U.S. government orders major U.S. airlines to explain their loyalty programs

The Biden administration is reviewing the four largest U.S. airline loyalty programs and how they devalue points earned by consumers and frequently change the number of points or miles needed to book flights.

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

Consumers often complain that airlines are increasing the number of points needed to earn a free flight and limiting the number of seats that can be purchased with points.

Buttigieg said loyalty programs provide value to consumers and people rely 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,” he said in a statement released by the Department of Transportation. “Our goal is to ensure that consumers get the value they were promised, and that means validating that these programs are transparent and fair.”

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

Airlines for America, a trade group that represents the four carriers targeted by Buttigieg, said millions of people enjoy participating in loyalty programs.

“U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to benefit from these important benefits,” a spokesperson for the group said.

Loyalty programs used to be based on the number of flights taken or miles flown. In recent years, they are now fueled by consumer spending on airline credit cards. Revenue 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 in May on the airline programs, during which they raised many of the issues addressed in Buttigieg’s letter to airline CEOs. Witnesses included consumer advocates and executives from three smaller airlines, but no representatives from the four major airlines covered by the new investigation.

Erin Witte of the Consumer Federation of America, one of the attorneys who testified, said frequent flyer loyalty programs were launched to reward consumers for loyalty to an airline.

“It’s ironic that many of these have turned into programs that are not at all loyal to their customers and instead make people feel like they need an insurance policy to keep the points they’ve earned,” Witte said Thursday. She said she’s glad the Department of Transportation is looking at these programs.

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

Buttigieg has ordered the airlines to report within 90 days on issues including how the value of points is determined, the fees consumers pay and the details of 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 list all changes made to their programs since July 31, 2018, including how each change affected the dollar value of reward points.