What Southwest Airlines Just Said to the SEC About Its Frequent Flyer Program
Southwest Airlines filed its annual 10-K with the SEC and contains disclosures about the airline’s Rapid Rewards frequent flyer program, relating to the number of trips they are taking with miles and what that tells us about how they are recovering from a disastrous service during the holidays.
The beauty of Southwest’s frequent flyer program is that more passengers travel in points than with any other airline. In 2022,
- Members redeemed 9.2 million flight awards.
- This represented 15% of revenue from passenger miles flown.
More than 1/7 of all travel on Southwest Airlines took place at points. It’s actually slightly less than in 2021, though that’s only because there were fewer paid trips in 2021. There were 8.1 million prizes in 2021, more than 1 million less, but as a percentage of total trips that was higher (17.3%) since (1) there were almost exclusively leisure trips and (2 ) people were spending accumulated balances that didn’t burn in 2020.
In 2020, after all, travel was very down. Still, passengers claimed 4.1 million award flights representing 15.8% of all travel (revenue passenger miles flown).
this is more or less double the percentage of trips you will find in American, Delta and United using points.
In total, Southwest recognized $3.03 billion in trade revenue in 2022, up from $2.1 billion in 2021. They still have $5.2 billion in liabilities on their books for points, and in fact, that liability increased by about $400 million during the year.
The biggest source of revenue for the program, and the points on its books, are sales to Chase to reward co-branded credit card customers. They resumed their card agreement at the end of 2021.
The airline suggests that Rapid Reward redemptions are on the rise in early 2023, which they note as an “encouraging” sign about customers’ willingness to book after the airline’s holiday operational collapse.
Unfortunately, considering the program’s importance to the airline’s bottom line, they don’t disclose basic data like how many active members they have or how many elite members they have. But the data is still useful to see that they continue to provide free rides for members, and indeed, if you’re on a Southwest flight, you can look at the line next to you and in front of you and wink knowing that someone sitting there you are probably paying for your ticket with points.