Major US Airlines Face Federal Probe Over Loyalty Program Practices

The U.S. Department of Transportation announced Thursday that it will investigate the country's four major airlines regarding their rewards and frequent flyer programs to ensure that consumers are getting fair deals and are not facing any deceptive practices.

The four largest U.S. air carriers — Delta Air Lines Inc., American Airlines Group Inc., United Airlines Holdings Inc. and Southwest Airlines Co.— have to submit detailed reports on their loyalty programs within 90 days, reported Reuters.

The transport department said in a statement that it will review how the customers are "impacted by the devaluation of earned rewards, hidden or dynamic pricing, extra fees, and reduced competition and choice."

The major airlines in the U.S. have been under scrutiny since last December over their frequent flyer programs for potential deceptive or unfair practices. The move came after customers expressed frustration about air carriers raising the bar associated with rewards, making it hard for them to earn the benefits.

The probe would be the first detailed government check of the loyalty programs that have been generating billions of dollars for airlines each year, and in some cases, adding even more revenue than their flight operations, Fortune reported.

The carriers will have to disclose details on their loyalty programs -- including credit card, consumer incentives, loyalty and frequent flier programs, the changes made over the last six years, complaints from customers and the impact of mergers on the programs.

"Many Americans view their rewards points balances as part of their savings," Transportation Secretary Pete Buttigieg said in the statement. "But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value."

Buttigieg, during a joint hearing with the Consumer Financial Protection Bureau in May, had also raised the issue of airlines altering the programs to prevent customers from receiving the perks.

The loyalty programs of each carrier were valued at more than $20 billion last year, according to consulting firm On Point Loyalty.

Trade group Airlines for America urged the administration to ensure that the customers benefitted from the reward programs while maintaining that the company had been transparent with its flyer programs.

"Our commitment to providing customers with Rapid Rewards points that never expire, regardless of how they're earned, has led us to have double the industry average of seats booked with points," the Dallas-based Southwest stated, according to the Fortune report.

Meanwhile, Delta responded that it would cooperate with the inquiry, adding that "providing a meaningful rewards experience is the top priority within Delta's SkyMiles program."

United Chief Executive Officer Scott Kirby pointed out that the company's loyalty programs accounted for a large part of its operations and they were beneficial to the customers and the airline.

In 2023, Delta reported generating $6.8 billion from its credit card partnership with American Express Co. The company expects 10% growth in revenue this year and earning up to $10 billion over the long term.

American Airlines, on the other hand, received $5.2 billion in cash payments in 2023 from its credit card and other partners.

These programs are a hit with the flyers as they provide benefits like priority boarding and airport lounge access. Nearly one out of every four U.S. households has an airline credit card, according to Airlines for America.