Is It Time to Regulate Frequent Flier Programs ? No. Here is Why…

ary Leff of View From The Wing wrote a thoughtful article earlier today asking the question “Is It Time to Regulate Frequent Flyer Programs?

In response to this letter written by Matthew Hampton — who is the Assistant Inspector General for Aviation Audits of the Department of Transportation of the United States — where an audit has been initiated pertaining to the oversight of the frequent flier loyalty programs of airlines and is being conducted at the request of Alan Grayson, a member of Congress who represents the ninth district of Florida, I first addressed this question in an article I wrote and posted on Sunday, September 28, 2014 called Should Frequent Flier Loyalty Programs Be Regulated by the United States Government?

I wrote that “In general — although I personally do not like the recent trend in frequent travel loyalty programs in general — I believe in the free market economy where decisions are based on supply and demand and would rather have that than government intervention dictating against market trends.”

My opinion has not changed.

Let us not confuse the operation of an airline itself with the maintenance of its frequent flier loyalty program. Airlines are a vital part of the economy, responsible for transporting millions of passengers every year — and to ensure that that continues successfully, a plethora of government regulations are in place to ensure that your transport from one location to another is done as safely as possible. Think about it: when was the last time you chose one airline over another because of safety concerns? When was the last time you were hesitant to step aboard an airplane because of the almost negligible likelihood that you might not arrive at your destination alive?

It is easy to forget that airlines are not required to even offer a frequent flier loyalty program. Regardless of the recent changes in policies — some of them seemingly downright boneheaded — management of airlines have been implementing to frequent flier loyalty programs, they cause no safety issues for you. Rather, frequent flier loyalty programs are simply a marketing arm of an airline — nothing more. They are designed to entice you to patronize an airline more often — that is, spend more of your money in return for the promise of benefits and amenities — under the misused guise of loyalty.

If you remember the glory days of frequent flier loyalty programs — when award flights were truly free of charge and did not cost a penny; when elite status was significantly easier to earn; when lounge access was attained with little more than asking for it; when the airlines seemed to have been giving away the store and do just about anything simply to retain your patronage — there was no call for government regulation as we were all dining on caviar in our wide leather seats while sipping on champagne counting our boatloads of miles like millionaires with their bankrolls…

…and now that the “gravy train” of frequent flier loyalty programs seems to have basically come to an end, we should cry to the government to protect us from them?

Sorry, folks — I am not stooping myself all the way down to the level of an airline. Unlike airlines — who are laughingly complaining about the unfair competition currently posed by Etihad Airways, Emirates Airline and Qatar Airways because they are supposedly significantly funded by their respective governments — I do not need the assistance of lawmakers.

It is because of those glory days — and with that, an entitlement mentality which was allowed to be pervasive by some people — which have conditioned us to expect the benefits and perks as frequent fliers rather than truly appreciate them when they are bestowed upon us. Despite losing billions of dollars over the years and not being able to afford to do so, the airlines showered its frequent fliers with lavish amenities — and, of course, we always want more…

…but this is now a new age in commercial aviation. Times have changed, whether we like it or not. I was taken to task when I opined about Why This Petition to Reinstate the Benefits of the SkyMiles Program Will Not Work; and I feel similarly about regulating frequent flier loyalty programs. Airlines do not owe us anything — although I also do believe that some of them have gone overboard with the changing of policies and cutting back amenities and benefits. A “sweet spot” — a compromise of sorts which still allows the airline to significantly profit while keeping its frequent fliers from straying by providing enough benefits and amenities to prevent them from straying to patronizing competitors — needs to be reached, in my opinion.

My belief is that the government should enact laws designed to protect its citizens — such as ensure that airlines follow strict standards of safety to mitigate the possibly of danger to passengers — rather than dictate to airlines how to operate their frequent flier loyalty programs. Of course, that is a general opinion to which you and I could certainly conjure plausible exceptions…

…but I believe that our efforts would be better spent maintaining our perspective in life and adjusting our expectations, rather than attempt to force airlines to adjust their frequent flier loyalty programs to our tastes. Our wallets should do the talking or we should do the walking. Choose your battles wisely. Although I believe that things happen in cycles, for now the glory days of the frequent travel loyalty program are behind us.

Does that mean that it is time to give up on frequent travel, miles and points? Although the answer for many of us seems to be more and more that it should be “yes”, I personally do not believe so, as there are still opportunities to be had — even if they may be fewer and farther between. I just do not believe that those opportunities should be available because the federal government of the United States forced airlines to do so…

…besides, why stop there? How about regulating those programs by sandwich shops where if you have 12 holes punched on your card, you get a free sandwich?

In April of last year, the justices of the Supreme Court of the United States ruled unanimously in the case of Northwest, Incorporated versus Ginsberg that the lawsuit initiated by S. Binyomin Ginsberg against Delta Air Lines was barred by the Airline Deregulation Act of 1978. How might the landscape of frequent flier loyalty programs have been affected had he won his case? More importantly, what would the airline industry be like today if it was still regulated by the federal government like it was until the late 1970s — before there was even such a thing as frequent flier loyalty programs?

I wonder what a frequent flier loyalty program would look like if it existed while the airlines were still being regulated by the government — if they would even exist at all.

The Department of Transportation should stay out of this one, in my opinion. The primary initial purpose of a frequent flier loyalty program was to give a perk to someone who demonstrated “loyalty” to the airline — both in dedication and in revenue. To reiterate, how an airline operates its frequent flier loyalty programs does not directly impact its primary purpose, which is to transport passengers as safely as possible.

Of course, with the advent of affiliate credit cards, the frequent flier loyalty program “game” has itself changed significantly.

However, if an airline attempts to purposely defraud its members with the way they operate their frequent flier loyalty programs, is that not already under the jurisdiction of the Bureau of Consumer Protection of the Federal Trade Commission — a federal agency of the United States which has existing laws in place to protect consumers?

Besides, what would a regulated frequent flier loyalty program look like when the economy falters once again, which will eventually happen? Would those regulations designed to protect us actually “bite us in the rear end”?

Speaking of in the end, I believe that the only thing which really speaks volumes is money. If you do not like the frequent flier loyalty program of an airline, then do not patronize it; but realize that — unless ceteris parabus — a frequent flier loyalty program should not be the deciding factor of which airline you should patronize. Other factors — safety being a given, but also cost, convenience, service and schedule as some examples — should come into play first…

…and no amount of government regulations imposed upon frequent flier loyalty programs should change that priority of factors in deciding which airline you choose to patronize.

Perhaps I am wrong. Is it time to regulate frequent flier programs? What are your thoughts?

Photograph ©2015 by Brian Cohen.

3 thoughts on “Is It Time to Regulate Frequent Flier Programs ? No. Here is Why…”

  1. Emily Garrigan says:

    Government regulations are overrated. Your second-last paragraph is an accurate assessment. As a small business owner I do not make business decisions based on Government Regulations!
    As far as free market, something to think about is how closely do the different FF programs follow what the other one does. Do they communicate? If so, how much? Which bears the question, do they combine strategies in a monopolistic way? You know, sort of like the petrol stations do. Or worse.
    Because free markets don’t work in a monopoly. I can attest to that with my lack of broadband internet where I live.

    1. Brian Cohen says:

      I have owned a small business myself for years, Emily Garrigan; and I must agree with you.

      There should be policies and laws implemented by the government offering protection for its citizens, yes; but only to a certain extent. It is really up to all of us to protect ourselves by being alert and using common sense. Some people would argue that too much government regulation is worse than none at all…

  2. john says:

    Times have changed. That is why some limits on airlines ability to take advantage of their customers is necessary. I didn’t read View form the Wing so I don’t know what the discussion is there. The airlines, however, spend vast sums in promoting the benefits of their FF programs to induce people to purchase tickets or use credit cards in part to receive FF benefits the airline promises. The airlines structure the programs so that these benefits can be changed or eliminated without notice. Of course there is no negotiation of these terms with the members. There is something fundamentally unfair and abusive when one party is permitted to get the benefit of a bargain and then deny the other party what was promised. Many of the recent changes in and operation of FF programs I would characterize as abuse of the airlines’ rights and as being deceptive and even fraudulent towards its customers. Often when there are abuses in commercial dealings, remedies will follow either by common law, statute or regulation. For example, a core principle of the employer-employee relationship is that unless there is an express agreement to the contrary, the employer can discharge the employee for any reason or no reason at all. Over the years courts and legislature have created many exceptions to this principle. The same is true of the old maxim caveat emptor. There are things such as implied warranties and duties of fair dealing. There is no reason why airline FF programs should be viewed as leally untouchable especially when government regulation is what permitted the airlines to eliminate customer choice and legitimate competition in the industry. The nature of any legal restrictions on FF programs is up for debate, but my view is something needs to be done.

Leave a Reply

Your email address will not be published. Required fields are marked *