The Biden administration is currently investigating the frequent-flyer programs of the four largest U.S. airlines — American, Delta, Southwest, and United. The main focus is on how these airlines devalue the points consumers earn and how they frequently alter the number of points or miles required to book flights.
This inquiry reflects the administration’s concern over the fairness and transparency of these programs, which are widely used by consumers to offset the cost of vacations and family visits.
Transportation Secretary’s Request to Airlines
Transportation Secretary Pete Buttigieg has reached out to the CEOs of these airlines, requesting a detailed report on their loyalty program policies, fees, and any other significant features.
The Secretary emphasized that loyalty programs offer value to consumers, who rely on them as part of their travel planning. However, unlike traditional savings accounts, loyalty points can be unilaterally devalued by the companies running these programs.
Buttigieg’s goal is to ensure that consumers receive the value they were promised and that the programs operate in a transparent and fair manner.
Consumer Complaints About Loyalty Programs
Consumers have often expressed frustration with these programs, especially when airlines increase the number of points required to earn free flights or limit the availability of seats that can be purchased using points.
Loyalty programs, originally designed to reward frequent flyers, have become less predictable and reliable for consumers, leading to dissatisfaction and complaints. The Department of Transportation aims to address these issues through its investigation.
Airlines Respond to Investigation
In response to the inquiry, Delta Airlines emphasized that loyalty within its frequent-flyer program, SkyMiles, is highly valued, and its primary focus is on offering meaningful rewards.
Southwest Airlines pointed out that their points never expire and claimed that they offer more seats available for booking with points than other carriers.
Evolution of Frequent-Flyer Programs
Frequent-flyer programs were originally based on the number of flights or miles flown by a customer. However, in recent years, they have evolved to be heavily dependent on consumer spending through airline-branded credit cards.
The income airlines receive from credit card issuers has become a significant source of revenue. This shift has complicated the loyalty programs, as consumers now need to spend on credit cards rather than relying solely on their travel history to accumulate points.
Government Hearings and Consumer Advocates
Earlier this year, the Transportation Department and the Consumer Financial Protection Bureau (CFPB) held a hearing focused on airline loyalty programs. During this hearing, consumer advocates and representatives from smaller airlines raised many of the issues now being investigated by Buttigieg. Notably absent from the hearing were representatives from the four major airlines currently under scrutiny.
Rise in Consumer Complaints
The CFPB reported a significant increase in complaints regarding credit card rewards, receiving over 1,200 complaints last year, a rise of more than 70% from pre-pandemic levels.
These complaints are not limited to airlines; many other industries, such as hotels and retailers, also offer loyalty programs tied to credit cards, further complicating the rewards landscape for consumers.
Airlines Ordered to Report on Program Practices
As part of the investigation, Buttigieg has given the airlines 90 days to report back on key details of their frequent-flyer programs. The report must include information on how the value of points is determined, any fees consumers must pay, and the nature of deals between airlines and banks that issue branded credit cards.
Additionally, the airlines must list any changes made to their programs since July 2018 and explain how those changes impacted the dollar value of reward points.
Ensuring Fairness for Consumers
The administration’s inquiry is focused on ensuring that airlines uphold their promises to consumers, particularly regarding the value of points and the transparency of the programs.
By holding airlines accountable for sudden and unexplained changes in their loyalty programs, the government hopes to protect consumers from unfair practices that devalue their earned rewards.
The investigation highlights a broader concern about the loyalty program industry and its growing reliance on credit card spending, which may not always align with consumer expectations for fairness and transparency.
The Biden administration’s investigation into frequent-flyer programs underscores the increasing complexity and commercialization of airline loyalty programs. By questioning the transparency and fairness of these systems, the government aims to address consumer concerns and ensure that these programs remain beneficial and accessible for the millions of Americans who rely on them for travel rewards.
The outcome of the investigation could lead to changes in how these programs operate, making them more consumer-friendly and less prone to sudden changes that undermine their value.
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