Southwest AirTran Acquisition Impact on Frequent Flyer Programs

Sep 27, 2010

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Wow! Didn’t see this one coming. (Link)

How will this effect the frequent flyer?I think this move will have an impact on all US flyers- not just Southwest and AirTran customers. This acquisition gives Southwest access many new markets- including Delta hub Atlanta, US Air mini-hub DCA and American hub Boston. I hope this spurs competition and prompts the major airlines to strengthen their frequent flyer programs . For example, Delta has historically targeted new markets for promotions, taking its ATL base for granted. I see that changing, with some juicy promos launched to lure disenchanted AirTran frequent flyers who are not happy about losing a first class cabin.

Overall, their frequent flyer programs are shockingly similar, so the transition should be fairly seamless- with one caveat- the impending loss of a first class cabin for AirTran loyalists. AirTran always made it easy to upgrade to first and if that that goes away, which I suspect it will, I can see AirTran frequent flyers looking for a new alternative. I did program score cards on Southwest and Airtran this summer and both fared well in my analysis with Southwest’s B+ slightly edging out Airtran’s B. Since AirTran’s program will merge into Southwest’s, here are the major wins and losses for AirTran frequent flyers.

Wins
1) Many more partners. AirTran currently has no hotel partners.
2) A better expiration policy. Currently AirTran credits expire after one year. With Southwest, they will expire after 2 years.
3) You can earn up to 2 credits for business fares. Currently you can only earn 1.5 credits for business class. Southwest offers 2 credits for A List fares on flights over 750 miles
4) A FREE companion pass when you hit 100 credits. With AirTran, the companion pass costs 100 credits, whereas Southwest gives you one for every 100 credits you accrue (whether flying or with partners/credit card spend). A huge benefit.
5) More options to redeem miles, especially out west. Partnering with Southwest vastly increases the amount of places AirTran flyers can go with their credits.

Losses
1) The first class cabin. Southwest’s business model is based on a one-class cabin. Based on their comments, I’d gather they will phase out the first class cabin, which will be a big loss for AirTran business customers who have grown used to easy, cheap upgrades.
2) A less generous credit card. You currently earn 1 credit per $1,000 in spend on the AirTran Visa. The Southwest visa gives 1 credit for every $1,200 in spend (plus 2 free credits a year, so it may be a wash for some people)

Wins for Southwest customers
1) More redemption opportunities, specifically the addition of Mexico/Caribbean
2) A first class cabin, at least for a while until it is phased out. I suspect A List members will still get first pick at seats, which may include the current first class AirTran seats

Of course all of this will take a while to play out, so some of these wins/losses may be the opposite. Overall, I am optimistic about this move and hope it encourages more more competition from the legacy carriers as the Low Cost Carriers increase their strength in the marketplace. The less legacy carriers differentiate their product (upgrades and service) the more people will get fed up with the fees and head to Low Cost Carriers.

 

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