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The Department of Transportation is looking into whether America’s largest airlines are treating their most loyal customers fairly. The investigation revolves around frequent flyer rewards programs, with an emphasis on the credit cards associated with them.
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English Nvidia stock is navigating one of its most turbulent weeks ever
“As part of the probe, U.S. Secretary of Transportation Pete Buttigieg sent letters to American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines ordering them to provide records and submit reports with detailed information about their rewards programs, practices, and policies,” the agency said in a statement announcing the action. “DOT’s probe is focused on the ways consumers participating in airline rewards programs are impacted by the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice.”
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The letters shouldn’t be a surprise to the companies, since the Biden administration has been public about its skepticism around airline credit cards following Consumer Financial Protection Board hearings about them in March.
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Loyalty programs are an important revenue driver for airlines. For one, those customers tend to book more frequently because they want access to the perks that come with accumulating lots of points with a particular carrier. Plus, airlines make money on loyalty programs by selling their rewards points to other companies and through deals struck with the credit card companies who offer co-branded cards for members. (To encourage people to sign up for its rewards program, Southwest launched a buy-one-fly-one-free promotion this week.)
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Among the largest airlines in 2023, according to their latest annual reports:
Airlines for America, an industry trade group, defended its members’ credit card practices, telling CBS News that “U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”