Ladies and gentlemen, welcome to the sunny, storied southwestern United States. Tonight we present a battle for the ages — the “Armadilla Thrilla,” a showdown between two of the most innovative airlines in the industry and their frequent flyer programs.
At stake: the loyalty of you, the business traveler.
There will be no mercy. There will be no surrender.
It’s time for the main event.
Let’s get ready to rrrrumblllle…………
In this corner, in the orange, red and blue trunks, weighing in at 385 planes, from Dallas, Texas…
The year is 1971. Janis wails soulfully about Bobby McGee, and Johnny Unitas has recently led the Baltimore Colts to a 3-point Super Bowl victory over the Dallas Cowboys. A man with a vision, Herb Kelleher, decides it’s time for something different in the air.
Enter Southwest Airlines, the no-frills, low-fare gremlin that would rock the industry and forever change the way Americans fly.
Don’t look for meal service, first-class cabins or assigned seating here — you won’t find them. The airline Kelleher created has foregone such tawdry excesses in favor of inexpensive, reliable service.
The plan is simple.
Flights are based on a point-to-point basis, as opposed to the more traditional hub-and-spoke system. In essence, that means that a passenger will fly more or less in the direction he is heading. Someone flying from Dallas to L.A., for example, will go directly west, with perhaps a stop somewhere in the middle. Under the hub-and-spoke system, that same passenger might end up traveling hundreds of miles in the wrong direction to reach a designated hub, switch planes, then make the jump to the west coast.
And Southwest only flies one kind of plane — the Boeing 737, with about 135 seats on average — which keeps training and maintenance low.
But what about customer loyalty? To what degree has Rapid Rewards played a role in building what may well be the most successful airline in U.S. history?
Oddly enough, Southwest was not initially enthusiastic about introducing a loyalty program. At the time frequent flyer programs were introduced, the early 80s, a number of industry watchers had little hope for the success of the programs — they were, to many minds, a marketing gimmick with no real staying power.
But it quickly became apparent that the availability of loyalty programs was becoming a major factor in determining market share. And it was no accident that the business traveler — the high-yield holy grail of airline revenue — was opting to go with airlines with rewards programs.
Kelleher himself admitted Southwest had a reactive, not proactive, approach: “We didn’t want an FFP. But it came to my attention that FFPs were siphoning business travel away from us. We did it defensively, and I think if we had not done that we would have been terribly disadvantaged.”
As a result, Southwest went ahead and launched its first incarnation of the frequent flyer program — Company Club — on June 18, 1987 — a good six years after the birth of the modern program.
During the 80s, when the carrier was really coming into its own, promotions such as “Friends Fly Free,” combined with promotional fares of $100 or less, had pairs of previously earth-bound travelers coming to Southwest in droves.
Today, of course, Southwest has grown to megalithic proportions — serving 58 cities and with annual revenues of over $5.5 billion. And it’s no coincidence that Rapid Rewards has come along for the ride. It is now one of the largest frequent flyer programs in the world — in terms of award tickets given out annually, it is the largest in the world.
It is also, without doubt, one of the most well-liked programs in the world. Rapid Rewards has racked up up no less than five Freddie Awards — four for Best Bonus and one for Program of the Year.
And in this corner, in the red, white and turquoise trunks, weighing in at 178 planes, from Phoenix, Arizona…
Three planes and a quick flight from Kansas City to Phoenix on Aug. 1, 1983 marked the humble beginning of Ed Beauvais’ America West Airlines. Ten years, a bankruptcy, and a bucketful of innovation later, Phoenix-based America West has established itself as one of the few profitable airlines in the country.
The carrier was founded at a time when no-frills airlines like Southwest and PEOPLExpress were beginning to have a serious impact on the industry. But Beauvais chose to go a more traditional route, establishing a full-service airline, with free cocktails, free newspapers, king-sized overhead bins, and assigned seating.
Not surprisingly, then, it took America West much less time to establish its first frequent flyer program — the mercifully short-lived “Free Flight Plan.”
By June 1987, Free Flight Plan gave way to FlightFund, but the plan was rather different from what we know today. At the time, the program offered “dollars” to members based solely on fares paid, which could be collected and spent on awards.
It wasn’t until 1989 that FlightFund was revamped into a standard mileage-based program.
Rapid growth, route expansion, labor issues and a few well-intentioned but ultimately unsuccessful attempts at international routes led to bankruptcy in 1991. But the plucky little airline was not finished yet. It shook off the reigns of bankruptcy not long after, and under the leadership of Doug Parker (who, despite taking over at a critical juncture, hasn’t aged a day since he graduated from college), even managed to survive the near-crippling effects of September 11.
One of Parker’s major achievements, of course, was the complete overhaul of America West’s fare structure in 2002. Walk-up fares were reduced, and restrictions were eased. America West became a true low-fare carrier.
But not everyone was happy. The big boys, whose complex fare structures would now find even more competition, were angry. In less than a day, codeshare partner Continental had pulled out in disgust.
But America West was undaunted, as were its customers. The new fare structure worked, and the carrier finally hit profitability in the second quarter of 2003.
Today, with 178 planes and 13,000 employees, America West is well known as the second-largest low-fare carrier in the country.
Interestingly, it was in the same year that America West reinvented itself as a true low-fare airline that FlightFund took home the Freddie award for Best Elite program, illustrating that it was, apparently, entirely possible to offer customers the perks and privileges of a traditional frequent flyer program while offering cheap tickets.
It’s tough to pin down the “average” traveler. On any given flight, you could find yourself next to Joan CEO, laptop and cell phone at the ready, or Bob the family man, whose newly-purchased mouse ears exude the vague but unmistakable scent of cotton candy.
But who, in the end, represents the highest yield to the airlines? The business traveler, of course. Even in the aftermath of 9/11, when companies are pinching their travel-budget pennies, it is the business traveler who is more willing to pay what’s necessary to fly, and to do it over and over again. It was the loss of the business traveler, after all, that finally convinced Southwest’s Kelleher to go with a frequent flyer program in the first place.
America West’s Parker says that today’s business travelers are choosier. “Customers are somewhat price-sensitive and want convenience and reliability. You’ve got to fly where they want to fly and provide reliable service, ” he said in an interview with OAG Frequent Flyer last year.
But price-sensitivity has its limits. Indeed, the mere fact that frequent flyer programs continue to enjoy robust membership numbers is precisely because price is just one factor in determining which airline to fly.
Other concerns, including customer service, route choices, the ease of earning award travel, and the perks associated with program membership all play into the business traveler’s calculus.
A poll taken by WebFlyer in April 2003 indicates another remarkable statistic — the desire for easy free tickets is not necessarily the primary reason people choose a frequent flyer program. In fact, free travel was almost matched by the desire for elite-status perks. The poll showed that 52.8 percent of respondents said free travel was most important, while 42.4 percent placed elite perks above free travel as their priority in choosing a program.
And the champ comes out swinging…
Rapid Rewards is an accurate reflection of the airline’s basic approach. There’s precious little about the program that could be described as fancy. It’s simple and egalitarian.
Southwest has eschewed the more traditional mileage-accrual approach in favor of credits — customers earn a credit for every segment they fly. Sixteen segments, and you’re looking at a free flight. In basic terms, that means you could be flying free in as little as four layover roundtrips.
And prior to this year, that process was significantly quickened by the fact that tickets purchased online at southwest.com earned double credits, effectively cutting the wait time in half. In essence, Rapid Rewards offered the fastest way to a free ticket in the industry.
But Southwest has never been a fan of looming debt, so don’t expect those credits to simply lie dormant until you’re ready to use them. The minute you reach 16 credits, Rapid Rewards automatically emails you to tell you your award is ready. And you’d better move fast — that award is only good for a year.
Obviously, this doesn’t sit well with everyone. Among American programs, expiring miles are almost unheard of. But there is an upside. By managing its outstanding mileage debt, Southwest has been able to keep its awards free of capacity controls. If there’s an available seat, it’s yours. In theory, any given Southwest flight could contain no one but award travelers.
In another dramatic departure from traditional programs, Southwest has no elite levels. Certainly, there is the sought-after Companion Pass, which allows members who fly 100 segments in a year to bring along a friend for free. But the perks generally associated with elite status — priority check-in and boarding, mileage bonuses, airport lounges and upgrades — are nowhere to be found. Regardless of how often she flies, a Rapid Rewards member will be subject to the same festival-seating arrangements as the air travel rookie.
Southwest claims this is evidence of its spirit of inclusiveness. “Our Rapid Rewards program is really a good reflection of the kind of egalitarian brand that we are,” said spokesperson Linda Rutherford. “The simplicity is really the beauty of the program.
“We think that’s what people like — it’s frustrating to keep up with so many things. There’s so many offers out there with our competitors that sometimes rather than being an incentive, it’s actually a demotivator.”
The importance of that simplicity can’t be overstated. There’s a familiarity to Southwest, a sense of predictability. “I have faith that a Southwest experience will be straightforward,” says Jamison Prime of Washington, D.C. “I’m convinced that I’m getting a good thing with Rapid Rewards and see no reason to stray.”
The challenger fights back…
You won’t find the same type of industry-bucking in the FlightFund program. America West has opted to pursue a more traditional approach, offering miles, and most importantly, perhaps, elite status.
A free flight on America West will run 15,000 miles for short haul trips and 25,000 for long-haul. In very basic terms, that means a non-elite flyer will need to fly about 30 short segments at a minimum mileage earning level of 500 miles to reach an award — roughly eight layover roundtrips. Of course that number drops dramatically once the passenger reaches elite status and earns a mileage bonus.
And FlightFund offers more partner choices, as well. While Rapid Rewards focuses almost entirely on travel related partners (about 15 of them) FlightFund loosens it up, offering financial, publishing and retail partners (somewhere around 50 at last check).
Of course, all those earning options would be of dubious value with a 12-month ticker strapped around the neck of your miles. With FlightFund, miles don’t expire (oh, sure, you’ll need to show some kind of activity every three years, but barring a coma, it’s not that difficult). So while you’re out earning miles by reading The Arizona Republic, those miles are waiting patiently, safe and sound.
But it seems elite status is where FlightFund separates itself from Southwest. Silver, Gold and Platinum status with FlightFund brings a host of gradually increasing benefits, including elite mileage bonuses, guaranteed confirmed reservations on sold-out flights, a priority phone line, preferred seating, first-class check-in, early boarding and more.
Perhaps above all else, FlightFund offers its elite members unlimited complimentary upgrades to first class. If there’s a free seat in the first-class cabin, you’ll get it. Free.
And those upgrades can be the best benefit of all, according to some travelers.
“I still enjoy sitting up front and enjoying a meal (a first-class perk) on longer flights,” said one member from Scottsdale, Ariz. “Elite status in itself is enough to sway me away from Southwest.”
After all, if you want to be at your best, the last thing you want to do is play musical chairs and jostle elbows with just anybody.
And the winner is…
If you go by sheer numbers, it’s clear that Southwest has been kicking butt and taking names for sometime. But that’s not solely due to Rapid Rewards. The multitude of incentives Southwest provides as an airline — cheap fares, reliable service, etc. — are just as responsible for the airline’s success.
Head-to-head, Southwest has the advantage in two key areas. First, it’s quicker to get a free flight. Even without the late, great double-credit online booking bonus, a freebie-fanatic would be hard-pressed to find a quicker route.
Second, Southwest’s essential simplicity, combined with its proven reliability, make it an easy choice for flyers who crave familiarity in what can be a chaotic world for travelers.
But as for fares, don’t be too quick to jump to conclusions. According to columnist Joe Brancatelli, Southwest fares have actually increased to the point that in cents per mile, they’ve outstripped even American Airlines. Five or 10 years ago, it might have been fair to say that nobody beat Southwest in pricing, but that’s becoming less and less true.
In terms of mileage expiration and earning potential, FlightFund has the edge. Miles won’t expire, and can be banked for a rainy day — a common-sense approach, given the myriad of ways miles can be earned through partners.
And perhaps most obvious are the elite-level benefits offered by FlightFund. There’s simply no comparison. And if you’re one of the 42.4 percent who claim elite status is the most important factor, there’s no real choice between the two.
In the end, it comes down to your preferences and your personal experience. Comparing such radically different programs objectively is about as realistic as oceanfront property in Arizona. Of course, that won’t stop these bruisers from continuing to duke it out.
There’s the bell…