The Airlines Fire Back at DOT: The Soap Opera Continues
by Robert McGarvey
The Department of Transportation threw the first punch, sending letters to the four big US carriers (United, Delta, American, Southwest) demanding info about their frequent flyer programs and strongly suggesting that there is something rotten about how the carriers fiddle awards thresholds to fill the corporate coffers.
Now the carriers are firing back.
My advice to you is to plug your ears with wax, as Ulysses had his men do as their ship approached the island of the Sirens. I will do as Ulysses did, keeping my ears unplugged and my eyes open so as to understand the threat – but Ulysses of course was firmly lashed to the mast so he couldn’t be seduced by the Sirens’ song. Me, I’m tied to my desk so I couldn’t be bribed by any carrier with a freebie flight.
But I am listening to them and reading what they say.
Scott Kirby, the United CEO, for instance. The DOT demand has Mr. Kirby’s dander up. Speaking at a US Chamber of Commerce confab in Washington DC Kirby seemingly has taken the “how dare they” posture vis a vis DOT’s demands to learn some specifics about how carriers run their loyalty programs. Said Kirby: “Customers love these programs.” He specifically commented that this summer 3 million pax flew United paying with miles.
He did not say the airline has over 110 million members which means <3% of members got rewards flights this summer.
Kirby could just as well have said 107 million members of United’s loyalty program did not use miles for trips this summer.
He also didn’t mention that in Q2 United banked $892 million in “other revenues,” including sale of miles and credit card agreements. Much of that money drops to the bottomline and is a huge chunk of UAL’s profits.
Kirby is not alone.
“It is stunning that the federal government would waste precious time micromanaging airline rewards programs beloved by 80% of travelers at the same time they are failing the American air traveler to the tune of 3,000 air traffic controllers,” U.S. Travel Association CEO Geoff Freeman said about DOT’s inquiry.
He offered no proof that the programs are “beloved” by 80% of travelers, nor did he acknowledge that many travelers applaud DOT’s efforts to push carriers into speedier, kinder handling of refunds for cancelled flights
Incidentally, a YouGov poll founds that less than half of us have a positive view of any carrier, save Delta which notched a 55% approval vote. Mr. Kirby’s carrier managed only a 48% approval. “Beloved” and “airline” don’t belong in the same sentence.
Meantime, the Airlines for America trade group said: “Because there is fierce competition among airlines for customers, loyalty programs are a way carriers can say thank you to travelers. Millions of people enjoy being a part of various loyalty programs, which allow them to accumulate rewards to apply toward travel or other benefits. U.S. carriers are transparent about these programs, and policymakers should ensure that consumers can continue to be offered these important benefits.”
The programs are transparent? Back when the carriers issued static rewards charts, there was at least a degree of transparency but in today’s era of dynamic pricing there is no transparency in the programs that I’m aware of. Right now I’m thinking about putting together enough miles to “buy” two free tix to Europe next summer, but, honestly, I have no idea if the cost will be 150k miles or 400k miles and that uncertainty complicates putting together an attack strategy.
And if the programs are so “beloved” why are an estimated 90+% of miles never redeemed?
Look, I still don’t think the DOT inquiry will force the carriers to play nicer with their rewards programs. Just maybe DOT will throw enough shame on the carriers that they toss us a few trinkets to make us forget how badly the loyalty programs treat us. A free glass of warm jug white wine anyone?
I just don’t see the loyalty programs getting better. Why should the carriers do anything?
Bill McGee, senior fellow for aviation and travel at the American Economic Liberties Project, summed up the miles mess nicely in a quote for Travel Weekly: “People enter programs with the best of faith. They spend decades playing by the rules. Then the goal posts keep getting pushed further and further back. … Everything they do is opaque, it’s unfair and deceptive.”
Amen.
Joe Brancatelli has repeatedly offered the best advice: Forget frequent flier miles, and book the best flights based on schedule and costs. Forget loyalty to any one or more airlines. I was a Delta Platinum or Diamond tier flier for several years and finally concluded that loyalty works in only one direction — from the flier to the airline. I got the rare upgrade from Delta a couple of times but never for international flights. The only guy I know who consistently benefits from frequent flier miles is my mechanic. He buys all car parts on his credit cards to install in customers’ cars. His wife is the one who keeps up on the credit card offers and juggles them masterfully.