As the cost of travel rises, aspiring vacationers are increasingly treating loyalty rewards like saving accounts. So when points aren’t going as far as they used to, rewards members want answers.
What happened: The U.S. government has launched an investigation into whether the country’s biggest airlines are devaluing the rewards earned through their loyalty programs, after years of complaints tied to the rising number of points needed to earn a free flight.
- The lowest average price of tickets bought with points rose 28% between 2019 and 2024. In 2021 alone, Delta, Southwest, and United devalued miles by up to 20%.
Why it’s happening: Since American Airlines introduced the first frequent-flyer program in 1981, it has grown to be worth more than the airline itself. Loyalty programs at Delta, United, and American are worth a combined US$74 billion, $25 billion more than their total market capitalization.
- Airlines found they could sell loyalty points to banks offering rewards for credit card customers, and that they could even put up points as collateral to secure loans.
- They could then maintain the profitability of these schemes by devaluing points over time, like when they used them to hedge against major losses during the pandemic.
Bottom line: In 2021, the Economist wrote that airlines could keep this whole thing up as long as they could strike a balance between the costs and benefits of the perks. But more complaints, lower satisfaction, and rising disloyalty could prompt a change in the system.—SB