Southwest Airlines slashes Rapid Rewards earnings: Is it a bad sign for customers?

Last fall in Texas, Southwest Airlines executives laid out a far-reaching plan to transform the airline.

They shared the finer details of the carrier’s first-ever assigned (and extra-legroom) seats. They spoke about the airline’s first international partnership. And, executives teased upcoming changes to Southwest Rapid Rewards meant to entice customers to focus more attention on the airline’s loyalty program — perhaps driving increased value to its suite of cobranded credit cards in the process.

But despite the seismic shift to its business, the airline promised one thing would not change.

“Throughout the transformation, all Members will earn and redeem points at the same rate that they do today,” the carrier said in a written statement that accompanied its September 2024 Investor Day presentation at the airline’s headquarters in Dallas.

This week, though, the airline changed course on that very promise.

Abrupt Rapid Rewards earnings change

On March 4, Southwest quietly altered the earnings structure for its two lowest fare classes, slashing the number of points customers can earn for those fares while raising customers’ earning potential for its highest-priced tickets.

New earnings structure

Going forward, flyers who purchase a standard Wanna Get Away fare will only earn 2 points per dollar — down by two-thirds from the previous rate of 6 points per dollar.

Wanna Get Away Plus customers will now only earn 6 points per dollar — a 40% drop from the previous 10 points per dollar rate.

The earnings for passengers booking Anytime fares stayed the same, at 10 points per dollar.

The one winner: passengers who regularly fly on a Business Select ticket, which will now earn 14 points per dollar instead of 12.

The changes, which came with no prior notice to customers, ran plainly contrary to Southwest’s 5-month-old pledge that it would leave earnings rates untouched — even as the airline underwent a myriad of other changes.

Here’s how the airline characterized the changes this week.

“Although we modified some ratios for earning points, Southwest Rapid Rewards remains one of the most rewarding and flexible loyalty programs in the airline industry with unlimited reward seats, no blackout dates, and points that don’t expire for all Members,” the carrier said in a statement to TPG.

Wanna Get Away meets basic economy?

Yet, the reduced earnings — steepest for Wanna Get Away bookings — do offer yet another factor customers will have to consider going forward when selecting a fare class that once doubled as the catchphrase of long-running Southwest commercials.

Remember, when Southwest’s assigned seating goes live in 2026, Wanna Get Away passengers won’t be able to select their seats for free, as TPG reported last fall — a restriction more reminiscent of the large network carriers’ basic economy policies.

Of course, Southwest executives rightly argue its cheapest fare class remains more customer-friendly than its competitors, between free changes and cancellations and the fact that airline executives have promised to leave the carrier’s two free bags policy in place.

“That’s by far the best base fare product in the industry,” Ryan Green, Southwest’s executive vice president and chief transformation officer, said in September, suggesting that Wanna Get Away passengers who don’t purchase EarlyBird or Upgraded Boarding are already left to scrounge for empty seats.

A larger shift

But Southwest’s about-face on earnings rates for its loyalty currency was also just the latest in a series of recent large-scale changes at an airline long known for its customer-friendly policies — dating back to the leadership of industry pioneer Herb Kelleher, whose one-of-a-kind laugh can still be replayed at Southwest headquarters with the push of a button (Yes, there’s actually a Herb Kelleher “laugh button” at the airline’s offices).

In recent years, Southwest has drawn no shortage of criticism from industry insiders, particularly as the airline has, at times, been slow to respond to stiff competition — both from network airlines boasting ample premium accommodations and ultra-low-cost carriers undercutting Southwest with lower base fares (and operational costs).

“Today, with budget airlines as the price leaders, and with its key competitors offering deeply discounted basic economy fares, Southwest’s value reputation isn’t as clear,” Henry Harteveldt, industry analyst and president of Atmosphere Research Group, told TPG last month.

Customer-facing and behind-the-scenes changes

It’s not just the carrier’s shift away from its hallmark open seating policy or its move last week to allow booking giant Expedia to sell its flights that has served to crystalize the notion that Southwest has entered a far different era than the one Kelleher once oversaw.

Just last month, the airline cut 1,750 corporate employees — the first reduction in force in the history of a company long known for avoiding layoffs at all costs.

Green, the very Southwest executive who last year was charged with overseeing the carrier’s sweeping commercial changes, tendered his resignation a day later, according to a filing with the U.S. Securities and Exchange Commission.

Those layoffs came as Southwest continued to face pressure from activist investment group Elliott Management — whose involvement and stake in the company came in the midst of recent years of lackluster earnings at the airline.

A new era

In fact, Southwest’s evolution is long overdue, argued Rob Britton, a former American Airlines executive who’s now an adjunct faculty member at Georgetown University’s McDonough School of Business in Washington, D.C.

“They’re kind of at the limits of what the old business model could do. They’re morphing in the direction of a business model that looks more like their competitors,” Britton said.

Indeed, Southwest executives have repeatedly said that changes in recent years are about future success — and backed by market research, such as the 80% of its customers that wanted assigned seats, according to Southwest’s surveys, or the extra-legroom seats — and the ability to redeem points on international partners — that have been a boon for its competitors.

“It is our responsibility to keep tabs on what our customers want,” chief operating officer Andrew Watterson told me in a January interview.

The future of Luv

Surely, though, Southwest’s customers didn’t want to see a reduction in the number of Rapid Rewards points that they can earn for a flight — a shift that, in some ways, evoked the sort of shrewd, corporate move the airline historically not associated with the airline.

Collectively, do these changes jeopardize the longstanding ethos of a company whose most recognizable emblem is, quite literally, a heart?

Time will tell.

“I think this is all in the hands, probably, of their employee base … to the extent they can continue, sort of the informality, and the humor, and the friendliness that they’ve been known for,” Britton offered. “I think that stays on. I think that endures no matter what.”

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