Southwest Airlines to fuel growing customer engagement with loyalty perks

Dive Brief:

Southwest Airlines improved customer experience in Q3 2023, through more efficient operations and new technology as leisure travel surpassed pre-pandemic levels, Executive Vice President and Chief Commercial Officer Ryan Green said on a Q3 earnings call last week.
A record number of customers signed up for the company’s Rapid Rewards loyalty program during the quarter and the number of engaged members rose 10% year over year, according to Green. The airline is planning additional enhancements in 2024.
Southwest also noted that the widescale cancellation of flights between Dec. 21 and Dec. 29, 2022 could result in a civil penalty levied by the Department of Transportation, according to a Securities and Exchange Commission filing. The airline said it has improved operations and added technology to prevent a repeat situation.

Dive Insight:

Customer experience improvements helped fuel growth at Southwest Airlines, with Q3 operating revenues up 4.9% year over year to $6.5 billion. Green stated that the number of business travelers has returned to pre-pandemic levels and leisure customer trips are up year over year, though individual travelers are flying less frequently.

The airline is reacting to this shift by reducing the requirements for earning A-list and A-list Preferred status in its Rapid Rewards program in 2024. The upcoming ability to combine rewards points and cash to pay for flights are likewise designed to make it easier for customers to earn and use rewards.

Point redemptions were up 16% year over year in Q3, and Southwest is aiming to keep this momentum going in 2024.

“We see when customers make a redemption, after that redemption, they fly us more, they spend more on their card,” Green said. “It just drives further engagement with Southwest Airlines. And so, doing things like adding the ability to combine cash and points, that’s all about making it easier to use Rapid Reward points, which will then in turn provide value back to Southwest.”

Southwest’s loyalty plans go live next year, but the company has already made customer experience-focused improvements in other areas. These include completing the rollout of improved in-flight Wi-Fi and adding a customer bag tracking service that lets travelers check the status of their luggage throughout the trip.

“By providing additional transparency and information to customers about where their bags are during their travel journey, we’re elevating the travel experience and removing friction for our customers,” Green said. “This enhancement is an early release of our larger digital hospitality modernization plan.”

The company’s completion factor, mishandled bag rate and on-time performance have all shown “substantial” year-over-year improvement as well, according to COO Andrew Watterson. The company recorded a trip Net Promoter Score up nearly four points from the previous year.