DOT Launches Probe Into Loyalty Programs of 4 Largest U.S. Airlines

Skift Take

The investigation seeks to determine whether recent industry trends like devaluing the worth of miles and consolidation have adversely affected consumers.

Meghna Maharishi

The Department of Transportation officially launched an inquiry Thursday into whether the loyalty programs of the four largest U.S. airlines have engaged in unfair, deceptive or noncompetitive practices.

The department said its probe would focus on how frequent flyer programs are impacted by the devaluation of miles, hidden and dynamic pricing, extra fees, along with reduced competition and choice.  

Transportation Secretary Pete Buttigieg sent a letter to American Airlines, Delta Air Lines, United Airlines and Southwest Airlines requesting them to provide records and reports about their loyalty programs, practices and policies. 

Skift has contacted the four airlines involved for comment.

“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,” Buttigieg said in a statement. “But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”

The DOT also expressed concerns that mergers within the industry could lead to less competition and choice among loyalty programs. When two airlines merge, a combined loyalty program could create issues for customers if they lose rewards, value or status in the transition, the department said. 

The letter Buttigieg sent to the airlines includes a lengthy questionnaire. One asks airlines to detail each change they’ve made to their loyalty programs since 2018. Another asks airlines how the dollar value of a mile has changed in the last six years.

Southwest said that its Rapid Rewards program has led it to have double the average of seats booked with points.

“At Southwest, we take great pride in our award-winning Rapid Rewards program, which includes flexible travel policies and unmatched availability of reward seats,” Southwest said in a statement.

United declined to comment. American and Delta did not immediately respond to a request for comment.

Loyalty Programs Are a Lucrative Asset for Airlines

The DOT first announced in November that it would investigate the fairness of loyalty programs. It also hosted a panel with the Consumer Financial Protection Bureau in May. The four largest airlines were notably not present for that panel. 

CFPB director Rohit Chopra said in May that the agency found airlines were selling inflated points to consumers while credit card issuers would receive the same points at a much lower price. 

“This not only creates confusion about the true value of the points but also raises some questions about fairness,” he said at the panel. 

Loyalty programs are often one of the most lucrative assets for an airline. For example, Delta received $1.9 billion in the second quarter from its deal with American Express, which includes a co-branded credit card. Revenues for Delta SkyMiles also rose 8% in the second quarter. 

United spun off its United MileagePlus program into a subsidiary worth $22 billion. 

Trade group Airlines for America estimates that 30 million Americans hold an airline credit card and 63% of frequent flyer miles were issued through credit card spending. 

“Millions of people enjoy being a part of various loyalty programs, which allow them to accumulate rewards to apply toward travel or other benefits,” A4A said in a statement. “U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”