Over the years, airlines have resisted any sort of regulation of their frequent flyer programs. These are sales programs, they say, and shouldn’t be subject to regulation at all. Actually, a reasonable position.
The Department of Transportation (DoT), on the other hand, receives lots of consumer complaints about frequent flyer programs in its inbox. We don’t do anything because it’s outside our purview, the Department says. Also a reasonable position.
Recently the DoT and other agencies decided to take a closer look. I have no idea whether anything will come of it, or what form any future regulation might take, but I can list the issues and my take on them.
Anti-competitive Behavior. Ask any economist to give a detailed definition of “anticompetitive behavior” and you’re likely to get a different answer from each. It’s the same with frequent flyer programs. Yes, a good program gives an airline an advantage over other lines, and their programs give giant airlines an advantage over their smaller competitors, but is that anti-competitive, or just good competition? I don’t know, and I’m not sure who, if anybody does. We’ll hear from the several agencies in due time, but I have no inkling about what they’ll say.
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Even if a consensus emerges that the big-line programs are anti-competitive, the next question is what to do about it. Again, I see no obvious remedies. Murky waters are ahead on this one.
Deceptive. DoT has a mandate to ban deceptive practices, and at least one such ongoing practice is clear and evident. As with hotel “resort fees” and other deceptions, it’s the practice of cutting out a portion of the full actual fare, labeling it as a fee, and saying the “fare” is only the remainder of the actual figure after removal of the fee. A while back, I looked at a few routes and found one where the airline quoted $350 as the fare and added a “carrier-imposed fee” of $300. Clearly, the true fare was $650.
This form of pricing is obviously deceptive. DoT has specifically cited it as a deception in its full-fare advertising rules. But there are two big questions as to whether anyone will even look at this in the current investigations:
- The question arises in many situations other than frequent flyer. Flyers get hurt because their miles typically cover just the low-ball carve-out and they have to pay the fee part. But lots of other interactions are involved.
- The worst offenders are foreign lines. The big U.S. lines don’t do this much, if at all, at least as far as I can tell. And I’m not clear how far the U.S. agencies want to go in issuing regulations that primarily affect foreign lines and their business practices.
In any case, the behavior is (1) going on and (2) deceptive. We shall see how this plays out.
Consumer Pain Points. DoT’s consumer mandate also includes rectifying any practices deemed as “unfair.” Here again, defining “unfair” can be slippery.
As far as I can tell, consumers have three major interrelated pain points with frequent flyer programs:
- Continuous increases in the mile or point “prices” for award trips.
- Scarcity of award seats on reasonable itineraries.
- Unannounced sudden devaluations.
Clearly, these are all facets of the same problem. And frequent flyers often find it virtually impossible to find award seats for reasonable itineraries for a reasonable number of miles or points. The last time I researched a trip from my West Coast home to Europe, for example, I started with an airline flying at least two nonstops daily to a big European hub. But I found that, for a full year, the line offered no seats at all on nonstop flights. The best miles deal was on back-to-back red-eyes: Overnight domestic to an East Coast hub, wait around all day, then another overnight to Europe. Feh.
The problem here is that something consumers don’t like is not necessarily unfair. Overall, I find it hard to believe anything substantial will happen. But that’s the way the system works.
(Send e-mail to Ed Perkins at eperkins@mind.net. Also, check out Ed’s new rail travel website at www.rail-guru.com.)
