U.S. to Investigate Airline Loyalty Programs

22.12.2023 - 00:39 / skift.com / Dick Durbin / Meghna Maharishi

The U.S. Department of Transportation is opening an investigation into possible deceptive and unfair practices of airline loyalty programs as part of an effort to further regulate the industry.

The DOT is looking into whether airlines have devalued the frequent flier miles in their loyalty programs, making it more difficult for customers to book tickets using rewards, Reuters first reported. 

“We plan to carefully review complaints regarding loyalty programs and exercise our authority to investigate airlines for unfair and deceptive practices that hurt travelers as warranted,” DOT said in a statement. “DOT officials are actively meeting with U.S. airlines and gathering more information on this issue.”

The agency is also assessing how airlines alert customers of changes to its frequent flier programs, the level of transparency in practices for booking award tickets and the rules regarding the transferability of miles, according to Reuters. 

Loyalty programs are lucrative for airlines. United Airlines, for example, spun off its United MileagePlus frequent flier program into a subsidiary worth $22 billion. 

Delta Air Lines made $5.7 billion in 2022 from its co-branded credit card with American Express.

Airlines estimate that around 30 million Americans hold an airline credit card and that around 63% of frequent flier miles were issued through credit card spending. 

The DOT investigation comes as Congress renews scrutiny on the airline industry. Senators Dick Durbin, a Democrat from Illinois, and Roger Marshall, a Republican from Kansas, have proposed legislation to rein in fees charged by Visa and Mastercard, something the airline industry has lobbied heavily against. 

The senators said they had seen reports from the Consumer Financial Protection Bureau outlining unfair and deceptive practices in frequent flier programs, urging the DOT and CFPB to investigate these loyalty programs. 

“For example, reports have suggested that airlines are changing point systems in ways that are unfair to consumers, including by devaluing points, meaning it takes more points than initially marketed to achieve the promised rewards,” the senators wrote in October. 

Airlines have argued that the legislation would harm their ability to provide customers with credit cards that allow them earn frequent flier miles. 

Airlines for America, the trade group that represents the major U.S. airlines, declined to comment.