Inquiry into Airline Rewards Programs

By David Shepardson and Rajesh Kumar Singh
WASHINGTON/CHICAGO (Reuters)

The U.S. Transportation Department (DOT) announced an inquiry into the four largest U.S. air carrier rewards and frequent flyer programs, aiming to protect consumers from unfair, deceptive, or anticompetitive practices.

Transportation Secretary Pete Buttigieg addressed American, Delta, Southwest, and United Airlines, demanding records and detailed reports on their rewards programs.

The DOT is assessing how consumers are affected by issues including the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and diminished competition and choice.

In December, Reuters revealed that the DOT began examining frequent flyer programs for potential unfair practices. This scrutiny also follows a public hearing held in May by the DOT and the Consumer Financial Protection Bureau on airline loyalty programs.

Buttigieg emphasized the need for “more specific data” to comprehend the largest rewards programs better and identify any risks related to competition or consumer protection.

Consumers frequently raise concerns that airlines are increasing requirements to earn perks linked to these programs. Although U.S. Congress considered imposing a 90-day notice before changing frequent flyer program values, no mandate was enacted last year.

The trade group Airlines for America argues that U.S. airlines maintain transparency in their frequent flyer programs, advocating that these benefits should remain available to consumers.

Airlines relied on loyalty programs, which boast tens of millions of members, to generate revenue and secure funds during the COVID-19 pandemic when travel demand drastically fell. According to consulting firm On Point Loyalty, Delta, United, and American’s loyalty programs were valued at over $20 billion last year.

Delta acknowledged receiving the DOT’s inquiry and will provide a response. In contrast, Southwest highlighted that its flexible rewards program has helped double the industry average of seats booked with points, while United and American chose not to comment.