Why Southwest Rapid Rewards Is Awesome for Domestic Travel

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Southwest Airlines often gets overlooked by those in search of a premium flight experience, but today, TPG Senior Points & Miles Contributor Peter Rothbart explains why you should include Rapid Rewards in your points and miles portfolio.

Southwest has gained a reputation among domestic flyers for the things it doesn't do. On the positive side, there are no checked bag fees or change/cancellation fees (in most cases). However, there are also no premium cabins or seat assignments, which count as strikes to many frequent flyers. Even among award travelers, Southwest is often held in high regard for the coveted Companion Pass, but is sometimes passed over due to the airline's limited international destinations and lack of lucrative elite benefits.

That's unfortunate, because while Southwest doesn't offer a flashy first-class experience, the Rapid Rewards program is incredibly useful for travel on the airline's steadily expanding network. In this post, I'll explain why Southwest should be a part of your strategy for domestic award travel, and how you can maximize points and miles by using Rapid Rewards in concert with the loyalty program from your preferred legacy carrier.

What Sets Southwest Rapid Rewards Apart

Most frequent flyer programs use award charts, which specify how many miles you need to redeem for a ticket based on the origin and destination, the class of service and (in some cases) the time of year. Other factors like demand and availability may come into play, and some airlines use a distance-based award chart in favor of a region-based one, but generally speaking, most legacy carriers offer awards at fixed prices.

The Rapid Rewards program employs a different model: Rather than offer a chart, Southwest prices its awards based on the going cash rate. When fares are high, the cost of awards goes up; when fares are low, the cost of awards goes down. This revenue-based system isn't unique to Rapid Rewards — both JetBlue's TrueBlue program and Virgin America's Elevate program operate in the same fashion, and even Delta has added some similar elements since pulling the SkyMiles award charts last year. However, Southwest is the largest carrier to have a purely revenue-based frequent flyer program.

Each pricing system has its advantages. Fixed charts can offer incredible value in certain geographical sweet spots, as well as for premium awards like Singapore Suites and Lufthansa first class. On the other hand, revenue-based programs give you a discount when airfare is inexpensive, which creates some great opportunities to maximize your points and miles.

When Prices Are Low

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Fixed award charts typically charge 25,000 miles round-trip for a saver-level domestic flight. Delta introduced discounted SkyMiles awards last year, as did AA a few months ago, and you can find other special prices like the AAdvantage program's Reduced Mileage Awards, but you'll generally need the same number of miles to fly from Miami to Los Angeles as you will to fly from Detroit to Chicago.

That can give you a very low return for your miles when you're buying an inexpensive ticket. In his most recent monthly valuations, TPG lists SkyMiles at 1.2 cents apiece, and both AAdvantage and MileagePlus miles at 1.5 cents apiece. That means if a ticket costs less than $300 on Delta, or less than $375 on American or United, then you're getting below-average value by redeeming 25,000 miles instead of paying cash. When you account for the miles and elite credits you earn on revenue flights, the threshold for booking an "average" award becomes even higher.

You won't have that problem when redeeming Rapid Rewards points, since the cash price and award price are connected. For example, consider a round-trip flight from Seattle to Las Vegas on June 5-9. At the time of writing, Southwest was offering a nonstop evening departure and afternoon return for 10,700 points (plus $11.20 for security fees). If you paid cash, that same flight would cost you about $188.

That was the cheapest nonstop option, but you could save a few thousand points (or dollars) by selecting an itinerary with a layover. In contrast, Delta's cheapest option for a similar flight was 20,500 miles or $298:

Meanwhile, American Airlines and Alaska Airlines both offered saver-level awards for 25,000 miles round-trip. There were no comparable paid fares on American, since the airline doesn't fly nonstop along that route, but Alaska was charging about $278 for a flight with similar departure times. (British Airways Avios would also be a good option along this route, since you could fly for 15,000 points round-trip so long as Alaska has saver space available.)

As another example, consider a round-trip from Denver to Boston on October 15-22. United had a few nonstop flights available for 25,000 miles or $339. Meanwhile, Southwest had nonstops starting from 20,880 points or $340. Once again, you could save a few thousand points by booking a Southwest itinerary with one stop in each direction. United doesn't give you the same discount; flights that include a stop still price out at 25,000 miles.

Among these options, Southwest is the clear winner. There's little reason to pay 20,000-25,000 miles for the SEA-LAS flights when you can purchase a similar itinerary for under 11,000 points. The gap is smaller on the DEN-BOS flights, but when it comes to maximizing rewards, spending less is just as important as earning more. If you have high-level elite status with another carrier and suspect you'll be upgraded to first class, then you might make an exception. Aside from that, you're probably better off saving your legacy miles for more valuable awards.

On a tangential note, I find it interesting how different award pricing impacts the usefulness of sign-up bonuses from co-branded airline credit cards. You can generally find bonuses of 50,000 miles, which I sometimes see advertised as enough for two round-trip flights. The Southwest Rapid Rewards Premier Credit Card offers a sign-up bonus of 40,000 points after you spend $1,000 in the first three months. However, that bonus can easily get you more than two flights if you redeem when fares are low. Of course, it can also get you fewer than two flights when fares are high, but in the five years or so that I've been using Rapid Rewards, my average Southwest award has been much less than 25,000 points for a round-trip.

When Prices Are High

You might think that Rapid Rewards is at a disadvantage when fares are high, but that's not necessarily the case. Consider a round-trip from the Washington, D.C. area to the Bay Area over Fourth of July weekend (July 1-5). Southwest had nonstop flights from Baltimore to Oakland for 15,545 points or $234 each way. In terms of raw numbers, that's more expensive than a saver-level award on a legacy carrier. The problem is that high fares often correspond to low award availability, which means you may need more than 25,000 miles for a similar trip.

Sure enough, United had no saver-level economy awards on the outbound leg from IAD to SFO. There were standard economy awards for 25,000 miles one-way, but there was also a saver-level business award for the same price — if you're paying the extra miles anyway, you might as well fly up front. On the return trip, there were several saver-level options in economy for 12,500 miles, or another business award for 25,000 miles. In total, you would have needed at least 37,500 miles for the round-trip (or $519 for a paid economy fare). That's about 6,400 more points than you'd need on Southwest.

It's not a true apples-to-apples comparison, since you'd be getting business-class service in one direction with United. If I had plenty of MileagePlus miles and Rapid Rewards points on hand, I'd probably pay extra for the upgrade. However, I might conserve my points if I were transferring from Ultimate Rewards. You could also mix and match one-way awards to save even more (by using Southwest on the outbound and United on the return, for example).

For the sake of comparison, Delta offered round-trip economy awards starting at 40,000 miles with a stop in each direction. That isn't great, but you could certainly do worse: American had zero saver-level availability in any cabin on the outbound leg, so you would have needed 65,000 miles one-way for an economy AAnytime award. There's no contest in these two cases; Southwest is clearly the better option.

Bottom Line

TPG often stresses the importance of diversifying your travel rewards, and a key part of that is giving yourself access to more than one frequent flyer program. Rapid Rewards can give you excellent value on domestic travel, and it pairs well with the legacy programs because of the different method for pricing awards. Using Southwest keeps you from having to search for saver-level availability, and helps conserve your legacy miles for more expensive international trips.

I only gave a few examples above, but they represent the larger picture. Southwest won't always be your best option, but it will rarely be a bad option, and I think most US-based flyers will benefit from adding some Rapid Rewards points to their portfolio.

Later this month, I'll discuss how you can save on Southwest awards by taking advantage of the airline's No Change Fee policy. Until then, check out these posts for more on how to maximize Rapid Rewards:

• 9 Ways to Use 50,000 Southwest Rapid Rewards Points
• Can I Use Southwest Rapid Rewards for International Flights?
• What Is Southwest Airlines Elite Status Worth in 2016?