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With Southwest Takeover, Whither AirTran Frequent Flyer Credits?

With Southwest Takeover, Whither AirTran Frequent Flyer Credits?

Today’s announcement that Southwest will acquire AirTran for $1.4 billion raised eyebrows. While the move is consistent with the industry trend toward consolidation, no one I know was anticipating a Southwest-AirTran tie-up.

The get-together also raises questions, not least for members of the two airlines’ frequent flyer programs.

Answers weren’t immediately forthcoming. The news release was terse at best, offering only this: "The carriers’ frequent-flyer programs will be combined over time, as well."

Still, we know how the combination is likely to play out, and what events might intervene to change the outcome.

Rapid Rewards + A-Plus = ?

The typical merger scenario—think Delta and Northwest, or United and Continental—has two mileage-based programs being consolidated into a single mileage-based program. While the combined programs may have different rules and policies at the margins, they share a common currency, miles, and are therefore easily combinable.

Can the same be said of Southwest and AirTran’s programs, neither of which use miles as the basic unit of earning?

As it happens, AirTran clearly had Rapid Rewards in mind when they designed their program, so both airlines’ programs use credits as their loyalty currency. And their award charts are essentially the same, too.

A-Plus members earn one credit for every one-way AirTran flight, and need 16 credits, amounting to eight round-trip flights, for a round-trip award ticket.

In Southwest’s program, members also earn one credit for each one-way flight, and also receive a free round-trip award ticket after eight paid round-trips.

There are some disconnects. AirTran operates a proper business class, so upgrades and business-class tickets are available to A-Plus members but not to Rapid Rewards members. Assuming that Southwest keeps to its all-coach product, that will be a downgrade for A-Plus members transitioning to Rapid Rewards.

On the other hand, Southwest’s expiration policy is more consumer-friendly than AirTran’s, giving Rapid Rewards members 24 months to reach award thresholds before credits disappear, where AirTran expires credits after a draconian 12 months if members don’t have elite status or a program-affiliated card.

Overall, the two programs are more similar than they are different. And access to Southwest’s much larger flight network, for earning and for rewards, should go a long away toward mitigating any loss of benefits

Which Rapid Rewards?

There’s another program-related variable in the merger scenario that warrants mention. Without disclosing details, during the past year Southwest management has confirmed that a redesign of Rapid Rewards is underway. And in November 2009, Rapid Rewards’ chief Ryan Green told me that the new program would be launched "sometime this year."

If that’s still the schedule, and given that we’re already on the verge of this year’s fourth quarter, it might make sense to introduce the new Rapid Rewards (assuming the current name will be retained) slightly ahead of the merger with AirTran, and transition both existing Rapid Rewards members and AirTran A-Plus members to the new Southwest program at the same time. Two birds, one stone.

That could constitute a major change, both for Southwest and AirTran customers.

My prediction is that the new Rapid Rewards will be a revenue-based program, like Virgin America’s Elevate and JetBlue’s redesigned TrueBlue. Such programs offer much more transparency than traditional schemes, but also limit the opportunities to leverage the programs to yield outsized value.

But let’s not get ahead of ourselves here.

For now, what is most important to AirTran loyalists is that they can expect an orderly transfer of their credits to Southwest’s program.

And the value of their credits should remain roughly the same, at least while the current Rapid Rewards program remains in place.

If and when Southwest launches its revamped program, there will no doubt be an exhaustive discussion of the merits of the new versus the old programs, and how the change affects the value of previously earned Rapid Rewards credits.

Today’s merger announcement means that AirTran customers will now be part of that discussion.

  • Jason

    I work in sales and live in Atlanta and fly Airtran 2-4 times a month. I have been extremely satisfied with AirTran operations and in particular the Elite program. As an Elite member I’ve been able to get a free upgrade to business class 40 minutes prior to departure I’d say around 75% of the time. The XM radio on all flights is great too. Very few delays, only 1 delay for ‘mechanical’ in probably 100 flights. My biggest gripe with Airtran is that they often don’t display a correct departure gate for ATL flights.
    The Elite program is simply awesome. It’s a simple and straightforward program and it works great.

    To hear that AirTran is “removing” business class from their airplanes?? Are you kidding me? And no assigned seats? Ha….goodbye! My business is all east of the mississppi river and Airtran has excellent coverage in this area…which incidentally is where 2/3 of the population lives. This merger may be great for AirTran’s vision but for an AirTran Elite customer based in Atlanta, IT SUCKS!!!!!

  • Kevin M

    It’s true that Southwest has far more daily flights (and more aircraft) than AirTran, but if you define “flight network” as the number of places served, AirTran actually flies to three more cities (currently) than Southwest does. Southwest had previously announced three additional cities for service (Charleston, Greenville and Newark) and AirTran one (Punta Cana). By that measure, AirTran has the larger (or at least “wider”) network.

    More interestingly: I look at the route maps and see where each gains “good” destinations. Southwest fliers are gaining Atlanta (the biggest airport in the country), as well as Memphis, Miami (allowing far more Central/South American connections), and a number of medium-density population spots in the midwest. AirTran fliers are gaining a few optional airports around the three major population centers in California (they already flew to Los Angeles, San Diego, and San Francisco), and a host of medium-to-smaller markets in the southwest (Amarillo, Lubbock, Midland, El Paso, etc.), as well as footholds in the Pacific Northwest. I think it’s probably more of a gain for Southwest fliers to get the AirTran network than it is for AirTran fliers to get the Southwest network.

  • Adam

    I’m another elite member who will rapidly stop using Airtran if they remove business class. Off to delta for me. I didn’t fly airtran exclusively numerous times just to fight with others for a coach seat on southwest.

  • Lisa

    How can Air Tran think this will be a good thing for Elites? I received an email from them (I am an Elite member) that is already trying to butter me up making this sound like it’s going to be so great. Like everyone else here, if they remove the business class seats, I will remove myself from Air Tran.

  • Tim Winship

    Lisa – There’s no question that AirTran’s elite customers are the losers in this, for the reasons you and others have noted. I haven’t seen the email you received — what did they say would be the benefits post-acquisition?

  • Harristottle

    SWA screwed its customer base in an attempt to sell miles. SWA expects business travelers to get their companies to purchase high-priced fares (Business Select, Anytime) by bribing them with points to redeem s low-end Wanna Get Away seats at their leisure. SWA downgraded the low price tickets so users don’t earn free tickets. Its perks are for business flyers buying premium Business Select fares. Fly 16 times to earn a free ticket is replaced by a system that generates several hundred million dollars in annual revenue from an expected inflow of business converts on paper Existing customers were devaluated to vagrants that are segregated like buses in south. SWA failed to note that business customers may not bear standing in line next to a number waiting to battle for seats, listen to lame jokes with a coke and peanuts, while taking a flight that generally takes twice as long to reach any destination (i.e. SLC to SAN routes thru Phoenix). Short this company big time!

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