Biden Administration Investigates Airline Frequent-Flyer Programs Amid Consumer Complaints

The Biden administration is taking a closer look at the frequent-flyer programs of the four largest U.S. airlines—American Airlines, Delta Airlines, Southwest Airlines, and United Airlines—due to concerns over the devaluation of points and the constantly changing requirements for redeeming them. Many consumers have voiced frustrations about how airlines modify the number of points or miles needed to book flights, often without much notice.

On Thursday, Transportation Secretary Pete Buttigieg sent a letter to the CEOs of these four major airlines, requesting detailed reports about their loyalty programs, including policies, fees, and any other relevant features. This inquiry follows increasing concerns from consumers about the transparency and fairness of these frequent-flyer programs.

One of the most common complaints is that airlines frequently increase the number of points required to earn a free flight, making it harder for consumers to take advantage of the points they’ve accumulated. Additionally, there are reports of airlines limiting the availability of seats that can be purchased with points, further complicating the redemption process.

Buttigieg acknowledged that frequent-flyer programs do offer value to consumers, noting that many people rely on these programs to help fund vacations or family trips. However, he also raised concerns about the power imbalance between airlines and their customers. “Unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value,” he said in a statement from the Transportation Department. He emphasized that the department’s goal is to ensure these programs are transparent and that consumers receive the value they were promised. “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,” Buttigieg stated.

Airlines have responded to the inquiry, each defending the integrity of their loyalty programs. Delta Airlines, for instance, said in a statement that the loyalty of its SkyMiles members “means everything to us” and that providing a rewarding experience is their top priority. Southwest Airlines also highlighted a unique feature of its program, noting that points earned never expire, and they offer more seats for booking with points than their competitors.

Airlines for America, a trade group representing the major U.S. airlines involved in this investigation, stressed the popularity of frequent-flyer programs. A spokesperson from the group commented, “Millions of people enjoy participating in these loyalty programs. U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”

Frequent-flyer programs have evolved significantly since their inception. Initially, these programs rewarded consumers based on the number of flights taken or miles flown. Over time, they’ve shifted towards being more centered around consumer spending, particularly through airline-branded credit cards. These credit card programs have become a major revenue stream for airlines, with banks purchasing miles from airlines and offering them as rewards for customers who use the cards.

In May, the Transportation Department, alongside the Consumer Financial Protection Bureau (CFPB), held a hearing about frequent-flyer programs. This hearing, which covered many of the same issues addressed in Buttigieg’s letter, included testimonies from consumer advocates and representatives from three smaller airlines. However, none of the four major airlines now under investigation were represented at the hearing.

Erin Witte, a representative of the Consumer Federation of America, was one of the advocates who testified at the hearing. She expressed frustration over how the programs have changed from their original intent. “It’s ironic that many of them have morphed into programs that are anything but loyal to their customers and instead make people feel like they need an insurance policy to keep the points they have earned,” Witte remarked. She expressed satisfaction that the Transportation Department is now taking a closer look at these programs.

A report by the Consumer Financial Protection Bureau presented during the May hearing revealed a significant rise in complaints about credit card rewards. The CFPB noted receiving more than 1,200 complaints in 2022 related to these rewards, a 70% increase compared to pre-pandemic levels. While frequent-flyer programs have drawn considerable attention, loyalty programs tied to hotels, retailers, and other businesses also play a significant role in this issue. Many of these businesses have credit card-linked loyalty programs as well, leading to increased consumer dissatisfaction.

Buttigieg has now given the airlines a 90-day deadline to provide reports covering a wide range of issues. These reports are expected to include details on how point values are determined, any fees consumers are required to pay to redeem points, and the specifics of partnerships between airlines and banks that purchase miles. These deals, involving airlines and banks, often encourage consumers to use branded credit cards by offering additional miles for their purchases.

Additionally, Buttigieg’s order requests that airlines outline any changes made to their frequent-flyer programs since July 31, 2018, including how those changes have affected the dollar value of reward points. This information is critical in determining whether consumers have experienced a reduction in the value of their earned miles or points and whether airlines are being transparent in communicating these changes.

The frequent-flyer program inquiry comes at a time when airline industry practices are under intense scrutiny. Beyond loyalty programs, airlines have also faced criticism for operational inefficiencies, such as frequent delays, cancellations, and issues related to refund policies during the pandemic. The Biden administration, through the Department of Transportation, has made it clear that it intends to hold airlines accountable for these practices to ensure consumers are treated fairly.

For now, consumers and industry experts alike will be awaiting the results of this latest investigation. As Buttigieg’s department continues its oversight of the airline industry, the reports from these major airlines will likely set the stage for future reforms. Whether the inquiry will lead to significant changes in how frequent-flyer programs operate remains to be seen, but one thing is certain: the pressure on airlines to increase transparency and fairness is mounting.

Airlines have yet to indicate whether they plan to make changes to their programs in light of the investigation. However, given the heightened focus on consumer rights and protection, airlines may soon face more regulations that aim to protect frequent-flyer participants from sudden or unfair devaluation of their earned points.