It wasn’t just the elimination of free checked baggage that was announced today at Southwest Airlines. In the weeks ahead, we will also see points worth less, the return of expiration on travel credits, and the formal introduction of basic economy.
More Devaluations At Southwest Airlines: Points, Travel Credits, Cheap Fares
Let’s look at the other changes Southwest announced today, all of them negative.
Variable Redemption Rates Will Squeeze Value Out Of Rapid Rewards
Per Southwest, “Rapid Rewards, the carrier’s loyalty program, will introduce variable redemption rates across higher-demand and lower-demand flights.”
Think of it this way. Southwest has a revenue-based loyalty program on both the earning and redemption sides. Award ticket pricing is directly tied to the price of a ticket. What Southwest means by this change is that your points may be worth slightly more when you book in advance on low-demand flights (say, 1.6 cents instead of 1.4 cents) but will now be worth less on close-in, high-demand flights (say, 1.2 cents instead of 1.4 cents).
Those are not the exact numbers…I’m just trying to illustrate the way Southwest is hinting how pricing will work. That’s an overall negative because, at least to me, the greatest value of points is in last-minute redemptions.
The companion pass will still keep some using the Southwest Airlines credit card, but for most, a cash-back card will make more sense.
New Basic Economy Fares With More Restricted Flexibility
Per Southwest, it “will introduce a new, Basic fare on our lowest priced tickets purchased on or after May 28, 2025, in advance of offering assigned seating and extra legroom options.”
Here’s a chart Southwest has published with its new “fare products” available along with the fine print:
There appears to be a contradiction here. Southwest says, “Basic fares are nonrefundable and non-changeable except as allowed by our 24 hour cancellation policy. Customers may be eligible for a flight credit if cancelled at least 10 minutes prior to the flight’s original departure time.”
May be eligible? What does that even mean?
On the same chart above, Southwest says that no changes are allowed on basic fares.
My guess is that there will be some penalty assessed… perhaps a percentage of the fare…that will be forfeited if a basic economy ticket is rebooked. I also suspect basic economy fares will earn 1x points per dollar (if anything at all) and will not include assigned seating.
Flight Credits Will Once Again Expire
Flight credits issued for tickets purchased on or after May 28, 2025 will expire one year or earlier from the date of ticketing, depending on the fare type purchased. Specifically, flight credits on basic economy fares will expire six months from date of purchase (subject to potential restrictions I discuss above) while flight credits on all other fares will expire 12 months from date of purchase.
Flights must be cancelled 10 minutes or more before departure or all value is lost.
Since 2022, Southwest has maintained a no-expiration policy on future flight credit.
CONCLUSION
In addition to eliminating its free checked baggage benefit, Southwest Airlines will also introduce basic economy fares, restrict travel credits, and introduce more variability into Rapid Rewards points redemptions.
I see no need to repeat my analysis, other than to say that I do not think these changes will work. Instead, I think they will alienate passengers from Southwest and ultimately hurt the bottom line. While the investment bankers who seem intent on destroying Southwest may deserve our imprecatory prayers, I do not wish ill on the airline…not when it has over 72,000 employees.
This is a fascinating business case to watch: I’ve never seen an established carrier change as quickly as Southwest has.
image: Southwest CEO Bob Jordan
Southwest hasn’t been a low cost carrier for a long time. They started as one in an era where full service airlines really were full service. I actually think these changes make sense. Southwest has a great domestic route network and still remains an attractive option for point-to-point leisure travelers and short-distance business travelers. The bag issue (if it’s even an issue at all) is corrected with a credit card. That’s not hard.
NK and F9 made a lot of waves, but their share of the market was and remains small. WN makes up a huge amount of the domestic market. It’s not like their customers will have a choice to go fly another full service airline. There isn’t one. WN base fares have been high. Hopefully they’ll fall and we’ll see a true robust LCC operating in the United States. The “loss” of Southwest sucks, but times change. I think these changes needed to happen, and this could reduce the overall cost of domestic airfare in the United States.
A very optimstic take, Jerry!
With these changes (baggage deletion, devalued points/rewards, assigned seating, etc), Southwest will look no different than the rest of the airline carriers.
In fact, it will fall into purgatory (not legacy format, not low cost carrier, lack of Southwest effect), but something in between. And don’t hand you hat on “direct service”. From my home base, there’s only one non-stop to south east Florida per day; the rest require transfers. Might as well go AA or DL.
Frontier (and maybe Spirit) will keep the ULCC slice of the pie. JetBlue will move towards legacy format with its lounges and Mini-Mint seating, and Southwest will fall in the middle….looking for a new identity to distinguish itself from the rest of the crowd.
Feels like the 80’s again….this time, it’s Elliott substituting for Frank Lorenzo & Carl Icahn…Greed is Good!!
Oh no, a company making business decisions to stay competitive? The horror! Guess Southwest should just ditch capitalism altogether and let the workers run the airline—maybe hand out free flights in the spirit of equality? Stay strong, comrade, the revolution against basic economy fares will be a tough one.
Spoken like a true bootlicker who doesn’t understand what captailism really is.
I’m getting a strange sense of deja-vu when a hedge fund took over Sears and Kmart and destroyed them. Sears and K-mart were institutions. Sears was the inventor of catalog shopping, the Amazon of its day. Kmart was like Costco: A place you’d take the family to grab a bite to eat and then shop for bargains. The hedge fund sucked it dry by putting it into debt, to themselves, and then declared bankruptcy leaving the unpaid vendors and banks holding the bag.
Back when I was young and didn’t know much about travel, I thought Southwest was fun and didn’t mind it taking me forever to get anywhere having to transfer, always, and then, get this, took a rideshare that added another 1/2 hour.
I can’t imagine going through that hell now.
My wife insists on non-stop flights and, as others point out, I avoid baggage fees with branded credit cards and prefer an assigned seat. I haven’t flown them for decades so I don’t care, but it’s better to have more airlines in the market than fewer, obviously.
Feel Southwest went too far on the baggage. Will alienate more customers compared to gaining fees.
Could have provided two bags for Business Select and one bag for Anytime. The rest (Wanna Get Away + and Basic) could pay for bags accordingly.
As a side note, don’t be surprised if the current administration applies the the 7.5% federal excise tax to ALL auxiliary fees (baggage, seat selection and upgrades, refundable fares, purchased meals and beverages, early boarding, etc). Trump and Musk are looking to plug the deficit. The argument will be that all need to pay their fair share.
Looks like Big Balls and Elon’s other henchmen have hacked into Southwest’s systems with dreams of imposing their idea of “efficiency”.
This will not end well for them.
There is the reptilian look to Bob Jordan
Stupid is as stupid does.
Southwest is just implementing the market enhancements recommended by Brett Snyder 10 years ago.
A lot parallels with the current trajectory of southwest and our government.
Chillingly true.
“Tear it all down and hope for the best”?
So crazy. I remember when their big differentiator was no change fees, then United did it during the pandemic and equalized the playing field, and now SWA has actually made itself *worse* than United with fare credit expirations!