While Southwest’s plan to start flying to Hawaii is expected to provide its customers with a popular new redemption option, it is also likely to bring a big benefit to the airline: more sign-ups for its Chase Rapid Rewards credit card– and more revenue that comes with those sign-ups.
In an interview with the travel news website Skift, Southwest chief revenue officer Andrew Watterson said as the airline adds service to the islands from the West Coast, it expects to see a big bump in new credit card customers from California markets where it has a strong presence, including the Bay Area, Sacramento, San Diego, and greater Los Angeles.
Southwest hasn’t yet said which airports will get the new Hawaii flights or when they will begin, except to suggest that ticket sales could begin sometime later this year. The airline is relying on next-generation 737MAX aircraft to provide the necessary range for flights to the islands from the West Coast.
The calculation of a big credit card benefit was a part of Southwest’s decision to go to Hawaii. “You have to have that kind of sexy place for the credit card,” Watterson said. That was also part of the reason Southwest was eager to expand on grab routes to Mexico and the Caribbean, he noted. (Southwest inherited most of those routes from AirTran in 2011.)
See how Chase/United uses Hawaii in its ads to promote card sign ups.
According to the Skift report, the Southwest exec said revenue from the sale of loyalty points and miles to banks for their credit card customers has been burgeoning for major airlines since the end of the Great Recession. “Even before then, it was interesting, but I think as the economy strengthened and the airlines went through the re-negotiations with the banks, it got to the point of critical mass.”
From 2011 to 2016, the revenue from Southwest’s Rapid Rewards loyalty program jumped by $1.7 billion. Skift reported that Southwest took in $2.8 billion from selling miles to Chase last year, a year-over-year increase of 24 percent.
Airlines typically use sign-up bonuses to lure new credit card customers, offering tens of thousands of miles or points. Last year, a Southwest promotion offered 60,000 bonus points to those who signed up for its Chase card and achieved a specified spending level in the first three months.
Which airline card do you carry? What kind of bonus did you get for signing up? Please leave your comments below.
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