Travel Funds

[gsking]

Great!  I'll make money on this.

$49 ticket paid with cash.

Returned to travel funds worth $49

Your conversion rate of 1.28 cents per point earns me 3828 points.

I use those points to book the $49 fare over again for 3033 points.

I have 795 points left over. 

Glad you did all the heavy lifting on the math.  Thanks! 

PS.   You can say points didn't get devalued all you want.  But when a flight costs me the SAME price in cash, but MORE points, then I can certainly say the points were devalued.  Maybe using your above nonlinear complex math, they didn't.  But I'm still out points due to some change.  If you would like to tell me where those points are hidden so I can get them back, I'd appreciate it.

[chgoflyer]

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@gsking wrote:

Great!  I'll make money on this.

$49 ticket paid with cash.

Returned to travel funds worth $49

Your conversion rate of 1.28 cents per point earns me 3828 points.

I use those points to book the $49 fare over again for 3033 points.

I have 795 points left over. 

Glad you did all the heavy lifting on the math.  Thanks! 

PS.   You can say points didn't get devalued all you want.  But when a flight costs me the SAME price in cash, but MORE points, then I can certainly say the points were devalued.  Maybe using your above nonlinear complex math, they didn't.  But I'm still out points due to some change.  If you would like to tell me where those points are hidden so I can get them back, I'd appreciate it.

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One last try:

First, you are familiar with the phrase "apples and oranges," right? 😉

Cash fares are not directly comparable to points fares. You're using a metric from one (the total cash price, which includes taxes and fees) to calculate the other (points cost, which does not). This is incorrect.

Remember that base fare and total fare are two different things. Base fare is what is used to calculate points cost. It's lower than the total fare.

A $49 cash fare returned to Travel Funds worth $49 means some of that $49 is additional taxes and fees. A $49 points fare doesn't include any taxes and fees.

You would be "making money" because you would be using something worth $49 (the travel funds, converted into $49 worth of points) to buy something that cost less than $49 (the points price of a $49 fare, since points are based on the base fare, which can be as low as $38-$43).

Do you see where the "points left over" come from now?

And -- I hesitate to complicate things here -- but to further explain your idea of "devaluation" pre-tax holiday vs post, what really happened is that the base fare increased.

Pre-tax holiday, a Southwest $49 cash fare included a bunch of taxes and fees, meaning the base fare was a smaller portion of that $49. Post tax holiday, there are less taxes and fees in that $49 price, but Southwest has increased the base fare so they can still advertise a $49 sale price (while increasing their profits, which was the whole point of the tax holiday). The base fare increased. Since the points price is calculated based on the base fare, the points price increased as well. But the points conversion factor (78 points per $1 of base fare) stayed exactly the same. Points weren't devalued, the base fare increased.

Yes, you are correct when you say that your realized points value has decreased. But the realized points value is always variable, since it's based on a number of different things, as we've discussed. With respect to loyalty programs, "valuation" and "devaluation" are specific terms with specific meanings. To measure the valuation of a loyalty point, you take out the variables and look at the fixed conversion rate. For a "devaluation" to have occurred, the fixed value of a point would have to have changed (as it has in the past with Southwest, multiple times, from 60/$1 to 70/$1 to 72-76/$1 to the current 78/$1). With respect to pre-tax holiday vs post, it hasn't.

Hope this helps.

[gsking]

I get it now.  You're purely fixated on the term "valuation".  Yes, that means something to SW, but what points are worth to us is something different.  You're talking SW apples, I'm talking customer oranges.  I think most of the people here concerned about their travel funds are more concerned about oranges.  Fine.  I won't use the term valuation if that perturbs you.

And thanks for explaining a bunch of stuff I already knew.  Yes, you elucidate it better than I do.  That wasn't my point.  My point was getting the question answered, which I'll state again...

So, you agree we'll be making money?  Doesn't that seem strange to you?  SW will convert our fees paid for taxes to points, and then let us use those points to buy flights without taxes?  I suppose THEY aren't losing money, it's the government.  Some loophole where the government doesn't get to tax reward fares?

Therefore, it's an opportunity to buy points for the best possible price., or another way of saying it, is you can prepurchase a bunch of flights at base fare price without taxes.  Extending the tax holiday, if you will.  With the aforementioned benefit of unlimited refunds, offset by the disadvantage of losing TQP's.

Are we in agreement now?

[chgoflyer]

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@gsking wrote:

I get it now.  You're purely fixated on the term "valuation".  Yes, that means something to SW, but what points are worth to us is something different.  You're talking SW apples, I'm talking customer oranges.  I think most of the people here concerned about their travel funds are more concerned about oranges.  Fine.  I won't use the term valuation if that perturbs you.

And thanks for explaining a bunch of stuff I already knew.  Yes, you elucidate it better than I do.  That wasn't my point.  My point was getting the question answered, which I'll state again...

So, you agree we'll be making money?  Doesn't that seem strange to you?  SW will convert our fees paid for taxes to points, and then let us use those points to buy flights without taxes?  I suppose THEY aren't losing money, it's the government.  Some loophole where the government doesn't get to tax reward fares?

Therefore, it's an opportunity to buy points for the best possible price., or another way of saying it, is you can prepurchase a bunch of flights at base fare price without taxes.  Extending the tax holiday, if you will.  With the aforementioned benefit of unlimited refunds, offset by the disadvantage of losing TQP's.

Are we in agreement now?

---

To be clear, I'm not "fixated" or "perturbed," I'm using the words as they are defined with respect to the industry. Valuation and devaluation are kind of like nonstop or direct -- words that have specific meaning when you're talking about air travel (or loyalty programs).

Sure -- absolutely, "making money" is one way to look at it. But either way, you've spent the $49. I'd suggest a more accurate way to view it is that you're maximizing the value of your money. Like when you use points for lower fares vs higher ones (pre-tax holiday). 

The details haven't yet been announced, but I suppose it's possible Southwest might only allow the airfare portion of travel funds to be converted, since the tax portion is fully refundable since the internal accounting of the tax portion might present some challenges. FYI: One reason the taxes and fees, except the 9/11 fee, aren't collected on points fares is that the value of a points fare is zero. A percentage of zero is zero.

You're correct that conversion basically is "purchasing points at the best possible price." But remember, points fares have never triggered the collection of extra taxes and fees (except the 9/11 fee), and won't even after the tax holiday expires in December. So anytime you book a points fare you're "prepurchasing a bunch of flights at base fare price without taxes." If your point was that you're doing that using cash, yes that's true -- but it would be limited to the cash you already spent prior to the tax holiday (existing pre-tax holiday travel funds).

[Edited: Correction to tax portion refundability statement.]

[gsking]

I'm trying to just end this since you need to be right.   And seem to have finally admitted you don't know what SW will do.   Even though you can't bring yourself off your pedestal enough to understand that consumers don't care about your legal definitions.   They care about what their dollars will buy.

But really? 

The details haven't yet been announced, but I suppose it's possible Southwest might only allow the airfare portion of travel funds to be converted, since the tax portion is fully refundable. 

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Fully refundable?  Maybe legally, but it's NEVER been offered back.   So why do you make these statements?   Are you trying to confuse people?   They only refund the 9/11 fee.  The other taxes are NOT fully refundable,  not now or in the past. 

Let's just ignore this discussion until SWA makes their offer.     Then we can argue the merits of converting based on value.   Oops, based on worth.  

[chgoflyer]

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@gsking wrote:

I'm trying to just end this since you need to be right.   And seem to have finally admitted you don't know what SW will do.   Even though you can't bring yourself off your pedestal enough to understand that consumers don't care about your legal definitions.   They care about what their dollars will buy.

But really? 

The details haven't yet been announced, but I suppose it's possible Southwest might only allow the airfare portion of travel funds to be converted, since the tax portion is fully refundable. 

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Fully refundable?  Maybe legally, but it's NEVER been offered back.   So why do you make these statements?   Are you trying to confuse people?   They only refund the 9/11 fee.  The other taxes are NOT fully refundable,  not now or in the past. 

Let's just ignore this discussion until SWA makes their offer.     Then we can argue the merits of converting based on value.   Oops, based on worth.  

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I'm so sorry, I seem to have upset you. That was never my intention, so I apologize. I was just trying to have a rational discussion.

You're absolutely right that taxes and fees are not refundable on cash Wanna Get Away fares. (I've edited my post.) I book mostly WGA fares on points, or Business Select cash ones, and for these the associated taxes and fees are fully refundable, which is probably why I was confused when making that comment.

I've always prefaced my comments, from the beginning of this conversation here and in other threads, with the qualification that the details of what Southwest will do once the Travel Funds to points conversion becomes active are unknown. Hopefully, once that happens, we can continue the discussion in a more cogent and less emotional manner.