Airline rewards programs under scrutiny by U.S.
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The U.S. is investigating whether major airlines have unfairly devalued customers' frequent flier points, part of a broader probe into potentially fraudulent, deceptive or anticompetitive practices.
Why it matters: Rewards points earned on trips or from using an airline's branded credit card are an important form of currency that travelers may redeem for flights, upgrades and other products and services.
- But the airlines have sole power to determine how much they are worth.
Driving the news: U.S. Transportation Secretary Pete Buttigieg sent letters to the four largest airlines — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — seeking details about how their rewards programs work.
- DOT's probe is focused on the ways consumers are affected by the devaluation of earned rewards, hidden or dynamic pricing, extra fees and reduced competition and choice.
- Some airlines hide the dollar value of rewards points, for example, making it harder to compare the redemption price against the cash price.
What they're saying: "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.
- "But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value. 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."
The bottom line: The investigation is the latest effort by Buttigieg's DOT to step up the pressure on airlines to protect consumers.
