WASHINGTON/CHICAGO – On Thursday, the U.S. Transportation Department (DOT) said it is opening an inquiry into the four largest U.S. air carrier rewards and frequent flyer programs to ensure consumers do not face unfair, deceptive, or anticompetitive practices.
Transportation Secretary Pete Buttigieg sent letters to American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), Southwest Airlines (NYSE: LUV), and United Airlines (NASDAQ: UAL), ordering them to provide records and submit reports answering detailed questions on their rewards programs.
The department reviews how consumers are “impacted by the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice.”
Reuters first reported in December that DOT had begun scrutinizing the frequent flyer programs of major U.S. airlines for potential deceptive or unfair practices.
In May, DOT and the Consumer Financial Protection Bureau held a public hearing on airline loyalty programs, while some lawmakers have also scrutinized the programs.
Buttigieg said the department seeks “more specific data to understand the largest rewards programs better and identify potential competition or consumer protection issues or risks.”
Customers often complain airlines have been raising the bar to earn perks associated with these programs. The U.S. Congress last year considered but did not mandate requiring airlines to provide 90 days’ notice before devaluing frequent flyer program points.
However, trade group Airlines for America said U.S. airlines are transparent about frequent flyer programs “and policymakers should ensure that consumers can continue to be offered these important benefits.”
U.S. carriers relied on these programs, which have tens of millions of members, for revenue and to raise funds during the COVID-19 pandemic when travel demand plunged.
Loyalty programs of Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and American Airlines (NASDAQ: AAL) were each valued at more than $20 billion last year, according to consulting firm On Point Loyalty.
Delta said it has received the DOT’s inquiry and will respond.
Southwest Airlines (NYSE: LUV) said its flexible rewards program benefits have resulted in the carrier doubling the industry average of seats booked with points, while United and American Airlines declined to comment.
(Source: Reuters)
Jennifer Tacker is a staff writer at ABBO News. She holds a B.A. from the University of Waterloo and a B.Ed from Western University. Jennifer has been active in the stock market and crypto sector for a decade. She specializes in technical analysis and trading strategies.
