In a significant move, the U.S. Transportation Department (DOT) announced on Thursday that it is launching an investigation into the frequent flyer and rewards programs of the four largest airlines in the country: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. This inquiry aims to ensure that consumers are protected from any unfair, deceptive, or anticompetitive practices associated with these loyalty programs.
Transportation Secretary Pete Buttigieg has directed these airlines to provide comprehensive records and answer specific questions regarding their rewards systems. The department is particularly interested in understanding how consumers are affected by potential issues such as the devaluation of rewards, hidden or fluctuating pricing models, additional fees, and the overall competitive landscape. This scrutiny aligns with a broader concern over how airlines are perceived when it comes to their loyalty offerings.
This investigation follows concerns raised last December, when it was reported that the DOT initiated a review of these programs amid complaints from consumers about increasing difficulties in earning and redeeming rewards. A public hearing held by the DOT and the Consumer Financial Protection Bureau in May further highlighted these issues, prompting additional scrutiny from lawmakers eager to protect consumer interests.
Buttigieg emphasized the need for detailed data to gain a better understanding of these large-scale rewards programs and to uncover any potential consumer protection violations. He remarked that customers frequently express dissatisfaction with the rising hurdles they must overcome to access benefits associated with these loyalty programs. Last year, Congress even contemplated a proposal requiring airlines to provide a 90-day notification before they could devalue frequent flyer points—though that measure has yet to be enacted.
The trade association representing airlines, known as Airlines for America, has defended these loyalty programs, asserting that U.S. carriers maintain transparency and should be allowed to continue offering these essential services to consumers.
The frequent flyer programs of major carriers like Delta, United, and American have become a vital source of revenue, especially during the downturn in travel demand caused by the COVID-19 pandemic. A consulting firm, On Point Loyalty, recently estimated that these carriers’ loyalty programs are individually valued at over $20 billion, underscoring their significance within the airline industry.
In response to the DOT’s inquiry, Delta has acknowledged receipt and pledged to cooperate fully. Southwest Airlines has also indicated that their flexible rewards program is performing exceptionally well, citing that it has resulted in booking rates that are double the industry average. However, both United and American Airlines declined to comment publicly on the matter.
As this investigation unfolds, it may lead to significant changes in how airlines manage their loyalty offerings. Consumers have long relied on these programs not just for benefits but as a crucial aspect of their travel experiences, making it essential for industry standards to keep pace with consumer expectations and regulatory scrutiny. The outcome of this investigation could redefine the dynamic between airlines and their loyal customers, potentially leading to more clarity and fairness in frequent flyer rewards.