U.S. DOT Investigating 4 Largest Airlines’ Reward Programs for Potentially Unfair Changes

If you’ve noticed the constant changes and devaluations in airline rewards programs over the past few years and thought those seemed unfair, you aren’t alone. In fact, the U.S. Department of Transportation (DOT) is taking a closer look at these changes to see if they are indeed unfair to consumers.

The DOT has requested responses and documentation from the 4 largest airlines in the U.S. to explain how their programs work, why changes were made over the past few years, and what effects these changes had on consumers.

Here’s what consumers need to know about what’s happening with the DOT and airline rewards programs — as well as what remains unknown at this time.

DOT Investigation of Airline Reward Programs — What We Know

In a press release, the DOT confirmed that it requested documentation from the U.S.’ 4 largest airlines: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines.

This is a move many saw coming, as 2 senators asked the DOT and Consumer Financial Protection Bureau (CFPB) to investigate these rewards programs in 2023, alleging unfair treatment of consumers and deceptive practices.

This DOT investigation comes as frequent flyer rewards programs are gaining popularity — and as using them gets increasingly complex.

In May 2024, DOT Secretary Pete Buttigieg joined the CFPB Director, Rohit Chopra, for a public hearing on airline and credit card rewards programs. Unsurprisingly, smaller airlines touted the perceived strengths of their programs against those of larger airlines, encouraging a DOT investigation into these larger airlines’ reward programs.

“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. 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. 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

So, what is the DOT requesting from American, Delta, Southwest, and United? The list is quite lengthy, and it covers a period from July 31, 2018, to July 31, 2024. You can see a sample letter from the DOT to the airlines here.

The airlines need to respond in detail to these elements by December 4, 2024. They do have the option of requesting that responses and data contained in the responses be kept private.

Program Devaluations

The Department of Transportation wants to know why airline award programs have changed the number of miles and points you need for an award flight or flight upgrade. Not only has the DOT requested explanations of these changes, the DOT wants explanations on any “new restrictions” added, such as blackout dates or making it more difficult to earn elite status with the airline.

As part of the documentation, the airlines must describe each of these changes during the 6-year review period, how these impacted existing points held by rewards program members, how it affected elite status for program members, and how the airlines notified members in ways that could avoid them losing value on points or benefits they’d already earned.

The key angle in this section is that the DOT is investigating whether these programs are “moving the goal posts” on consumers unfairly. It’s no secret that these airlines have made multiple changes to their award charts, requiring consumers to pay more miles for an award flight today than what you needed yesterday, and that results in a loss of value for the points in your account.

Hidden and Dynamic Pricing

These 4 airlines have increasingly employed dynamic pricing over the past 4 years, meaning you don’t know how many points or miles you need for an award flight until you start searching for flights to book. Due to holidays, demand, and seat availability, the cost of a flight might be 50,000 miles on Tuesday and 85,000 miles the following day.

The DOT wants to know if airlines are intentionally hiding award costs to make it easier to devalue consumers’ rewards without them noticing. Here, airlines will need to provide the average dollar value of their points, the value of points for various redemptions in the rewards program, and the price to buy points from the airline. Specifically, the DOT has ordered the airlines to identify any dynamic pricing models they use and how those impact consumers.

The key aspect of this request is that the DOT believes that “problems created by opaque pricing are compounded by dynamic pricing,” where the number of points needed for redemption changes frequently and unpredictably.”

Extra Fees

The DOT wants to know what fees consumers have to pay to “maintain, redeem, or transfer points they have earned.” The press release wonders whether these fees decrease the value of consumers’ rewards without adding tangible value, and that’s the thrust of this section.

Airlines need to identify and explain the purpose of any such fee for using or maintaining points.

Reduction in Competition and Choice

The DOT describes rewards programs as “a critical financial asset” and is investigating whether airline mergers reduce or eliminate choice for rewards consumers. And when 2 programs merge, consumers in both may lose value.

Here, airlines need to describe and document related to any mergers in their rewards programs, how these were integrated, what partnerships were formed, and how the airlines are monitoring or responding to changes in rewards programs from their competitors.

The timing of the requests in this section is very interesting, given the pending merger between Alaska Airlines and Hawaiian Airlines — and the assumed merger of their rewards programs.

DOT Investigation of Airline Reward Programs — What We Don’t Know

First, we have no guarantee the airlines will initially comply. What would happen if they don’t? That remains to be seen. But aside from outright refusal to comply (which seems unlikely), the more likely form of noncompliance would be providing insufficient responses or saying that the instructions aren’t clear enough to provide what the DOT is actually looking for. How the DOT will respond if it doesn’t get what it wants is unclear at this time.

We also don’t know what the DOT will do next. Will it announce its findings? Will it provide reports based on how the airlines responded and any findings from the documentation? We don’t know.

Moreover, we don’t know what the DOT will do if it finds something it doesn’t like. If the airlines are honest about dynamic pricing in their award programs and that award prices were changed for reasons many consumers suspect — simply to increase profits — how will the DOT respond? Will there be penalties for the airlines? Would caps be set on rewards program redemption prices? This could go in countless directions, and any ideas here would be pure speculation.

Once the December 4 deadline passes, we’ll have to wait and see what the DOT does next.

Final Thoughts

The Department of Transportation has asked for thorough documentation regarding rewards programs from the 4 biggest airlines in the U.S. It wants to know why American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines have made changes to their rewards programs, how these affected consumers, and whether these practices were fair.

The airlines have until December 4, 2024, to respond with the requested explanations and documents. After this process is complete, it’s anyone’s guess what might happen next.