US government orders major US airlines to clarify their frequent flyer programs

(AP) – The Biden administration is investigating the four largest U.S. airline frequent flyer programs and how they reduce the value of points consumers earn and often change the number of points or miles required to book flights.

Transportation Secretary Pete Buttigieg wrote Thursday to the CEOs of American, Delta, Southwest and United, asking each for a report on policies, fees and other aspects of their loyalty programs.

Consumers often complain that airlines increase the number of points needed to receive a free flight and limit the number of seats that can be purchased with points.

Buttigieg said loyalty programs benefit consumers and people count on them to pay for vacations and trips to visit family.

“But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value,” the Department of Transport said in a statement. “Our goal is to make sure consumers get the value they’re promised, which means confirming that these programs are transparent and fair.”

Delta said the loyalty of its frequent flyer members “means everything to us, and providing a valuable rewards experience is a top priority with Delta’s SkyMiles program.” Southwest emphasized that its points never expire and said it books more seats with points than other airlines.

Airlines for America, a trade group representing all four carriers targeted by Buttigieg, said millions of people are eager to participate in the frequent flyer programs.

“US carriers have been transparent about these programs, and policymakers should ensure that consumers continue to enjoy these important benefits,” a spokesman for the group said.

Frequent flyer programs used to be based on the number of flights taken or miles flown. In recent years, however, they have been fueled by spending that consumers make on airline-branded credit cards. Income from credit card issuers has become a major source of revenue for airlines.

The Transportation Department and the Consumer Financial Protection Bureau held a hearing on airline programs in May that addressed many of the issues covered in Buttigieg’s letter to airline CEOs. Witnesses included consumer advocates and officials from three smaller airlines, but no representatives from the four largest airlines under new investigation.

One of the advocates testifying, Erin Witte of the Consumer Federation of America, said frequent flyer programs were initially designed to reward customers who were loyal to one airline.

“The irony is that many of them have morphed into programs that are far from customer loyalty and instead make people feel like they need insurance to keep the points they’ve earned,” Witte said Thursday. She said she’s glad the Department of Transportation is investigating the programs.

The consumer protection council said in a report to the hearing that it received more than 1,200 complaints about credit card rewards last year, an increase of more than 70% from pre-pandemic levels. Many hotels, retailers and other businesses also offer loyalty programs with credit cards.

Buttigieg ordered airlines to provide information within 90 days, including how they determine the value of points, any fees consumers must pay and details of their agreements with banks that buy miles from airlines and use them to encourage people to make purchases with their credit cards.

The order requires airlines to detail any changes to their programs since July 31, 2018, including how each change affected the value of frequent flyer points.