On 5 September, the US Department of Transportation (DOT) launched an investigation into the four largest US airlines’ (American Airlines, Delta Air Lines, Southwest Airlines and United Airlines) rewards programs that is aimed at protecting rewards customers from potential unfair, deceptive or anticompetitive practices.
As part of the probe, US Secretary of Transportation Pete Buttigieg sent letters to the carriers, ordering them to provide records and submit reports with detailed information about their rewards programs, practices and policies. Specifically, Buttigieg is requesting information and documents relating to the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice.
“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings”, said Buttigieg. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”
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.
Pete Buttigieg, US Secretary of Transportation
Airline rewards points are typically earned by making purchases with the airline’s co-branded credit card, by flying on the airline or its partners, or by other activities specified by the airline or its credit card partner. Points can be redeemed for flights, upgrades, ancillary services, or third-party products and services. In many rewards programs, customers can also earn status by reaching certain benchmarks by accruing points, taking qualifying flights and/or hitting spending targets. Rewards customers receive complimentary perks like bonus miles, service upgrades or lounge access that increase in number and value with each status level.
The value of rewards is set by the terms and conditions that govern their use and benefit. Terms lay out the rules and requirements regarding how points are earned and what they can be redeemed for, how many points are required for rewards redemption, how status is achieved and what benefits come with it, and what, if any, restrictions limit the flexibility, redemption or duration of rewards. These rules determine how points stack up against the price to purchase the rewards in cash.
However, the DOT says many airlines reserve the right to change the terms, and therefore the value, of rewards at their discretion. The investigation was thus launched to examine the fairness, transparency, predictability and competitiveness of airlines’ rewards programs. DOT has the authority to investigate and take action against airlines for unfair or deceptive practices and unfair methods of competition in air transportation or the sale of air transportation.
by Dana Stefan
Source TravelTomorrow
