Southwest Airlines 2012 Annual Report Download - page 16

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 Southwest’s
previous program, under the current 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.
Under the current program, flight awards are not automatically issued when a member’s account reaches a
certain threshold. Instead, members continue to accumulate points until the time they decide to redeem them. As
a result, the new program provides members more flexibility and options for earning and redeeming rewards than
did the prior program. 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
points, such as the opportunity to book in advance to take advantage of a lower fare (including many fare sales)
ticket by redeeming fewer points or by being able to redeem more points and book at the last minute if seats are
still available for sale. Rapid Rewards Members can also earn points through qualifying purchases with Rapid
Rewards Partners (which include, for example, car rental agencies, hotels, restaurants, and retail locations), as
well as by using Southwest’s co-branded Chase®Visa credit card. In addition, holders of Southwest’s co-branded
Chase Visa credit card are able to redeem their points for items other than travel on Southwest, such as
international flights on other airlines, cruises, hotel stays, rental cars, gift cards, event tickets, and more. In
addition to earning points for revenue flights and qualifying purchases with Rapid Rewards Partners, Rapid
Rewards Members also have the ability to purchase points.
The All-New Rapid Rewards frequent flyer program also features enhanced A-List and Companion Pass
programs for the most active members and includes “A-List Preferred” status. Both A-List and A-List Preferred
Members enjoy benefits such as “Fly By®” priority checkin and security lane access, where available, as well as
dedicated phone lines, standby priority, and an earnings bonus on eligible revenue flights (25% for A-List and
100% for A-List Preferred). In addition, A-List Preferred Members enjoy free inflight WiFi on equipped
flights. Rapid Rewards Members who attain A-List or A-List Preferred status receive priority boarding privileges
for an entire year. When these Customers purchase travel at least 36 hours prior to flight time, they receive the
best boarding pass number available (generally, an “A” boarding pass). “A-List” or “A-List Preferred”
Customers are automatically checked in for their flight in advance of departure. Rapid Rewards Members who
fly 100 qualifying one-way flights or earn 110,000 qualifying points in a calendar year automatically receive a
Companion Pass, which provides for unlimited free roundtrip travel for one year to any destination available on
Southwest for a designated companion of the qualifying Rapid Rewards Member. The Rapid Rewards Member
and designated companion must travel together on the same flight.
The All-New Rapid Rewards frequent flyer program has been designed to drive more revenue by
(i) bringing in new Customers, including new Rapid Rewards Members, as well as new holders of Southwest’s
co-branded Chase Visa credit card; (ii) increasing business from existing Customers; and (iii) strengthening the
Company’s Rapid Rewards hotel, rental car, credit card, and retail partnerships. To date, the new program has
exceeded the Company’s expectations with respect to the number of frequent flyer members added, the number
of Southwest’s co-branded Chase Visa credit card holders added, the number of flights taken by members,
incremental revenues associated with members booking flights, partner revenue, and the number of frequent flyer
points purchased by program members.
The Company began the process of integrating the frequent flyer programs of Southwest and AirTran in
2011 by offering top-tier status members of both airlines’ frequent flyer programs some limited reciprocal
benefits. For example, AirTran A+ Rewards®members who book on Southwest are eligible for reciprocal
“A-List” benefits on Southwest flights. In addition, Southwest “A-List” and “A-List Preferred” Rapid Rewards
Members booking on AirTran are eligible for reciprocal A+ Elite status, including free Business Class upgrades,
no baggage fees, and all other benefits that AirTran’s A+ Rewards members enjoy. During 2012, the Company
took further steps towards integrating the frequent flyer programs of Southwest and AirTran by enabling
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