The Department of Transportation’s investigation into the rewards programs of the four largest U.S. airlines may turn out to be more of a fishing expedition than anything else. The probe is intended to ensure consumers are not subjected to unfair or deceptive practices, but there’s little evidence suggesting they are.
A hearing earlier this year on airline points aimed to examine whether consumers are being treated fairly by airlines offerings rewards. However, much of the discussion shifted towards whether smaller airlines can compete in the current points-driven environment.
In the end, the hearing emphasized that airline rewards are not just ubiquitous but also very popular. That’s all the more reason for DOT’s probe to tread lightly, according to Ben Danner, Senior Analyst, Credit and Commercial, at Javelin Strategy & Research.
“Points systems are a critical part of credit cards rewards programs and are a major selling point for card issuers,” Danner said. “The card rewards economy has spawned an entire culture of rewards point maximizers that play between the rewards programs to maximize value and those that view it as a part of their overall financial savings. Any legislation arising from this investigation into points reward programs will affect millions of cardholders.”
During the earlier DOT hearing in May, Scott D’Angelo, Chief Marketing Officer at Allegiant Airlines cited a passenger survey showing that 95% of respondents were interested in participating in a frequent flier program. Additionally, a separate December 2023 survey from Airlines for America found that 81% of respondents considered earning bonus reward points for travel through their credit or charge card to be very important.
The Focus of the Probe
In the new investigation, Transportation Secretary Pete Buttigieg has asked American, Delta, United, and Southwest to submit records about their rewards programs and policies. The inquiry seeks information on the devaluation of rewards, hidden and dynamic pricing, and extra fees. Airline rewards generally charge higher processing fees than other credit cards. DOT is also examining whether airline mergers have reduced competition and limited consumer choice.
“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings,” Buttigieg said in a statement. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value.”
