DOT probe seeks to determine if frequent flyer programs are fair to travelers

Posted by Admin September 5, 2024 Travel

The DOT is opening an investigation into airline frequent flyer programs.
The DOT says airlines may be using points devaluations and other accounting techniques that are not consumer-friendly.
The DOT is giving airlines 90 days to turn over all documents related to its probe.

The Department of Transportation said it is opening an investigation into airline frequent flyer programs, accusing airlines of potentially illegal points devaluations and other accounting techniques that it says are not consumer-friendly.

“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,” Transportation Secretary Pete Buttigieg said in a statement. “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.”

In a letter to the CEOs of American Airlines, Delta Air Lines, Southwest Airlines and United Airlines, Buttigieg said that the financial value of airlines’ points programs can be a bigger boost to the company’s bottom line than their flight operations.

“The Department is seeking more specific data to better understand the largest rewards programs and identify potential competition or consumer protection issues or risks, and I have enclosed an order to file a report responsive to our questions,” the letter said. “Our goal with this inquiry is to ensure that customer rewards are protected from any practices that would diminish their value, benefit, or availability.”

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According to the DOT, it will investigate four aspects of frequent flyer programs:

Devaluation of earned rewards – how airlines can reduce or eliminate accrued value after travelers earn their points or miles.
Hidden and dynamic pricing – how airlines price award flights in a way that can mask or change the purported dollar value of a point or mile.
Extra fees – the practice of airlines charging cash to maintain, redeem or transfer points, which the DOT says can effectively reduce the value of a point or mile.
Reduction in competition and choice – how frequent flyer programs are combined during airline mergers and how the value of points or miles is affected as a result.

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Consumer advocates have long been critical of the opaque valuation of airline points and miles and applauded the DOT’s announcement.

“Economic Liberties strongly supports the DOT and Secretary Buttigieg’s order, so that issues of consumer protection, competition, and transparency within the airlines’ frequent flyer programs can finally be addressed,” William J. McGee, senior fellow for aviation and travel at the American Economic Liberties Project, told USA TODAY in a statement. “The transparency of the ground rules has evaporated behind an opaque screen, so the value of miles and points is harder than ever to discern. It’s imperative the Big Four carriers fully comply with this order, so that fairness can at last be addressed in loyalty programs.”

The DOT is giving airlines 90 days to turn over all documents related to its probe. Airlines for America, the trade group that represents most U.S. airlines, said frequent flyer programs are important for travelers.

“Because there is fierce competition among airlines for customers, loyalty programs are a way carriers can say ‘thank you’ to travelers,” a statement from the group said. “Millions of people enjoy being a part of various loyalty programs, which allow them to accumulate rewards to apply toward travel or other benefits. U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”

The DOT has not yet announced any potential penalties or enforcement actions that could result from the probe.

Zach Wichter is a travel reporter for USA TODAY based in New York. You can reach him at zwichter@usatoday.com.