DOT Inquiry of Airline Loyalty Programs
The Department of Transportation (DOT) has launched an investigation into the four largest U.S. airlines’ rewards programs to protect consumers from “unfair, deceptive or anticompetitive practices.”
As part of the probe, the DOT sent letters to American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines ordering them to provide records and submit reports with detailed information about their rewards programs, practices, and policies.
The agency says that it will look at the ways consumers participating in airline rewards programs are impacted by the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice.
“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 U.S. Transportation Secretary Pete Buttigieg.
He added that while “these programs bring real value to consumers…, they are controlled by a company that can unilaterally change their value”.
Airline rewards points are typically earned by making purchases with the airline’s co-branded credit card, by flying on the airline or its partners, or by other activities specified by the airline or its credit card partner. Rewards points can be redeemed for flights, upgrades, ancillary services, or third-party products and services. In many rewards programs, customers can also earn status by reaching certain benchmarks by accruing rewards points, taking qualifying flights, and/or hitting spending targets.
The value of rewards is set by the terms and conditions that govern their use and benefit. Airlines decide how many points are required for rewards redemption, how status is achieved and what benefits come with it, and what, if any, restrictions limit the flexibility, redemption, or duration of rewards. These rules determine how rewards points stack up against the price to purchase the rewards in cash. Many airlines reserve the right to change the terms, and therefore the value, of rewards at their discretion.
Given the proliferation of rewards programs in air travel, DOT has initiated a review with the focus of examining the fairness, transparency, predictability, and competitiveness of airlines’ rewards programs.
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