Audit Reports

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Improvements Needed in DOT’s Process for Identifying Unfair or Deceptive Practices in Airline Frequent Flyer Programs

Requested by Representative Alan Grayson
Project ID: 
AV2016068

Designed to promote travel and secure customer loyalty, frequent flyer programs are extremely popular, with approximately 630 million participants worldwide and more than 300 million members enrolled in U.S.-based programs. In a July 2014 letter and subsequent conversations with our office, Representative Alan Grayson expressed concerns about practices associated with these programs, including how far in advance members are notified about service changes, the devaluation of awards and benefits over time, and the availability of award seats. As the U.S. Department of Transportation (DOT) is authorized to investigate unfair and deceptive practices in air transportation, we initiated an audit to review its monitoring of airline frequent flyer programs. In particular, we looked at DOT’s oversight of air carriers’ disclosure agreements and its process for reviewing passenger complaints. We also examined airlines’ practices regarding the availability of award seats and the valuation of frequent flyer miles.

We found that DOT conducts oversight of air carriers’ frequent flyer program disclosures as part of its compliance inspections, and that airlines include frequent flyer rules in their customer service plans, as the Department requires. However, DOT’s reviews of passenger complaints are insufficient to determine whether airlines engage in unfair and deceptive practices. For example, from 2012 to 2014, consumers filed 76 complaints about frequent flyer programs at U.S. airlines, but none of those complaints were forwarded to DOT attorneys for review. Yet our review of 36 of these complaints showed that 4 (11 percent) warranted additional review. In addition, while award seats are available for most flights, it is unclear how many miles are redeemed at different award levels, as airlines do not publicly disclose this information. Finally, airlines do not fully explain their process for determining award-seat availability to the traveling public.

We made two recommendations to help DOT improve its process for identifying unfair or deceptive practices in frequent flyer programs. DOT concurred with both recommendations, and we consider them resolved but open pending the Department’s completion of its planned actions. We also encouraged airlines to provide consumers with more transparency regarding frequent flyer seat availability when feasible.

Recommendations

Open

Closed

Closed on 09.29.2016
No. 1 to OST

Provide training to DOT analysts on what constitutes unfair and deceptive practices.

No. 2 to OST

Define what constitutes reasonable notice for consumers regarding changes to frequent flyer programs' terms and conditions, and require airlines to provide such notice.