As reported by Mommy Points and elsewhere, Southwest will stop the practice of fixing award prices to revenue fares. An email sent to many Southwest members declared: “Beginning April 17, 2015, the number of Rapid Rewards Points needed to redeem for certain flights will vary based on destination, time, day of travel, demand, fare class, and other factors.” Hmmm, that sounds familiar…
The existing (and older) award chart
Currently, Southwest award prices are determined according to this “award chart”:
Last year (March 31, 2014), Southwest increased the award price for Wanna Get Away fares from 60 points per dollar to 70 points per dollar (see: The new true value of Southwest points). They also stopped publishing the above chart at around that time. Now, just over a year later, they’re planning to do away with this award pricing approach altogether.
The current award pricing scheme seemed to be working for Southwest. In fact, there have been rumors that Delta was jealous of Southwest’s approach – that’s partly the reason many have predicted that Delta would move to a fixed revenue based system like Southwest’s. Instead, ironically, Southwest is moving away from this system and copying Delta by becoming less transparent about the cost of awards. Just like Delta, award prices will be whatever the search engine tells you.
Here are a couple of factors that may have led Southwest to this decision (this is pure speculation on my part):
- Partnerships: Most airlines partner with other airlines and allow customers to use points/miles to book partner awards. They also let people use the partners’ miles to book flights with them. Southwest doesn’t currently offer any such partnerships. If they did, though, they may want/need more flexibility in award pricing to handle the partnership. For one, the partner would need a way of seeing when award inventory is available. Currently, all seats for sale are available for awards. I doubt Southwest would be that generous with their partners. Second, Southwest would have no control over their partner’s revenue prices and would likely need a way to price awards that isn’t fixed by the ticket price. Is Southwest looking to hookup with other airlines?
- Business acumen: Assuming that Southwest is pretty smart about how they run their business, its worth noting that there are good business reasons to abandon a pure revenue based award system. A smart business will encourage their members to book awards on flights that will likely run with empty seats. They can do that by lowering award prices on those flights. Similarly, they would want to discourage customers from booking awards on nearly full flights. They could accomplish this by raising award prices. Note that, due to competition and other factors, it’s not always possible or sensible to raise and lower paid ticket prices the same way.
If you have plans to book flights with points, book before April 17th. One of the best things about Southwest awards is that they’re fully refundable. You can cancel at any time and get all of your points back. So, there’s no harm in booking early and then rebooking if plans change or if award prices drop.
What if you’re waiting to earn enough points for a Companion Pass? Book your own ticket anyway. You can add your companion later once your account is setup with the Companion Pass. If you have enough points, it can’t hurt to book your companion now on a separate award, just in case your Companion Pass doesn’t arrive in time. Then, cancel that award if/when you get the Companion Pass.