DOT’s Frequent Flyer Program Inquiry: What’s Being Investigated

The U.S. Division of Transportation (DOT) has questions on frequent flyer applications. On Sept. 5, 2024, the company introduced it has launched an inquiry into loyalty applications of the 4 largest U.S. airways: American Airways, Delta Air Strains, Southwest Airways and United Airways.

The data gathered within the inquiry might inform future coverage adjustments round these applications, which could have an effect on how shoppers earn and redeem airline factors and miles. DOT says the purpose of the inquiry is to verify frequent flyer applications are clear and truthful to shoppers, which means the airways aren’t deceptive their loyalty program members with misleading or anticompetitive practices.

“Frequent flyer miles and bank card rewards have change into such a significant a part of our financial system that many Individuals view their rewards factors balances as a part of their financial savings,” U.S. Division of Transportation Secretary Pete Buttigieg mentioned in a press launch. “However in contrast to a conventional financial savings account, these rewards are managed by an organization that may unilaterally change their worth.”

This probe is the newest motion to enhance airline passenger rights with extra oversight of the airline business. The DOT additionally created guidelines that require airways to offer computerized money refunds when flights are canceled and to protect clients from shock airline junk charges.

There are 4 particular areas in query about how airways run their loyalty applications:

1. Rewards devalution. The DOT desires to know each change airways made to rewards applications during the last six years, particularly examples which will have made their rewards much less priceless. That would embrace the addition of blackout dates, factors expiration, growing the variety of factors wanted for elite standing or award redemptions, and any refusals to honor rewards. 

2. Hidden and dynamic pricing. Airways can muddy the greenback worth of miles and conceal devaluations by means of dynamic pricing, which is when the factors worth fluctuate wildly primarily based on demand. As a part of the inquiry, airways should give the common greenback worth of every mile, together with different data. 

3. Added charges. Some airways cost charges to redeem or switch miles, and that may lower the worth of the miles by making them dearer to make use of or preserve.

4. Mergers and companion applications. Airline loyalty applications are sometimes used to redeem miles on companion airways as properly. (Actually, that’s top-of-the-line methods to get a excessive redemption worth on your miles in some applications.) The DOT desires to know if mergers and partnerships negatively influence clients by driving up shopper prices. 

The chosen airways have till Dec. 4, 2024, to reply and reply the DOT’s many knowledge requests, corresponding to:

• Describe each elite standing degree.

• Disclose how a lot cash a shopper should spend on co-branded bank cards for every standing degree, profit and rewards.

• Establish each price associated to the loyalty program. 

• Present paperwork for each change to the rewards program during the last six years, together with reasoning and the way the adjustments had been communicated. 

• Compile an inventory of the highest 10 buyer complaints in regards to the rewards program, variety of complaints, resolutions for every concern and the common greenback quantity of every dispute.

That very same month, the CFPB launched a report saying 1,200 complaints involving bank card rewards had been acquired in 2023 — a 70% improve in comparison with pre-pandemic ranges. These points are associated as a result of co-branded airline bank cards earn miles that feed immediately into airline loyalty applications.

Southwest mentioned in an e-mail that it’s pleased with its Speedy Rewards program. “Our dedication to offering clients with Speedy Rewards factors that by no means expire, no matter how they’re earned, has led us to have double the business common of seats booked with factors,” a Southwest spokesperson mentioned by way of e-mail.

A Delta consultant shared the same assertion about its dedication to Delta SkyMiles members by way of e-mail. “Our members’ loyalty means every part to us, and offering a significant rewards expertise is the highest precedence inside Delta’s SkyMiles Program.” The airline additionally acknowledged they’d acquired the DOT’s inquiry and can reply accordingly.

American Airways and United Airways deferred to the assertion from Airways for America, an airline commerce affiliation, which mentioned, “Hundreds of thousands of individuals take pleasure in being part of numerous loyalty applications, which permit them to build up rewards to use towards journey or different advantages. U.S. carriers are clear about these applications, and policymakers ought to make sure that shoppers can proceed to be supplied these essential advantages.”

This inquiry is getting on the battle of curiosity between airways offering miles to clients and in addition setting — and altering — their worth at will.

It could be fascinating to see the airways’ responses, if the DOT decides to launch it, particularly how a lot every airline thinks their mileage foreign money is price. NerdWallet seems to be at lots of of award bookings annually to offer clients an estimate of how a lot miles are price as a result of airways don’t publish this data.

Whereas this DOT probe is concentrated on miles, airways supply many different rewards that aren’t below as a lot scrutiny, like improve certificates, companion certificates and precedence upgrades only for having a bank card. If changes are made to flight awards redeemed with miles, airways might all the time pivot towards different advantages.

One concern is that airways might “streamline” mileage applications to make them simpler to grasp. Whereas that sounds optimistic, it might have the unintentional impact of erasing so-called “candy spots,” that are rewards with outsize worth, within the title of simplification. Then again, if all awards had a assured price, it might elevate the general worth of miles.

One other potential result’s that the DOT might add extra laws for speaking adjustments. Extra advance communication would definitely be a internet win for shoppers, particularly if they’d recourse for unannounced adjustments.

Utilizing a bank card that earns transferable factors or miles — such because the Chase Sapphire Most popular® Card or Citi Strata Premier℠ Card — is a technique you possibly can hedge towards airline loyalty program devaluations. These applications permit you to accrue rewards and switch your factors to the companion applications if you discover a redemption that gives you essentially the most worth. This fashion, you’re circuitously affected by sudden devaluations and may nonetheless look ahead to candy spots. These are massive causes why transferable factors are price extra.