Hooray: Southwest Eliminates Flight Credit Expiration

For what felt like far too long, airline fees and restrictions seemed only to be heading in one direction: Up.

The global health crisis seems to have changed that, at least temporarily, and in many cases, hopefully for good.

As flexibility became an increasingly important sales point, airlines made radical changes, such as the elimination of most change fees at the US network carriers. This move was not insignificant, costing the majors hundreds of millions of dollars in highly profitable fee revenue.

A recent change at Southwest Airlines continues this trend. Its elimination of flight credit expiration means that passengers will no longer have to worry about using their credits before a specific date.

That continues a trend that Southwest started earlier this year, when it announced that credits from particular fare categories would be transferable to other Rapid Rewards members.

Expiration of flight credits has long been a nuisance in the industry, but airlines have been willing to make adjustments as travel halted over the past few years. Hopefully, Southwest’s actions will be the first in a trend.

Will Others Follow?

The question now, is whether the other major carriers in the USA will follow Southwest’s lead and make changes to their own policies. The answer for now is probably “unlikely”, but hey, it’s nice to be wrong!

Southwest already had the most flexible refund and change policies, making the credit bank a more integral part of the overall airline customer experience, i.e., Southwest customers are used to the flexibility of their account.

And the major airlines have already made one significant move, with the adjustments to change fees, or elimination entirely. It’s one step at a time.

Since airlines don’t recognize revenue until the flight takes place or the credit expires, they might never see that cash on the income statement. That’s not a joy many will be quickly eager to lose.

On that same note, Southwest has developed a brand around customer-friendly policies. Free bags, for instance, is a hallmark of the airline. The more Southwest can reinforce that image, the better it will be able to differentiate itself in a commoditized market.

Brand is Everything at Southwest

Over the past several decades, Southwest has managed to do what no other airline has: differentiate itself on a factor other than price. In the case of Southwest, that differentiating factor is “simplicity,” ranging from operations (no hubs, no assigned seating) to pricing (one class of service, fewer fare buckets, fewer nuisance fees).

True, airlines can innovate with hard products, such as lie-flat seats or seat-back TVs, but those are all replicable. It would be virtually impossible to recreate Southwest, and the airline will take the long-term view to extend its lead.