DOT on Frequent Flyer Programs: ‘Nothing to See Here’

In 2014, at the behest of Rep. Alan Grayson (D-Fla.), the DOT’s Office of Inspector General began an audit of U.S. frequent flyer programs, and the DOT’s monitoring thereof, with a particular focus on unfair and deceptive practices (summary, with a link to the full .pdf report, here). The audit results were published this month, with the following headline: “Improvements needed in DOT’s process for identifying unfair or deceptive practices in airline frequent flyer programs.”

According to the OIG, its mission was to review:

(1) DOT’s oversight of air carriers’ compliance with frequent flyer program disclosure requirements, (2) DOT’s process for reviewing passenger complaints regarding unfair and deceptive practices, and (3) airlines’ practices regarding the availability of award seats and valuation of frequent flyer miles.

It’s a strange and fraught mandate, requiring an assessment of both the regulator and the regulated. And the assessor, in this case, is tasked with evaluating the organization of which it’s a part. The potential for confusion and self-dealing is baked into the process.

The Findings

While the report found no problems with the airlines’ program disclosures, it did fault the DOT for failing to follow up on frequent flyer complaints filed with the Department. In reviewing program-related complaints filed between 2012 and 2014, the report found that 11 percent involved potentially unfair or deceptive practices and therefore warranted further investigation. None was undertaken.

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As for award-seat availability, the report found seats on 99 percent of their test bookings; and on 63 percent of the flights, award seats were available at the lowest-available mileage price. No problem there. The report took issue, however, with the airlines’ failure to disclose that award availability and pricing is demand-based, just as revenue-ticket pricing is.

Against the backdrop of so much program devaluation, and so much consumer frustration and outrage, the findings seem like the most inconsequential of quibbles. The only substantive improvement called for regarded advance notice of program changes: “DOT is considering developing a rule requiring air carriers to provide reasonable notice of changes to their frequent flyer programs.” The keyword being “considering.”

The takeaway for travel consumers is disheartening. It’s business as usual for loyalty programs. And with the conversion to spend-based programs, and the erosion of competition due to industry consolidation, that means more devaluation ahead.

Reader Reality Check

How relevant are mileage programs to your choice of airline?

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After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.

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