US probes top airlines’ frequent flyer programs for unfair practices

5:43 pm Thursday, September 05th, 2024

By David Shepardson and Rajesh Kumar Singh

WASHINGTON/CHICAGO (Reuters) -The U.S. Transportation Department (DOT) said on Thursday 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, Delta, Southwest and United Airlines, ordering them to provide records and submit reports answering detailed questions on their rewards programs.

The Department is reviewing 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.

DOT and the Consumer Financial Protection Bureau held a public hearing in May on airline loyalty programs, while some lawmakers have also scrutinized the programs.

Buttigieg said the department is seeking “more specific data to better understand the largest rewards programs 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.

Trade group Airlines for America, however, 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, United and American were each valued 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 said its flexible rewards program benefits have resulted in the carrier doubling the industry average of seats booked with points, while United and American declined comment.

(Reporting by David Shepardson in Washington and Rajesh Kumar Singh in ChicagoEditing by Chris Reese and Sandra Maler)