The U.S. Transportation Department on 05SEP said it’s opening an inquiry into the four largest U.S. air carrier rewards and frequent flyer programs to make sure consumers don’t face unfair, deceptive, or anticompetitive practices.
Reuters reports that Transportation Secretary Pete Buttigieg sent letters to the top four U.S. airlines on Thursday; American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
The letter orders them to provide records and submit reports on their rewards programs as the department reviews how consumers are "impacted by the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice."
The four airlines did not immediately comment, Reuters said.
“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,” Buttigieg said in a statement. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones.
“But, unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value. Our goal is to ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair,” he said.
USA Today said the DOT will investigate four aspects of frequent flyer programs:
- Devaluation of earned rewards – how airlines can reduce or eliminate accrued value after travelers earn their points or miles.
- Hidden and dynamic pricing – how airlines price award flights in a way that can mask or change the purported dollar value of a point or mile.
- Extra fees – the practice of airlines charging cash to maintain, redeem or transfer points, which the DOT says can effectively reduce the value of a point or mile.
- Reduction in competition and choice – how frequent flyer programs are combined during airline mergers and how the value of points or miles is affected as a result.
The formal probe comes nearly nine months after the DOT first launched a preliminary investigation into potential unfair or deceptive practices within the programs, and follows a hearing on rewards programs in Washington D.C. this spring, which was held jointly by the DOT and the Consumer Financial Protection Bureau, thepointsguy.com reports.
