Southwest tries risky frequent-flier revamp

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Jan. 07--Southwest Airlines is preparing a $100 million reboot of its Rapid Rewards loyalty program that ties frequent-flier rewards to the amount customers spend to fly the low-cost carrier.

The sweeping revamp, unveiled Thursday, immediately drew an angry outburst from Southwest loyalists on and other message boards. Among their complaints: The new point system is too complicated and will be stingier to short-haul customers than the carrier's current program of awarding a free trip to passengers who log 16 flights over a two-year stretch.

It is unprecedented and risky for a major airline to remake its loyalty program from scratch, analysts said. Executives described the overhaul as the biggest product launch in the company's 40-year history and part of Southwest's evolution from a quirky regional airline to a national powerhouse.

The changes to Southwest's loyalty program should more than pay for the hefty cost of the revamp, CEO Gary Kelly told reporters and analysts this week. Southwest expects to gain new business customers by offering richer rewards for longer flights and unveiling new perks, like free Wi-Fi and a dedicated hotline, for road warriors who log 50 flights or earn 70,000 points in a year.

Southwest executives vowed to make the program transparent. Every seat on every flight will be available to be redeemed by frequent-flier awards, with no blackout dates or other restrictions.

"The customer doesn't have to go hunt and peck to find seats," said Ryan Green, senior director of customer loyalty and partnerships at Southwest. "It's there in dollars and points."

But the complex new points system, which takes effect March 1, is at odds with one of the basic tenets of Southwest's corporate culture: the simplicity of its product offerings, said Tracey Croughwell, of San Diego, who flies the carrier about a dozen times a year.

"The Southwest brand is just known for making it easy, everything from the informality of the flight attendants to the lack of fees for checking in. ... This kind of goes against that feeling," Croughwell said. "Now I would really have to do a calculation to figure out how close I am to getting a free flight. It's just cumbersome. I don't want to spend time doing that."

The program changes are a response to requests that customers have made for years, said Southwest spokesman Chris Mainz.

"With more understanding of the benefits of the new program, we feel customers will ultimately agree not only that the changes make the program better, but that Southwest stands out among the other carriers with the most-lucrative frequent-flier program," Mainz said.

Based on the fare they select for a flight, passengers will earn six, 10 or 12 points for every dollar they spend. To claim a free ticket, passengers must redeem 60, 100 or 120 points for every dollar that paying travelers would be charged.

For example, Chicago customers heading to New York's LaGuardia Airport would earn 654 points by purchasing a $109 Wanna Get Away fare, 2,990 points for a $299 Anytime fare and 3,768 points for a $314 Business Select fare. The points required for a free flight on the route would escalate by fare category: 6,540, 29,900 or 37,680.

Southwest will tweak its "Select Fares" search matrix to display the Rapid Rewards points customers stand to gain with every fare choice. By toggling, passengers also can see how many points they would have to spend to grab that fare for free.

Southwest executives think more passengers will be tempted to purchase Anytime or Business Select fares, and will redeem those points on Wanna Get Away fares for maximum value. Rewards will accrue much faster for heavy users of Southwest than their counterparts at mileage-based programs, they said.

"It gives us a wonderful tool to set ourselves apart from the industry, just as we did with 'Bags fly free,'" Kelly said.

But in courting new corporate customers, Texas-based Southwest risks alienating its large base of leisure travelers drawn by the carrier's no-frills, no-nonsense approach.

"It will be interesting to see how Southwest maintains its egalitarian nature, which has served it well for 40 years," said Henry Harteveldt, travel analyst with Forrester Research Inc. "On the other hand, how do they retain and reward their best customers? Democracy ends at the jetway door. That's where people are clamoring to say, 'Somehow, I'm better than you.'"

Southwest spent years redesigning the program, studying customer preferences and borrowing the practices of rivals, including acquisition target AirTran Airways.

Among new Rapid Rewards features:

-- Its points don't expire, provided members fly Southwest or use one of its partners once every two years.

-- A new top-tier of fliers, called A-List Preferred, will be created for those who log 50 flights or earn 70,000 points in a year. Southwest will lower the current threshold to gain A-List status by 20 percent, to 25 flights or 35,000 points.

-- Members will be able to purchase points to "top up" accounts to qualify for awards.

-- Members who hold the Rapid Rewards credit card can redeem points for flights to more than 800 international destinations, 70,000 hotels worldwide, cruises, golf vacations and other freebies.

Infrequent fliers may be baffled by the changes, however, said Randy Petersen, editor of InsideFlyer magazine.

"Southwest was known as the simplest frequent-flier program," he said. "The new program is pretty complex. Some people are going to be scratching their heads, saying, 'Gee, if I wanted a complicated frequent-flier program, I'll go join United's or Delta's.'"

It's also unclear whether the revamp will win over more corporate travel managers, since the carrier isn't known for offering aggressive discounts to woo corporate clients.

"I think procurement departments are more interested in discounts and business-related amenities than revamped rewards programs," said Jean Covelli, president of The Travel Team Inc., a wholly owned subsidiary of Buffalo-based Rich Products Corp. "Nine out of 10 of those rewards don't go back to the corporation."

jjohnsson@tribune.com

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