The Department of Transportation on Thursday launched an inquiry into the four largest airlines over potentially unfair and deceptive rewards program practices.
The agency ordered American Airlines, Delta Air Lines, Southwest Airlines and United Airlines to provide records of their loyalty program policies and practices.
The probe will examine the fairness and transparency of airlines' loyalty programs as well as how the practices of devaluing earned rewards, hiding fees, instituting dynamic pricing, and reducing competition and choice impacts consumers.
The issue, Transportation Secretary Pete Buttigieg said, is that American consumers have come to use frequent flyer miles and credit card miles like cash or part of their savings — but with none of the protections or stability those offer.
“But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value,” Buttigieg said in a prepared statement Thursday. “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.”
United, American and Delta directed CX Dive to Airlines For America, an industry lobby group, for comment.
“Consumers have the power of choice when selecting an airline for a trip, and carriers want to reward travelers for their return business and brand loyalty,” Airlines For America told CX Dive via email. “U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”
In a separate statement to CX Dive, Delta said it received the DOT’s inquiry and will respond accordingly.
"Our Members' loyalty means everything to us, and providing a meaningful rewards experience is the top priority within Delta's SkyMiles Program,” a Delta spokesperson said.
A Southwest spokesperson said the airline takes great pride in its “award-winning Rapid Rewards program, which includes flexible travel policies and unmatched availability of reward seats.” The spokesperson also stressed that points can be redeemed for Southwest flights, hotels, car rentals, gift cards, and more.
“Our commitment to providing Customers with Rapid Rewards points that never expire, regardless of how they’re earned, has led us to have double the industry average of seats booked with points,” the Southwest spokesperson said in an email to CX Dive.
The probe follows a joint hearing with the Consumer Financial Protection Bureau in May on airline and credit card rewards programs. A CFPB report released in conjunction with the hearing found that companies often try to devalue rewards, impose vague conditions to keep consumers from receiving rewards or redeeming rewards, or revoke previously earned rewards.
The DOT’s probe “is a key step to prevent deceptive devaluation tactics that can plague these alternative currencies held by tens of millions of families,” CFPB Director Rohit Chopra said in a prepared statement Thursday.
“Airline valuations are increasingly driven by their points programs and lucrative partnerships with credit card companies, and Americans are paying high interest rates and fees to participate in these programs — yet these tempting points and rewards programs are often depreciated or changed with little notice,” Chopra said.
Under the Biden-Harris administration, the DOT has been cracking down on airlines’ treatment of consumers. It has created new rules to require automatic cash refunds when a flight is seriously delayed or canceled and to tell consumers potential fees upfront.
In March, the agency also said it would investigate the data privacy practices of the 10 largest airlines. In April, the agency empowered state attorneys general to investigate potential airline misconduct cases.
