Chase seeks radical overhaul of Southwest Airlines credit cards as seat assignment shakes everything up
Yesterday I reported on the planned changes to United Clubs and to United’s premium credit card. Chase, the issuer of United’s cards, is also considering changes to Southwest’s credit card portfolio, at least in part as a result of the planned move to seat assignments.
The good news is that you will receive 1,000 points for completing the survey.
I think it is safe to say that the main points of their considerations are the following:
Increase in annual fees
Abolition of anniversary points
Add a % discount to redemptions
Adding some sort of early boarding/seat upgrade/seat upgrade benefit credit instead of the current early bird/upgrade boarding credits
Asking more, giving less – a risky move that seems to be working for Amex
Higher annual fees are the direction rewards cards are heading as co-branded offers become more expensive. American Express seems to be at the forefront of raising annual fees while adding benefits with reasonable-sounding headline values that are either too special or too cumbersome for many cardholders to keep track of and use.
The elimination of anniversary points is an interesting move. It would be a cost reduction, but these points are intended to encourage consumers to keep the card at the time they are most likely to cancel. Rewards cards with annual fees have high attrition rates when these fees are incurred. Offering a reward for allowing the fee to be paid is one way to deter card cancellation.
Are premium discounts actually price increases for everyone else?
There are two models for reward discounts for cardholders.
- Delta 15% discount is actually a price increase for anyone who doesn’t accept the card. Delta has more or less raised prices for non-cardholders and restored the status quo ante for those with eligible co-brands.
- United Extra Inventory for Cardholders in some ways it’s a variation on the same theme, but it really does provide a different offering, sometimes at a lower price, that cardholders can take advantage of. It opens up a different rewards space, not just for cardholders, but for status members as well. And at the time of launch, there was no corresponding price increase associated with that.
Southwest Airlines offers sales-dependent redemption which generally represents a fixed value per point against paid airfares. So when they immediately reduce the value per point of redemptions for non-cardholders, it becomes obvious that this is actually a devaluation and not a benefit.
But perhaps they can afford to give some value back to cardholders, as the Rapid Rewards program devalued their points earlier this year and devalued by ~43% in 12 years.
Revised seat advantage for cardholders
Currently, premium Southwest cards come with statement credits for 4 upgrade boardings per year, when available, where you purchase A1-A15 boarding positions. If these are eliminated or come with assigned seating, switching to credits for purchasing paid premium seats might make more sense.
Boarding position is now important for seating, and the earlier you board, the more choice you have, as seats are assigned on a first-come, first-served basis. Under the new model, boarding early is only important to you to the extent that you’re concerned about overhead bin space—but as long as Southwest continues to offer free checked bags, it will have fewer problems with overhead bins than other airlines, even without installing larger bins.
(HT: Doctor of Credit)
