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The inquiry seeks to protect customers from unfair, deceptive and anticompetitive practices.
Aircraft on the move at New York’s LaGuardia Airport (Photo: AirlineGeeks | William Derrickson)
The U.S. Department of Transportation (DOT) has launched a federal inquiry into the four largest U.S. airlines’ rewards programs in an effort to protect customers from potential unfair, deceptive, or anticompetitive practices.
According to a news release posted by DOT on Thursday, U.S. Secretary of Transportation Pete Buttigieg sent letters to American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines ordering them to provide records with detailed information about their rewards programs, practices, and policies.
The probe is focused on the ways consumers participating in airline rewards programs are impacted by the alleged 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,” Buttigieg said in the release. “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.”
Airline loyalty programs are extremely effective marketing tools that drive customer loyalty and incentivize them to stay loyal. 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. These points can then be redeemed for flights, upgrades, and other products and services.
The value of rewards is set by the terms and conditions that govern their use. Because many airlines reserve the right to change their terms, the DOT probe argues that the value of the rewards is changed at their discretion.
Buttigieg is specifically requesting information and documents relating to:
In May, Buttigieg joined the Director of the Consumer Financial Protection Bureau Rohit Chopra for a public hearing on airline and credit card programs. At the hearing, smaller U.S. airlines touted their rewards programs’ consumer-friendly policies, while expressing some competition concerns as to how rewards programs are leveraged by the largest airlines.
Caleb Revill is a journalist, writer and lifelong learner working as a Junior Writer for Firecrown. When he isn't tackling breaking news, Caleb is on the lookout for fascinating feature stories. Every person has a story to tell, and Caleb wants to help share them! He can be contacted by email anytime at [email protected].
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