Emergence of a Market for Southwest Airlines Frequent Flyer Awards

Abstract

The Internet has facilitated the emergence of a secondary market for Southwest Airlines flight tickets awarded by its frequent flyer program. Possible reasons for the existence of this market are explored, because Southwest bans the sale of these travel vouchers. With data from eBay auctions, hedonic regression results show that a later expiration date, no blackout dates, and the inclusion of drink coupons have positive effects on the prices of these vouchers. Additional security fees and whether a voucher is in paper or electronic form do not appear to affect the price. It is calculated that by selling the voucher, the seller receives, on average, a $34 rebate on each round-trip flight traveled on Southwest.