DOT’s Frequent Flyer Program Inquiry: What's Being Investigated - NerdWallet

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

The knowledge gathered within the inquiry might inform future coverage modifications round these packages, which could have an effect on how shoppers earn and redeem airline factors and miles. DOT says the objective of the inquiry is to verify frequent flyer packages 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 develop into such a significant a part of our financial system that many People view their rewards factors balances as a part of their financial savings,” U.S. Division of Transportation Secretary Pete Buttigieg stated in a press launch. “However in contrast to a standard 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 present automatic cash refunds when flights are canceled and to defend clients from shock airline junk fees.

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

1. Rewards devalution. The DOT needs to know each change airways made to rewards packages during the last six years, particularly examples that will have made their rewards much less priceless. That would embody the addition of blackout dates, points expiration, rising the variety of factors wanted for elite status 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 way of dynamic pricing, which is when the factors worth fluctuate wildly based mostly on demand. As a part of the inquiry, airways should give the typical 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 keep.

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

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

• Describe each elite standing degree.

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

• Establish each charge 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 modifications had been communicated. 

• Compile an inventory of the highest 10 buyer complaints concerning the rewards program, variety of complaints, resolutions for every difficulty and the typical greenback quantity of every dispute.

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

Southwest stated in an e mail that it’s pleased with its Rapid Rewards program. “Our dedication to offering clients with Fast 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 stated by way of e mail.

A Delta consultant shared an analogous assertion about its dedication to Delta SkyMiles members by way of e mail. “Our members’ loyalty means all the things to us, and offering a significant rewards expertise is the highest precedence inside Delta’s SkyMiles Program.” The airline additionally acknowledged they’d obtained 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 stated, “Thousands and thousands of individuals get pleasure from being part of numerous loyalty packages, which permit them to build up rewards to use towards journey or different advantages. U.S. carriers are clear about these packages, and policymakers ought to make sure that shoppers can proceed to be supplied these necessary 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 attention-grabbing to see the airways’ responses, if the DOT decides to launch it, particularly how a lot every airline thinks their mileage forex is value. NerdWallet appears at lots of of award bookings every year to present clients an estimate of how much miles are worth as a result of airways don’t publish this data.

Whereas this DOT probe is targeted on miles, airways provide many different rewards that aren’t underneath 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 packages to make them simpler to grasp. Whereas that sounds optimistic, it might have the unintentional impact of erasing so-called “sweet spots,” that are rewards with outsize worth, within the title of simplification. Alternatively, if all awards had a assured charge, it might increase the general worth of miles.

One other potential result’s that the DOT might add extra rules for speaking modifications. Extra advance communication will surely be a web win for shoppers, particularly if they’d recourse for unannounced modifications.

Utilizing a bank card that earns transferable factors or miles — such because the Chase Sapphire Preferred® Card or Citi Strata Premier℠ Card — is a technique you may hedge in opposition to airline loyalty program devaluations. These packages let you accrue rewards and switch your factors to the companion packages while you discover a redemption that gives you essentially the most worth. This fashion, you’re circuitously affected by sudden devaluations and might nonetheless look ahead to candy spots. These are massive causes why transferable points are worth more.