Transportation Department Investigates Major Airlines’ Rewards Programs

Transportation Department Investigates Airline Rewards Programs

The U.S. Department of Transportation announced on Thursday that it is launching an investigation into the rewards programs of the nation’s four largest airlines. This initiative is part of the agency’s ongoing efforts to enhance protections for air travelers and ensure fair practices within the industry.

Transportation Secretary Pete Buttigieg has mandated that the airlines—United Airlines, Delta Air Lines, American Airlines, and Southwest Airlines—provide comprehensive records and detailed information regarding their loyalty programs. The investigation aims to scrutinize various aspects of these programs, particularly how they affect consumers.

The Department’s focus is on several critical issues, including:

• Devaluation of earned rewards
• Hidden or dynamic pricing
• Extra fees imposed on travelers
• Reduced competition and limited choices for consumers

In his statement, Mr. Buttigieg emphasized that these loyalty programs are often controlled by companies that can unilaterally alter the value of the rewards. He stated, “Our goal is to ensure consumers are getting the value that was promised to them,” adding that it is essential to validate that these programs operate transparently and fairly for customers.

The scrutiny of airline policies has intensified under the Biden administration, which has been actively working to curb practices perceived as detrimental to consumers. For instance, in April, the Transportation Department enacted new regulations requiring airlines to issue refunds in cases of canceled or significantly delayed flights while also mandating the disclosure of all fees before a ticket purchase.

Concerns regarding loyalty programs were previously raised by Mr. Buttigieg during a joint hearing held in May, involving both the Transportation Department and the Consumer Financial Protection Bureau. During the hearing, he highlighted the importance of ensuring that airlines communicate clearly with customers about the rewards they can expect to receive and whether they are indeed getting the benefits initially promised to them.

Furthermore, the agency is investigating the potential impact of these programs on market competition. Mr. Buttigieg pointed out that some loyalty programs might be structured in a way that hinders the growth of smaller airline competitors, ultimately limiting choices available to consumers.

In response to the investigation, both Delta and Southwest Airlines have defended the integrity of their loyalty programs. Meanwhile, American Airlines and United Airlines referred inquiries to Airlines for America, a trade association that represents major U.S. carriers. This organization stated, “U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”

Last year, Delta faced significant backlash from travelers when it announced modifications to its SkyMiles frequent flyer program. Following the outcry, the airline made adjustments to its changes, highlighting the sensitivity of such loyalty programs among consumers.