Buttigieg launches probe into airline rewards programs

The Department of Transportation (DOT) has launched an investigation into the four largest U.S. airlines' rewards programs to ensure consumers are not facing "unfair, deceptive or anticompetitive practices."

“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,” Transportation Secretary Pete Buttigieg said in a statement Thursday. “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."

The DOT wants to guarantee consumers are receiving the value that was promised by the airlines, and ensure the rewards programs are "transparent and fair," Buttigieg said.

Buttigieg sent letters to American Airlines, Delta Air Lines, United Airlines and Southwest Airlines requesting they hand over records and reports with information about their rewards programs and policies. This includes information on the devaluation of rewards, hidden and dynamic pricing, extra fees and if airline mergers have led to a reduction in competition and choice for consumers.

"As part of our review, the Department is seeking more specific data to better
understand the largest rewards programs and identify potential competition or consumer
protection issues or risks, and I have enclosed an order to file a report responsive to our
questions," Buttigieg wrote in the letter, dated September 5.

A spokesperson or United confirmed all four airlines received the letter. Both United and American Airlines referred The Hill to Airlines for America (A4A), a trade association and lobbying group, for comment.

"Consumers have the power of choice when selecting an airline for a trip, and carriers want to reward travelers for their return business and brand loyalty. Because there is fierce competition among airlines for customers, loyalty programs are a way carriers can say 'thank you' to travelers," a spokesperson for A4A said in a comment to The Hill.

The A4A spokesperson argued airline carriers are "transparent" about the programs, which are used by millions.

A spokesperson for Southwest Airlines said the company "takes great pride" in its Rapid Rewards program. They noted the points do not expire and the number of consumers using them to purchase seats is nearly double the industry average.

Delta Airlines did not immediately respond to a request for comment.

The letter comes months after Buttigieg appeared for a public hearing on airline and credit card programs, with Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra. The DOT said smaller U.S. airlines discussed their rewards programs during the hearing, but also concerns about how the nation's largest airlines are "leveraging" their own programs.

The CFPB released a report about credit card rewards in May. It found more than 1,200 complaints involving all credit card rewards, a more than 70 percent increase over pre-pandemic levels, the agency said.

At the same time, consumers in 2022 received more than $40 billion in rewards on major issuers' general purpose credit cards, an increase of more than 50 percent from 2019 levels, the report stated. It also found the average value of rewards earned grew from 1.4 cents per dollar spent in 2019 to 1.6 cents in 2022.