The new true value of Southwest points

Recently, Southwest devalued their rewards program a bit by increasing the number of points required for “Wanna Get Away” fares.  They used to charge 60 points per dollar for these fares, but now they charge 70. 

SouthwestPointsRequired

On the surface, it looks like Southwest reduced the value of their points from 1.67 cents per point to 1.43 cents per point.  However, as I’ve shown before, calculating the value of Southwest points is not as straightforward as it seems.  With each fare, there are taxes and fees that are not part of Southwest’s award calculation.  In other words, the points required for an award flight are less than you would expect based on the overall fare.  Of the taxes and fees included in a paid fare, only the TSA security fee is charged on awards.  The result is that the value you get from Southwest points is higher than the value that can be calculated directly from the awards points per dollar chart (shown above).

Southwest offers three fare levels, named “Wanna Get Away”, “Anytime”, and “Business Select”.  Each of these fare levels has a different point cost for award flights.  If you book an award seat at the Wanna Get Away level, you’ll pay 70 points per dollar.  Anytime awards cost 100 points per dollar.  And, Business Select awards cost 120 points per dollar.  If not for the taxes and fees issue I described above, this would lead to the following valuations:

  • Wanna Get Away: 1.43 cents per point
  • Anytime: 1 cent per point
  • Business Select: .83 cents per point

Observed Valuations

In order to find out the true value of points (with taxes included in the calculations), I ran dozens of flight searches and recorded the paid prices and award prices within each fare level.  For each flight and fare level, I calculated the point value as follows: (paid fare – award fees) / points.  Since results varied a bit from flight to flight, I then computed the minimum and maximum point value for each fare level.  Here were the results:

  • Wanna Get Away: Between 1.61 and 1.69 cents per point
  • Anytime: Between 1.11 and 1.13 cents per point
  • Business Select: Between .92 and .94 cents per point

Enhanced Valuations

If all you care about is the cost avoided for a particular flight by using points, then the valuations presented above should work well for you.  However, the analysis above doesn’t consider the fact that points would be earned on paid flights but not on award flights.  So, using the same data as above, I recalculated point values with a new formula that takes the loss of point-earnings into account.  Specifically, I counted the points lost by not paying for a flight as part of the overall point cost for an award.  That might seem strange, but consider this example: One flight I looked at cost $237 and would have earned 1200 points.  The alternative was to redeem 14000 points and $5 for the award.  The person who pays for the flight ends up 15,200 points richer and $232 poorer than if he or she had booked the award.  So, we can calculate the point value, in this example, as $232 / 15,200 = 1.53 cents per point.

With this enhanced valuation method, I found the following point values:

  • Wanna Get Away: Between 1.48 and 1.56 cents per point
  • Anytime: Between 1.01 and 1.03 cents per point
  • Business Select: Between .84 and .85 cents per point

Personally, I think that this second method provides more accurate estimates of Southwest point redemption values.  We can simplify a bit, by taking the average (mean) value I found (rather than the min and max):

  • Wanna Get Away: 1.53 cents per point
  • Anytime: 1.01 cents per point
  • Business Select: .84 cents per point

The irony of these results is that, with the exception of Wanna Get Away fares, we end up with almost the exact same valuations that we started with when doing straight-up calculations based on points per dollar.  That said, the best value of Southwest points is clearly to use them for Wanna Get Away fares.  For those fares, 1.53 cents per point is a better estimate of value than 1.43.

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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Pingbacks

  1. […] Southwest Airlines has no change fees.  There’s very little risk in buying a ticket since you can make changes to it anytime before departure.  The only small risk is with cancelling tickets.  Southwest will refund your money in the form of airline credit that must be used within 12 months.  The risk then is that you may not ending up using that credit unless you fly Southwest often.  A better solution is to use points to book a Southwest flight.  Flights paid for with points are fully refundable.  And, if you use points for a “Wanna Get Away” fare, you’ll get decent value from your points (see “The new true value of Southwest points”).  […]

Comments

  1. I love it!!

    I’ve felt so guilty focusing spending on my SWA card for years, I feel a whole lot better now.

    Might you be able to share how the numbers would look using my companion pass as 90% of my flights my companion flies with me?

    • Actually, that’s easy. The numbers come out exactly the same with a companion pass. Here’s why: the companion pass can be used for award flights or for paid flights. So, just as your points become worth twice as much towards travel with a companion pass, so does your money.

  2. Booking a flight with points certainly gives you more flexibility if the price is reduced – you get points refunded on the difference instead of cash which must be spent within a year after the flight was initially booked. That’s the real beauty of Southwest points.

    • That’s a great point. Depending upon how much you value the fully refundable nature of point awards over the somewhat refundable nature of paid flights, you might want to bump up the value of points a bit over what I calculated here.

      • This is a great point to add – and a selling point of SWA in general. It’s also a great value add of TripIt Pro – I’ve had a couple trips this year where they notified me of a price drop, and with SWA, no change fees means ANY price drop turns into saved points or a future flight credit with a few minutes work.

        Very handy!

        • I have TripIt Pro, how do you setup the alerts for flights booked on points? Specifically Southwest.

  3. @PSL and @FM- I agree. I did the same analysis as Greg did applying 70 pts/$ to all my past flown Southwest flights and came up with similar values after deducting loss of pts earned on award flights, then I bumped my value of Southwest pts back up to 1.6cpp for the benefit of fully refundable awards when using pts (vs 1 yr expiration of cash credits returned when canceling paid flights).

  4. Do you use the same valuation/ formula for rental car bonuses? We’ve primarily used Alamo for cars as they have good rates plus bonus rewards. I’m not sure how to value to bonus rewards when comparing to another Alamo rate (Costco) where you only get 600 base miles. I may be making this more difficult than it should be.

  5. I value the “fully refundable” feature more highly than some others. To me it’s valuable to be able to book flights when you’re not sure of your plans, then get a full “no strings attached” refund if needed.

    (“No change fees” on revenue bookings is nice, but there are still several “gotchas” with reusing revenue flight credits – travel must be completed within a year, only the original traveler can use the credits, and if you combine credits and new money in a booking, the ENTIRE fare value expires when the oldest credit expires. Example – you have a $69 credit that expires on July 31; on July 1 you use it as part payment toward a $400 fare. Now the ENTIRE $400 expires on July 31 – just 30 days later.)

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