DOT Probes Major U.S. Airline Frequent Flyer Programs for Potential Consumer Risks

The U.S. Transportation Department (DOT) is investigating the four largest U.S. airlines' rewards and frequent flyer programs for unfair, deceptive, or anticompetitive practices. Airlines, including American, Delta, Southwest, and United, must provide records detailing their programs. This move follows consumer complaints and scrutiny of potential hidden costs and devaluation of rewards.

The U.S. Transportation Department (DOT) announced an investigation on Thursday into the rewards and frequent flyer programs of the nation's four largest airlines. The focus is to ensure that consumers are not subjected to unfair, deceptive, or anticompetitive practices. Transportation Secretary Pete Buttigieg dispatched letters to American, Delta, Southwest, and United Airlines, demanding records and detailed reports on these programs.

This review by DOT seeks to understand how consumers are affected by factors like the devaluation of earned rewards, hidden or dynamic pricing, additional fees, and reduced competition and choice. Reuters had previously reported in December that the DOT was scrutinizing major airlines' frequent flyer programs for potential deceptive practices.

Both the Department and the Consumer Financial Protection Bureau had conducted a public hearing on airline loyalty programs in May, with some lawmakers weighing in on the issue. Buttigieg emphasized the need for specific data to comprehend the largest rewards programs and identify possible competition or consumer protection concerns.

Airline customers frequently complain about the rising difficulty in earning perks linked to these programs. Last year, U.S. Congress considered but did not mandate a 90-day notice requirement for airlines before devaluing frequent flyer points. Airlines for America, a trade group, asserted that U.S. airlines are transparent about their programs.

During the COVID-19 pandemic, these loyalty programs, which have tens of millions of members, were crucial for revenue and fundraising for the airlines. According to consulting firm On Point Loyalty, Delta, United, and American's programs were each valued at over $20 billion last year.

Delta confirmed receiving the DOT's inquiry and committed to responding, while Southwest highlighted that its flexible rewards program has doubled the industry average of seats booked with points. United and American chose not to comment.

(With inputs from agencies.)