The federal government is investigating the four largest U.S. airline frequent-flyer reward programs to examine their fairness, transparency, predictability, and competitiveness, the U.S. Department of Transportation (DOT) said in a Sept. 5 press release.
Secretary of Transportation Pete Buttigieg sent letters to the four airlines—American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines—ordering them to hand over records and submit detailed reports addressing questions related to their rewards programs and practices by Dec. 4, 2024.
The request covers information such as how the airlines determine the value of reward points, as well as details regarding how much money consumers must spend solely on credit card purchases to obtain various membership levels and rewards.
The DOT’s investigation will be focused on how consumers who participate in airline rewards programs are impacted by the “devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice,” according to the release.
The information requested from the airlines will help the department better understand and identify potential competition or consumer protection issues or risks, according to the department.
In a statement announcing the investigation, Buttigieg said points systems such as 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.”
“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,” said Buttigieg. “But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”
The transportation secretary said the department’s goal is to “ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair.”
The investigation comes after the DOT and the Consumer Financial Protection Bureau held a hearing in May regarding airline and credit card reward programs.
During that hearing, smaller U.S. airlines shared some competition concerns as to how rewards programs are leveraged by the largest airlines, according to the DOT.
Before the hearing, the Consumer Financial Protection Bureau published a report stating that the share of revenue generated by loyalty programs for the biggest U.S. airlines increased from 12 percent in 2019 to 16 percent in 2021, and the return on investment for frequent flyer programs was “far higher” than the profits gained from the core business of providing flights.
In response to the DOT investigation, Delta said the loyalty of frequent-flyer members “means everything to us, and providing a meaningful rewards experience is the top priority within Delta’s SkyMiles Program.”
Southwest Airlines said it books more seats with points than other airlines and noted its points never expire.
Airlines for America, a trade group that represents all four carriers subject to the probe, said millions of people enjoy participating in loyalty programs.
“U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits,” a spokesperson for the group said.
The Epoch Times has contacted American Airlines and United Airlines for comment.
The Associated Press contributed to this report.
From The Epoch Times