US scrutinizes top airlines’ frequent flyer schemes for unfair practices

3:40 pm Thursday, September 05th, 2024

By David Shepardson

WASHINGTON (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 Airlines, Delta Air Lines, Southwest Airlines 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.”

U.S. airline frequent flyer programs have tens of millions of members and along with co-branded credit cards generate billions in revenue annually.

Delta, which said in 2020 it had more than 100 million frequent flyer members, added 8.5 million members in 2022.

Southwest Airlines said its flexible rewards program benefits has resulted in the carrier doubling the industry average of seats booked with points, while the other carriers declined or did not immediately comment.

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.”

(Reporting by David ShepardsonEditing by Chris Reese and Sandra Maler)