The U.S. Department of Transportation (DOT) has officially launched an inquiry into airline rewards programs, aiming to protect consumers enrolled in loyalty plans from “potential unfair, deceptive or anticompetitive practices.”
The probe will include the four largest U.S. airlines — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — examining factors including hidden or dynamic pricing, reduced competition and choice, the devaluation of earned rewards and extra fees.
Our Analysis: Many Travelers Rely on Their Hard-Earned Rewards
Travelers often count on loyalty points and perks to make their vacation dreams achievable. What’s more, these rewards — ranging from free flights to seat upgrades, lounge access, preferred status and more — can require substantial investments of both money and flight time to achieve, making them as valuable as financial savings to many travelers.
However, it can frequently feel that the rules for redeeming such rewards are changeable at the drop of a hat, based on an airline’s discretion. Ultimately, travelers’ ability to fairly accrue and redeem airline points provides a benefit to the tourism industry, by encouraging and allowing consumers to take more trips.
Fast Facts: Details of the DOT’s Inquiry
- The DOT has requested records from American, Delta, Southwest and United detailing information about rewards programs, practices and policies.
- The devaluation of earned rewards refers to retroactively making changes that reduce or eliminate the value of rewards customers have already accrued. For example, increasing the number of points needed for redemption or status upgrades, or imposing new restrictions that limit a customer’s ability to use his or her earned rewards.
- Hidden and dynamic pricing makes it easier for airlines to devalue rewards without detection, masking disparities between a point’s purchase price and its dollar value.
- The inquiry will also investigate whether airlines are adding extra fees for passengers looking to maintain, redeem or transfer points they have already earned, which reduces the value of their rewards.
- The DOT has requested documents related to mergers involving rewards programs, to investigate the possible reduction of competition and choice caused by such deals. Mergers can eliminate or reduce competition among air carriers and create fewer choices for consumers; moreover, the integration of rewards programs can cause members of one or both plans to lose value, rewards or status during the transition.
- Should the DOT find that airlines are employing unfair or deceptive practices and/or unfair methods of competition, it has the authority to “take action against” the companies.
What They Are Saying: The DOT Wants to Ensure Fair Practices for Consumers
“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings,” said Pete Buttigieg, U.S. Transportation Secretary. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value. Our goal is to ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair.”
