Department of Transportation investigates frequent flyer program practices

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Department of Transportation investigates frequent flyer program practices

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By Sky Industry News

Sep 5, 2024

The Department of Transportation has sent letters to United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines demanding detailed information about their frequent flyer programs. The inquiry focuses on changes in award pricing, advance notice of program changes to members, and the value of points over the past six years. Each airline must respond by December 4.

Transportation Secretary Pete Buttigieg emphasized consumer protection as the primary goal: "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." He added that these programs offer real value to consumers but are controlled by companies that can unilaterally change their value. "Our goal is to ensure consumers are getting the value that was promised to them," he stated.

United has devalued its miles since eliminating award charts in 2019. Delta charges more than four times as many miles for certain seats compared to its partners. Southwest has reduced its points' value by 43% over twelve years.

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The Department of Transportation is responsible for regulating 'unfair and deceptive' practices by airlines, including frequent flyer programs. However, according to the DOT Inspector General, the agency has ignored complaints about these programs for years.

The DOT's demands from the airlines include details on how they price awards and all changes made to their programs since July 31, 2018. They must also provide information on whether advance notice was given for each change and how it affected membership numbers at each status level. Additionally, airlines must calculate the value of one point over the past six years and disclose how much they sell miles to banks for.

Airlines are required to submit copies of co-brand contracts, analysis of those deals' values, details on loyalty program mergers and changes due to airline mergers, partnership agreements with other airlines, and responses to competitive changes at other carriers.

DOT is also concerned with extra fees associated with using points. While American Airlines and Delta have added surcharges to certain awards, fees are more common among foreign carriers and low-cost carriers.

A sample letter from DOT indicates that this order applies not only to main loyalty programs but also any consumer incentive programs affiliated with the airline.

It remains unclear what information will be publicly available after this investigation. The DOT order specifies that airlines should not seek information from separately incorporated subsidiaries or affiliates but only provide data in their direct possession.

This investigation follows pressure from Senators Durbin and Marshall who pushed for scrutiny into frequent flyer programs after airlines opposed their credit card interchange legislation. It may also be timed as part of a 'middle class pocketbook' agenda for upcoming elections.

Future actions could include revisiting Supreme Court rulings or further regulatory measures by DOT if deemed necessary.