FYI: The U.S. Department of Transportation launches an investigation into airline frequent flyer programs amid growing consumer concerns.
Delta Airlines Faces Scrutiny Over Mileage Programs
A Delta Airlines Boeing 757 recently departed from San Diego International Airport, bound for Detroit on August 24, 2024. This image embodies the essence of frequent travel and loyalty programs that many passengers rely on. [Photo: Kevin Carter (Getty Images)]
Frequent flyer programs, while designed to reward loyal customers, have evolved into quasi-currencies regulated solely by airline executives. The U.S. Department of Transportation (DOT) has initiated an investigation into the mileage programs of America’s major airlines, including Delta Airlines, American Airlines, United Airlines, and Southwest Airlines. The probe seeks to address mounting concerns over the transparency and fairness of these programs.
Mileage Programs Under the Microscope
Frequent flyer programs are a significant revenue stream for airlines. However, consumers have reported a decline in the value and benefits of these programs. For instance, Delta Airlines implemented significant changes to its SkyMiles Policy starting in the latter half of 2023. The new policy made it more challenging to earn status, focusing primarily on passenger spending rather than the number of flights or miles flown.
Consumer Concerns and Government Response
Transportation Secretary Pete Buttigieg emphasized the real value these programs offer to consumers. Families often bank on airline rewards for vacations or visits to loved ones. However, unlike traditional savings accounts, the value of these rewards can be unilaterally changed by the airlines.
"These programs provide real value to consumers, and families often rely on airline rewards to fund vacations or trips to visit loved ones. But unlike traditional savings accounts, these rewards are controlled by the company, which can unilaterally change their value," said Buttigieg.
Delta’s primary aim was to boost spending on its SkyMiles American Express credit card, as indicated by its financial performance. In 2022, the airline’s miles program generated $5.7 billion, playing a critical role in the company’s overall profitability of $3.6 billion.
Customer Backlash and Policy Revisions
Delta Air Lines recently reversed some of its stringent changes, such as limiting the number of passengers accessing airport lounges after facing widespread customer outcry. This incident illustrates the significant control airlines have over frequent flyer programs. Companies can devalue points indirectly by introducing blackout dates, raising fees, or dynamically adjusting ticket prices.
U.S. Department of Transportation’s Investigation
The DOT’s inquiry will require airlines to disclose all changes to their frequent flyer programs over the past six years, including the average value of one point or mile and associated fees and their rationale. This investigation could prompt significant policy changes, just as the government mandated automatic refunds for cancellations and major delays earlier this year.
Conclusion
The ongoing investigation by the U.S. Department of Transportation is a hopeful step toward ensuring transparency and fairness in airline frequent flyer programs. With consumers increasingly dependent on these rewards, it is crucial that airlines implement practices that genuinely respect and reward customer loyalty.
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Donald Smith, Editor of Automotive.fyi
