After the U.S. Department of Transportation last week announced it had launched a probe into the loyalty programs of the four largest U.S. carriers—American Airlines, Delta Air Lines, Southwest Airlines and United Airlines—some carriers and organizations are beginning to push back.
“This summer, over 3 million people flew on a free flight on United Airlines using the MileagePlus program,” said United CEO Scott Kirby on Tuesday at the U.S. Chamber of Commerce’s Global Aerospace Summit. “That, just for some context, is about 1 percent of the entire U.S. population, on just one airline, in just one season. So customers love these programs. We’ve known that—that’s why we keep trying to make them better.”
President and CEO of the U.S. Travel Association Geoff Freeman did not mince words after DOT made its announcement. “It is stunning that the federal government would waste precious time micro-managing airline rewards programs beloved by 80 percent of travelers at the same time they are failing the American air traveler to the tune of 3,000 air traffic controllers,” he said in a statement. “The lack of focus and ability to prioritize real problems is disappointing to the travel industry and the millions of travelers we serve each day.”
The association also released a fact sheet that argued that, according to the government’s own data, the value of consumer-earned rewards grew to $40 billion in 2022, a 50 percent increase from 2019 levels. It also noted that the value of rewards earned has grown to 1.6 cents in 2022 from 1.4 cents in 2019.
But airlines don’t offer these programs as a simple thank you to customers. They make money from them, especially from their partnerships with credit card companies. The increasing value of airline reward programs became clear during the pandemic when American, Delta and United each used their loyalty programs to secure funding during those lean times.
Some officials took notice, and for the past couple years, there has been talk that DOT would look into these programs. There’s also the Credit Card Competition Act, legislation that aims to change how merchants run charges which could affect reward miles. United’s Kirby has said passage of this bill “would kill rewards programs.”
When asked about the DOT probe during a Thursday interview at Morgan Stanley’s 12th annual Laguna conference, Delta president Glen Hauenstein said that the carrier has not yet had any conversations with the agency over the issue.
“We kind of got this letter and we thought, ‘What? This is a surprise.’ ” Hauenstein said. “But these are giveaway programs, and they’re very popular. And so we’re looking forward to it. These are the most popular loyalty programs of any industry, and people are joining at record numbers. I’m sure we’ll figure out how best to comply with their requests. But I think it’s hard to say—nobody paid anything to get this benefit. So we’ll see.”
