The US Department of Transportation recently held a panel discussion regarding frequent flyer programs and how their often unannounced changes can and do affect customers who use the programs. Consumer advocates made it clear they wanted more warning when airlines make changes to the programs, considering the agreement is not one-sided. Language in the agreements, however, may support the airlines case. Our own Marc Berman, CEO and Managing Partner of TMG, participated and is quoted in the following article by USA Today contributor, Bart Jansen, who posted a summary of the event and outlined both positions.
A copy of the article is below (with corrections in brackets […] including Marc’s name). You can find the original article here.
Originally posted April 15, 2015 USA Today
WASHINGTON – Airline loyalty programs can change on a dime, but consumer advocates told a Transportation Department panel Tuesday that travelers deserve more warning.
Airlines have disclaimers in their frequent-flier programs saying the rules can change anytime for any reason without notice. The Supreme Court upheld that policy, deciding unanimously in April 2014 that an airline has sole discretion to dump a frequent flier who complained too much.
Tim Winship, a former airline loyalty program manager who founded frequentflier.com, said examples of the one-sided policy included Delta Air Lines removing its award charts from its web site in February, American Airlines raising the price of its AAnytime rewards in April 2014 and United Airlines raising prices to change award tickets in June 2013.
“I suppose you could think of this as the Vladimir Putin School of Business Ethics,” Winship said, referring to the Russian leader. “Is that legal? Sure. Is it within the rules of the programs set out for themselves? Yes. But is it fair and reasonable? Absolutely not.”
He gave a presentation to the Advisory Committee for Aviation Consumer Protection — four members who represent consumers, local governments, airlines and airports – which studies issues and makes recommendations to the transportation secretary.
The meeting came [as] many of the major airlines are changing their loyalty programs to reward dollars spent rather than miles flown. American remains the last big holdout, though many industry observers expect it will follow the others once its merger with US Airways wraps up.
Winship urged the department to return to a policy from the 1980s and 1990s, when airlines warned [customers] about changes a year ahead of time. The advance notice came from a National Association of Attorneys General recommendation in 1988.
“Simple fairness and decency would say they should let consumers know the changes are in the pipeline,” Winship said.
But David Berg, a member of the panel who is also general counsel for the trade group Airlines for America, which represents the largest carriers, said loyalty programs are essentially discounts that could change as frequently as fares.
“I would beg to differ that changes in miles and changes in fares are different,” Berg said. “I think they’re the same.”
Another member of the consumer panel, Pennsylvania Attorney General Kathleen Kane, asked how the programs change the rules for their loyal customers.
“You basically keep moving the dial, or moving the end line,” Kane said. “How do you reconcile the fact that the terms of the contract change at any time without any notice only by one party without the consent of the other?”
Berg said other businesses such as Apple’s iTunes or Costco reserve the right to make changes at any time.
“It’s not an unusual kind of term in these types of loyalty programs,” Berg said.
The Transportation Department doesn’t regulate frequent-flier programs, such as how many seats are available on a given flight, but could still investigate problems as unfair or deceptive. Formal complaints are relatively rare.
Charles Smith, a senior trial attorney with the department’s office of aviation enforcement, of 15,537 complaints received last year about airlines, 184 dealt with loyalty programs. The complaints most often dealt with the rules or the availability of seats.
Despite the unpredictability, the programs are popular.
[Marc] Berman CEO of Mallett Group aviation consultants, said airlines generally reserve 6% to 8% of their seats to awards programs. Southwest Airlines had 6.2 million flight rewards last year totaling 11% of its revenue passenger miles, while United had 4.8 million flight awards totaling 7% of revenue passenger miles, he said.
“The goal of a marketing program is to reward your best customers,” Berman said.