I was wrong.  Southwest points are actually worth more than 1.67 cents each.

Before I explain, let’s look at why I thought the points were worth a fixed value of 1.67 cents each towards Wanna Get Away fares.  This chart is on Southwest’s website:

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In Southwest’s example, they show that you can use 6000 points to pay for a $100 fare.  Now, if we calculate the dollars per point, we get: $100 / 6000 = 1.67 cents per point.  Since Southwest charges a fixed rate of 60 points per dollar, the ratio will always be the same regardless of the fare and so points should have a value of 1.67 cents per point for all fares.  Simple.

There’s more to the story

A few days ago, I learned about my error from this blog comment dialog:

JL100: Southwest worth 1.8 cents/dollar on wanna get away fares

Frequent Miler:  Southwest points are worth 1.67 cents on wanna getaway fares.

JL100: I just checked a sample of three Southwest fares and the points were worth 1.8, 1.88 and 1.9 cents compared to fare amounts. Perhaps 1.67 is a minimum?

Frequent Miler: You’re right! I just did a search and found 1.95 cents value. That’s very weird because Southwest supposedly has a fixed value for their points. I’ll have to investigate more!

So, I investigated…

What I found

Just like commenter JL100, I ran a number of flight searches on Southwest’s website and I found that I was getting more than 1.67 cents value from every single flight.  After some digging, I figured out why:

  • Southwest calculates required points by adding the Base Fare and Excise Tax and then multiplying the result by 60. 
  • The above formula does not account for Government Segment Fees, Passenger Facility Charges, or Security Fees.  Security Fees are charged to those who pay with points, but Segment Fees and Passenger Facility Charges are not.

In other words, when you pay with points, Southwest pays some of the taxes for you even though they are not included in the calculation for the number of points needed.  As a result, the value you get per point will always be higher than 1.67 cents as long as the combination of Segment Fees and Facility Charges are more than the Security Fee.  Since these taxes are based on the number of segments you fly, you will get more value (when calculated as cents per point) on low cost trips with multiple segments.

An Example

I priced a flight from Detroit to Baltimore.  The cash price came to $168.80 and the fare breakdown looked like this:

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When I priced the same flight for points, the total came to 8,820 points and $5 for the Security Fee.  The fare breakdown looked like this:

image

By using points, I would save $163.80 ($168.80 – $5).  So, the value of the points would be: $163.80 / 8,820 = 1.86 cents per point.

Other calculations

You can argue that one wouldn’t really get 1.86 cents per point value in the example above because when you pay with points you do not earn points for the flight.  That’s true, but it doesn’t change the fact that whatever formula you use for valuing point redemptions, you will find a higher value than one would otherwise assume.

Companion pass

Southwest has the most generous companion pass benefit in the industry.  In any calendar year in which you accumulate 110,000 Southwest points from Southwest and from partners, you’ll get a companion pass that can be used as many times as you want for the rest of that year and all the next year.  Whether you reach that milestone by flying, or by shopping through the Rapid Rewards portal, or by signing up for lots of credit cards, the good news here is that the points you accumulate along the way are worth even more than you thought!

As an aside…  some people say that once they have a companion pass, their points become worth twice as much.  That’s both right and wrong at once.  Yes, the points will get you twice as much travel as they would before, but so will cash!  So, I think it is better to think of the Companion Pass as a way to make travel cheaper (with cash or with points) rather than to think of your points as being worth more.

Bottom Line

Southwest points are worth more than 1.67 cents per point towards Wanna Get Away fares.  And, incidentally, it means that using points for Anytime fares is not as bad of a deal as it appeared (since you’ll get slightly more than 1 cent per point value).  Business Select fares will still be a bad deal, though, as they’ll still calculate to less than 1 cent per point value.

We’re not talking about big numbers here, but its great to see a case where we can get more value from points than we previously thought!

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Comments

  1. Another good value for those that prefer to fly up front is transfer to FL. FL biz award availability is usually wide open so 38K gets you a r/t in biz. Not bad for a transcon.

    • HikerT: Thanks. Good suggestion. Any experience with it? How good is AirTran’s biz product?
      CodeAdam10: Yes, that’s right. It used to be harder to see that you got more than 1.67 cents value from points, but now that they are showing total cost it’s pretty obvious.
      Dave Q: Yes, it is more valuable that some of us previously thought, but keep in mind that these are pretty small extra savings.

  2. FM, SWA has always calculated award redemptions at their Base fare, however now all airlines must display the total cost of a flight (including all government fees) vs before where they only had to display the base fare on the initial search results page.

  3. I think that you can actually realize the full value even though you aren’t earning points. I like to use southwest points to book flights for people who wouldn’t sign up for or use their points anyways(aka mom and dad). They think this whole points thing is just a sham yet they have no problem flying on free tickets :).

    • Tyler: True
      Paul: Congrats!
      Drew: Yes, that’s true. I thought about adding a section to this post about cancel-able award tickets, but I decided to keep the focus more narrow.
      Grover’s Bathtub: Yep

  4. Yes JL100 is true. I have observed 1.8C per SW point long back… and have been booking flights at this value for last 3 months +

  5. Yep. I got the 50,000 point sign-up bonus for the SW credit card in February. About to redeem 48,240 points for two wanna get away roundtrip tickets that would otherwise cost $906 total. So that’s 1.878 cents/point in value. Incidentally, at that rate the sign-up bonus is worth $939 in SW fare. An extremely good deal.

    • Esskay: Yes, you can buy points (as Grant said), but that’s not a very good deal unless you just need a small number extra to have enough for an award. Also, purchased points do not count towards a Companion Pass.
      dmg: No, points transferred from Ultimate Rewards do not count towards a companion pass.

  6. Booked two direct r/t flights on SW Nov 15-20 arrive 1p depart 1215p for 36k points total.

    That’s incredible cpm.

  7. Alternatively, I could assume value of SW points based on if I didn’t have my companion pass. Suddenly my points are worth double AND I get a 50% discount on paid tickets. I like that method better =)

  8. This isn’t news to Southwest flyers, I don’t think. I usually will only redeem my miles on flights in the 1.88-2 cents/mile range. Otherwise, I prefer to pay with a southwest gift card or fly united for the EQM.

    And of course, on expensive flights, I like to use the AirTran credit trick to sometimes get even more than 2 cents/mile.

  9. You might do a post on the other miles redemption that the bloggers never touch: MR points transfers to Frontier for domestic flights or Carribean/Central America.

    Living in Denver, I have almost no use for BA and American, so these others are the only way to get around domestically on the cheap.

  10. Nice topic today! 🙂 Thanks for the shout out, I love the Chase/Southwest combination for the great value and ability to make plans and change them at no cost!

  11. I <3 SWA. Living in Denver it takes me EVERYWHERE. Also it takes me and my wife everywhere DIRT CHEAP as we have a companion pass. Oh lordy how I've made use of that. We've flown domestically at least 7 times with another 6 coming up this year on about 105k points. I mean, FFS, we're going to NYC (LaGuardia) round trip for 10560 points!!! We even did a 24hr trip to Las Vegas because it was only 7k pts for both of us! My best redemption yet was 6.5k pts to fly to SLC for a ski weekend in December. We're doing that again in Dec this year, but now the lift tickets are free thanks to Vail Resorts buying up all the damn ski areas!

  12. As long as one has the patience (and/or foresight) to keep monitoring when flights become available and go on sale, SWA is AMAZING. They ALWAYS seem to drop their fares…and best of all, change/cancellations are free. I can’t stress how liberating it is to virtually go anywhere you want whenever you want. And when you figure you can “buy” UR pts for 0.67 cents a pop, basically travel on SWA becomes 63% off of list price. 😀 😀 😀

  13. Now I’m beginning to rant…but I prefer the “ordered chaos” on SWA over other domestic carriers. I forgot how rude passengers in coach are on airlines like AA and United…trying to beat you off the plane by a mere 6 people and fighting for overhead storage space. At least the people who fly SWA tend to fly it frequently and understand order and how to get on/off a plane in a timely fashion. Plus bags fly free!

  14. Re: How good is AirTran’s biz product?

    Just fine. Same as domestic FC but with premium snacks instead of a meal. Also, if you can’t find RR1 availability on WN it appears you can transfer to FL and get WN flights via “biz” as a last resort. Basically the equivalent of legacy anytime awards, but with perk if you are traveling on FL metal you get biz. One downside is FL awards do have change / redeposit fees. I just booked LAX-SJU for someone who was going to throw away 35K AA for one-way AAnytime coach. I told them why not fly FL biz for almost half that.

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