Southwest Airlines 2011 Annual Report Download - page 13

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The Company believes the acquisition of AirTran has positioned it to better respond to the economic and
competitive challenges of the industry because:
• it grows the Company’s presence in key markets Southwest did not previously serve and represents
a significant step toward positioning the Company for future growth;
• it allows the Company to offer more low-fare destinations by extending its network and
diversifying into new markets, including significant opportunities to and from Atlanta, the largest
domestic market Southwest has not served;
• it expands the Company’s presence in slot-controlled markets where Southwest previously had little
(New York LaGuardia) or no (Ronald Reagan Washington National Airport) service;
• it expands the Company’s service in other key domestic markets, including Boston and Baltimore,
and adds destinations to its route system;
• it increases the Company’s share of current domestic market share capacity (as measured by
available seat miles or passengers); and
• it provides access to near-international leisure markets in the Caribbean and Mexico, as well as
smaller cities, and provides firsthand and meaningful insight into these new expansion
opportunities.
Implementation of Southwest’s All-New Rapid Rewards Frequent Flyer Program
In March 2011, the Company launched its All-New Rapid Rewards frequent flyer program. Under the
Company’s new frequent flyer program, members earn points for every dollar spent instead of credits for flight
segments flown. The amount of points earned is based on the fare and fare class purchased, with higher fare
products (e.g., Business Select) earning more points than lower fare products (e.g., Wanna Get Away). Each fare
class is associated with a points earning multiplier, and points for flights are calculated by multiplying the fare
for the flight by the fare class multiplier. Likewise, the amount of points required to be redeemed for a flight is
based on the fare and fare class purchased. However,unlike the Company’s previous program, under the new
program (i) members are able to redeem their points for every available seat, every day, on every flight, with no
blackout dates; and (ii) points do not expire so long as the Rapid Rewards Member has points-earning activity
during a 24-month time period.
Rapid Rewards points earned for each fare type are as follows:
• Business Select: 12 points per dollar spent
• Anytime: 10 points per dollar spent
• Wanna Get Away: 6 points per dollar spent
Rapid Rewards points required for redemption for each fare type are as follows:
• Business Select: 120 points times the fare
• Anytime: 100 points times the fare
• Wanna Get Away: 60 points times the fare
Under the new program, flight awards are not automatically issued when a member’s account reaches a
certain threshold. Instead, members can decide when to redeem points for travel on any Southwest flight. As a
result, the new program provides its members more flexibility and options for earning and redeeming their
rewards. For example, members can earn more points (and/or achieve tiered status such as A-List and
Companion Pass faster) by purchasing higher fare tickets. Members also have more flexibility in redeeming
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