Exclusive-US scrutinizing airline frequent flyer programs

By David Shepardson

WASHINGTON (Reuters) -The U.S. Transportation Department is scrutinizing the frequent flyer programs of major U.S. airlines for potential deceptive or unfair practices, the agency said Thursday as regulators step up oversight of the airline industry.

The department has been meeting in recent weeks with passenger airlines to discuss the popular loyalty programs, including transparency practices when booking award tickets, transferability of miles and notice given before making changes, two sources told Reuters.

One other key issue USDOT is looking at is the devaluation of frequent flyer miles over time that makes it harder to book award tickets, a separate source told Reuters.

"We plan to carefully review complaints regarding loyalty programs and exercise our authority to investigate airlines for unfair and deceptive practices that hurt travelers as warranted," a department spokesperson said. "DOT officials are actively meeting with U.S. airlines and gathering more information on this issue."

Delta Air Lines (NYSE:DAL) and United Airlines declined to comment, while others did not immediately comment. Frequent flyer miles are one of the most popular loyalty programs.

Delta, which said in 2020 it had more than 100 million frequent flyer members, last year added a record 8.5 million members.

The meetings come as some in Congress have raised concerns about frequent flyer programs.

In October, Senate Judiciary Committee chair Dick Durbin and Republican Senator Roger Marshal asked the Transportation Department and Consumer Financial Protection Bureau about "troubling reports" of unfair and deceptive practices in airlines’ frequent flyer and loyalty programs.

The pair cited reports "airlines are changing point systems in ways that are unfair to consumers, including by devaluing points, meaning it takes more points than initially marketed to achieve the promised rewards."

Major airlines heavily lobbied Congress this year to reject legislation co-sponsored by Durbin and Marshall they say threatens their ability to offer rewards credit cards that give consumers frequent flyer miles for making transactions.

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Durbin says the bill would address "outrageous" fees charged by Visa (NYSE:V) and Mastercard (NYSE:MA), and boost competition by directing the Federal Reserve to ensure that large credit card-issuing banks offer a choice of at least two networks over which an electronic credit transaction may be processed.

Airlines say there at least 30 million U.S. airline industry credit card holders. Delta in October revised some changes to its frequent flyer program it had announced in September after some members had raised concerns.