DOT Probing U.S. Airlines Rewards Programs for Transparency and Fairness

The U.S. Department of Transportation (DOT) is probing the rewards programs of the four largest U.S. airlines to see if they are operating fairly.

The DOT is currently seeking records and reports from American Airlines’ AAdvantage, Delta’s SkyMiles, Southwest’s Rapid Rewards, and United’s MileagePlus to determine the ways those programs are being “transparent and fair” to their members.

More specifically, the probe is looking at how those programs’ members are impacted by “the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice.” 

In its announcement, the DOT likened a rewards account, like SkyMiles or AAdvantage, to a person’s savings account and said that while consumers have full control of a traditional savings account, they are subject to unilateral rule changes with a rewards account.

“Our goal is to ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair,” U.S. Transportation Secretary Pete Buttigieg said in a statement.

For instance, because an airline fully controls how rewards can be used, what points can be redeemed for, and how much redemptions cost, they can fully change the value of those rewards at their discretion, the DOT says.

Airlines also impose blackout dates for redemptions, expiration dates for points, and extra fees to maintain or transfer points, along with a dynamic price system that hides the dollar value for redemptions, making it difficult to compare a redemption price against the cash price for different rewards.

If a rewards account is supposed to be the same as a traditional savings account, then those practices are unfair, the DOT says.

Outside of those practices, the DOT also wants answers on how mergers between airlines can impact rewards programs.

“Moreover, the integration of two rewards programs can present problems if customers in one or both programs lose value, rewards, or status in the transition. Some rewards practices may create opportunities to collude or price signal,” it said.

Rewards programs and credit card partnerships have become some of the most valuable assets for airlines.

According to numbers from Bloomberg, Delta made $6.8 billion from SkyMiles in 2023 via its partnership with American Express, a number it expects to grow to $10 billion eventually. American made $5.2 billion in cash payments in 2023 from its co-branded credit card and infamously dropped travel agent bookings from the program in order to try to drive consumers direct, a move it backtracked on shortly after.

JetBlue in August sought to raise cash with a $2.75 billion bond-and-loan sale backed by its loyalty program.

U.S. Travel response

In a statement shortly after the news broke, the U.S. Travel Association came out against the DOT’s move, calling it an overreach that “ultimately harm the traveling public and travel industry.”

“The lack of focus and ability to prioritize real problems is disappointing to the travel industry and the millions of travelers we serve each day,” CEO Geoff Freeman said in a statement.