Here in the United States, we’ve seen the government take a closer look at airline loyalty programs in recent times, with Transportation Secretary Pete Buttigieg launching an investigation into airline frequent flyer programs.
The reality is that this is a massive industry that’s largely unregulated. So while I personally probably don’t want the government to regulate these programs too closely, I also think it’s totally fair to do an investigation, given how these programs have historically slipped under the radar.
Along those lines, we’ve just seen some interesting legislation introduced, which I’m pretty skeptical of, frankly.
In this post:
Basics of Dick Durbin’s new “Protect Your Points Act”
Senate Majority Whip Dick Durbin, a Democrat from Illinois, has just introduced the “Protect Your Points Act,” which is legislation that’s described as strengthening consumer protections by requiring greater transparency from airlines’ frequent flyer, points, and loyalty programs.
This bill would give the Department of Transportation (DOT) and Consumer Financial Protection Bureau (CFPB) increased oversight of these programs. Here’s how Senator Durbin describes this legislation:
“I understand the practicality of airline rewards programs—I’m a participant myself. But without adequate oversight, airlines are taking advantage of their customers by offering grandiose rewards, only to change the terms and conditions without consumers’ knowledge. My new legislation, the Protect Your Points Act, would require one thing from the airlines – transparency. To be clear, my bill would not eliminate your airline rewards programs or regulate the value of your points or miles. My bill only requires the airlines to play fair. If these programs are as valuable to consumers as the airlines claim they are, the airlines should have no trouble taking these simple steps to make them more transparent.”
The “Protect Your Points Act” would give the DOT and CFPB the authority to:
- Prohibit airlines from including provisions within their frequent flyer programs’ and airline co-branded credit cards’ terms of service that reserve their right to make changes at any time without notice to consumers, and instead require them to provide at least one year’s notice to consumers of any changes to these terms of service, or any actions that would devalue or jeopardize accrued points
- Require airlines, within 90 days of enactment, to prominently display on every page of their website a disclosure of the financial value of one point/mile, updated in real time, so that consumers may more easily compare the value of points across different airlines
- Require airlines, within one year of enactment, to display airfare and add-on pricing concurrently in dollar value and points/miles value, without consumers needing to alternate between the two, so consumers can easily compare the worth of their points; further, it would allow consumers to pay for airfare and add-on services in any combination of points or dollars
- Ban junk fees related to points/miles by ensuring that consumers are allowed to transfer points to family members or other participants in the same program, and prohibit airlines from charging fees to do so
- Prohibit airlines from limiting the number of points/miles that can be transferred to another traveler’s account and ensure that any points/miles remain of equal value once transferred
- Prohibit accrued points/miles from expiring
It’s worth keeping in mind that Senator Durbin is the same person behind the Credit Card Competition Act, which aims to limit swipe fees among credit card issuers, and could have a big impact on credit card rewards.
My take on this points-focused legislation
As I said at the beginning of this post, I think it’s fair for the government to at least be looking into frequent flyer programs, given what a large industry this is, and how it has largely been unregulated. There’s absolutely nothing wrong with that.
That being said, I have concerns with this legislation. I don’t understand some of the logistics of this, and I think some of this could harm consumers. Let me hit on a few of the points that stand out to me.
For example, the bill calls on airlines to display on every page of their website what the financial value of one point or mile is, so that consumers can easily compare the value of points from different currencies. I’m sorry, but how are airlines supposed to decide on that valuation? Is the idea to force airlines to make their programs revenue based, and for each point to be worth a certain dollar amount toward the cost of a ticket?
The beauty of airline loyalty programs, and the reason so many of us are into them, is because of the ability to get outsized value by studying them. So should each point be worth one cent toward a ticket, meaning that long haul business class awards would cost a million miles?
Then there’s the requirement to allow consumers to transfer points freely between accounts of various people, to have points never expire, and to allow consumers to pay for all tickets through a combination of cash and points.
I mean, all of those things sound nice, but I’m not sure I understand why airlines should be required to do that? Nowadays virtually every industry has a loyalty or points program of some sort, so why shouldn’t they be required to allow free points transfers, have points not expire, and pay for purchases through a combination of points and cash?
What it comes down to for me is that I appreciate that airlines can use loyalty programs to differentiate themselves from the competition. Different programs have different pros and cons, and as consumers, we should decide which is the best fit for us. Much of this would essentially eliminate the ability for programs to differentiate themselves, by creating arbitrary requirements that largely don’t even make sense.
Durbin claims that this bill would just require transparency from airlines, and for them to play fair. But then so many of these individual points go beyond that. For example, the bill claims that points shouldn’t be able to expire. That goes way beyond requiring transparency and playing fair, but it’s forcing a policy on the airlines. Want to require transparency? How about requiring that airlines prominently post their points expiration policy, require them to notify consumers X number of times before their points expire, etc.?
Bottom line
Senator Durbin has introduced the “Protect Your Points Act.” While the claim is that this would only require airlines to be transparent and play fair, it goes way beyond that. It would force airlines to not allow points to expire, force them to offer free points transfers, etc. It would also require airlines to post the value of their points on every webpage, but it’s not even clear what that valuation would be based on.
While I’m all for more transparency and the government taking a look at this industry in general, it seems to me like this legislation was written with a lack of understanding of how these programs work.
What do you make of the “Protect Your Points Act” concept?
only trouble when the government gets into anything...like your points and miles....only======Taxes esp with the Dems and Comma La....stay tuned
This will only lead to taxing you points as income. It might take a year or 2 but they are not interested in helping us, only taxing us
When I "achieved" lifetime platinum status on AA from flying 70-100K miles per year, I thought it was cool. My waistline didn't benefit, but our family took wonderful advantage of my heavy business travel rewards with terrific vacations subsidized by all the miles and hotel points that all that waistline expanding travel provided.
As I'm closing in on lifetime gold on UA now, I simply don't care anymore. If I get there, fine, if not,...
When I "achieved" lifetime platinum status on AA from flying 70-100K miles per year, I thought it was cool. My waistline didn't benefit, but our family took wonderful advantage of my heavy business travel rewards with terrific vacations subsidized by all the miles and hotel points that all that waistline expanding travel provided.
As I'm closing in on lifetime gold on UA now, I simply don't care anymore. If I get there, fine, if not, fine. There's little actual benefit that I can glean from it, just like the zero benefit I get from my AA plat status. Nothing, zero, nada.
Lets talk about reality now. These "loyalty" programs do little to ensure loyalty anymore. My loyalty after 40 years of heavy travel is to the best seat for the lowest price on the most convenient schedule for my needs. My lifetime AA Platinum provides no benefits these days.
Our loyalty is to points accumulation to get something seemingly for nothing, whether it be travel, or a free product from some dopey miles promotion.
These points programs haven't done a single thing to help airlines improve operational performance, make their flight crews happier, make their passengers get anywhere faster or more reliably, make baggage handling more consistent, or make the horrific airport experience less soul crushing.
Whenever I hear about how airlines are "credit card companies that happen to fly airplanes" it makes me sad.
This of course, isn't the first time some idiotic politician has decided to scrutinize these FF programs to "protect" the consumer as a veil to potentially view miles/points as income. This notion gets rattled about every decade or so.
While I love all the miles/points blog sites like OMAAT et al, they've created a version of points/miles "porn" that both seduces noobies who think they've discovered some novel version of cold fusion, and enrages road warriors who suffer through the grind of actually flying regularly with almost zero benefit from these malignant frequent flyer programs.
If the FF programs completely ceased to exist, I'm not sure if most people's lives would change much... mine certainly wouldn't and we fly often on all sorts of airlines. Maybe some of those vapid brain dead instagram travel "influencers" would actually just disappear finally too.
And it is true, that these FF programs are like gambling at this point... they have become completely stochastic systems, ie, random in their performance and behavior.
The "devaluing" is in fact real. My lifetime platinum status on AA isn't status at all anymore. It used to be a wonderful perk, but now, anybody can get a credit card with AA and get most of the same perks.
The airline's middle management, if they could feel shame, should be ashamed they let these programs become so important and integral to the financial health of the airline companies. The airline companies are after all, transportation companies first, but they have unfortunately forgotten that for the most part.
Determining the value of points is easy, and every company with a rewards program has already done it, as they carry the value of points issued on their balance sheet as debt.
So that provision of the bill jsut requires the airline to disclose that valuation. And if they change their program to reduce the size of the liability on their balance sheet, they would now have to be very public about that change.
Agree...
Determining the value of points is easy, and every company with a rewards program has already done it, as they carry the value of points issued on their balance sheet as debt.
So that provision of the bill jsut requires the airline to disclose that valuation. And if they change their program to reduce the size of the liability on their balance sheet, they would now have to be very public about that change.
Agree that the provisions on transfer ability and expiration don't make sense.
This is from the department of beware what you ask for because you might get it!
This is from the department of beware what you ask for because you might get it!
@Ben, why is that a problem or concern when you (and Gary Leff) have claimed for years without evidence that "if a Hyatt standard room is available for booking with cash, then it is also automagically available for booking with points"?! Well, as I repeatedly countered, that claim was always bogus, and now you have just succinctly enunciated why it was bogus. Read on...
You see, for any a hotel program to guarantee the ability to book with points every standard room in a property that is available for booking with cash, it would have to make "each point be worth a certain dollar amount toward the cost of a [room]" so that points and cash are equivalent and, thus, interchangeable. No program would let members book with points every available standard room because business-wise it would be utterly stupid. Currently, only two programs allow it and they are able to do it because they made points and cash equivalent. They are (a) Accor ALL rooms and awards, where 2,000 ALL points are worth exactly 40 euros, and (b) Hilton Honors "premium" rooms and awards where a Hilton point has a fixed cents value at each property. Therefore, ANY Accor room or Hilton "premium" room that is available for booking with cash can always be booked with points because in both cases points and cash are interchangeable. However, especially in the case of Hilton's "premium" awards, the extra flexibility can cost you millions of points at the most coveted properties (e.g., WA Maldives).
So, to answer the question:
The answer is NO and YES:
NO, because programs that have implemented revenue basedschemes left "loopholes" (that they have been closing!) that still make it possible to get outsized redemption values.
YES, premium award rooms/tickets will cost millions of points/miles if each point is made to be worth a certain dollar amount toward the cost of a room/ticket, like HH "premium" awards, and that is also why you, Ben, and Gary Leff must stop gaslighting your readers with the claim that "if a Hyatt standard room is available for booking with cash, then it is also automagically available for booking with points." The claim has always been bogus and will remain bogus until or unless Hyatt institutes a policy that will make each point be worth a fixed dollar amount toward the cost of an award room -- a policy that you have just strongly opposed because awards would cost "a million points", but which you have for years claimed Hyatt had! Now, do you see why the claim was bogus?
If Mayor Pete wants to run the airlines, then re regulate it. If not STFU, it’s not your business. We are here to make money which is hard to do with all the taxes paid by the airlines.
When you identify someone who is actually not even part of this bill or mentioned. Hmmm.
As to making money….you mean with the bailouts the American tax payer shelled out for you?
The goal of a company is not to make money, but to serve the consumer.
To quote Adam Smith from the Wealth of Nations:
“ Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
The goal of any and every business is to serve their customer as best possible,...
The goal of a company is not to make money, but to serve the consumer.
To quote Adam Smith from the Wealth of Nations:
“ Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
The goal of any and every business is to serve their customer as best possible, They need to make a profit to keep providing the best possible product to the consumer.
Profit is a tool for serving the consumer, not the goal.
@Mike,
There is also an economic theory that companies exist only to provide employment. The truth is somewhere in the middle of profit, employment and serving customers. But I like the Bill Hewlett philosophy myself. I'll paraphrase him: Hire great people, keep them happy and they'll build great products that make your customers happy and then you'll make money.
Notice is the big issue and we deserve it, but not just for redemptions, but for elite status. Status at the various airlines runs on a calendar year basis, and you earn it in one year for the next year, and are promised certain benefits for the next year once you reach that status level. HOWEVER, the airline can change those benefits at any time, and often do, so once you meet your end of...
Notice is the big issue and we deserve it, but not just for redemptions, but for elite status. Status at the various airlines runs on a calendar year basis, and you earn it in one year for the next year, and are promised certain benefits for the next year once you reach that status level. HOWEVER, the airline can change those benefits at any time, and often do, so once you meet your end of the agreement and earn those benefits for next year the airline can (and does) say "Sorry, that benefit is going away!" and I just don't understand how that's not a contract violation just because their "rules" say "we can do whatever we want any time we want". Status benefit changes need to happen the next year, it's really as simple as that, and it's so easy to implement because everyone's status switches at the same time, so it's the lowest hanging fruit in the whole frequent flyer mess and would solve a lot of the dissatisfaction that people have with the programs. So many people have stopped chasing status and aren't loyal to a particular airline anymore because it's become too unpredictable, we earned status and then the benefits didn't materialize as promised, and then add into that worsening redemptions and we became free agents.
A lot of this stuff is unnecessary legislation and would be very difficult to enforce except through very expensive class action suits where the lawyers make tons of money and the frequent flyers getting some scraps.
I do think there should be better transparency on notice of devaluation of points (i.e. raising award redemption rates). One can quickly calculate the points devaluation.
For dynamic award pricing, there should be a cap between the...
A lot of this stuff is unnecessary legislation and would be very difficult to enforce except through very expensive class action suits where the lawyers make tons of money and the frequent flyers getting some scraps.
I do think there should be better transparency on notice of devaluation of points (i.e. raising award redemption rates). One can quickly calculate the points devaluation.
For dynamic award pricing, there should be a cap between the cheapest redemption rate and the most expensive redemption rate for a particular route.
As soon as the government (ie, Mayor Pete or Senator Dick) decides the value of your miles / points, then expect to be taxed on the unrealized value of the same. And if you think that such a tax would only be applied to multi-millionaires, all I can say is remember what happened with the AMT. You have been warned...
Govt intervention is sometimes good but often a mess. That said, this industry does need regulation. Points are currency and no 1 entity should be able to take your currency and reduce its value by 30% over night without warning. No hotel should be able to promise you things in writing and then expect you to file a lawsuit to get your free breakfast.
As soon as the government meddles, rewards will be reduced or canceled. Surely, the feds are looking to tax our rewards! Contact your senators to object to this legislation.
Surely if we just say surely then it makes every stupid argument correct even if we're just pulling stuff out of our asses and basing it off of absolutely nothing that's being proposed or recommended. Surely.
The same argument as, "They are coming to take our guns!!"
Pragmatic and practical solutions to a problem is not an invasion. It's evolving as a people. We see an issue, we address it, we look for compromise.
Just as defunding police is as absurd as removing the government from our lives. Neither are perfect but without them we are at the hands of chaos.
None of his proposed 'rules' actually help in protecting customer rights in FFP participation.
The credit card T&C? Something that everyone experiences on any branded credit card and not exclusive to FFP credit cards. This seems the wrong bill to put it on.
The point expiry thing is a bit of an odd one here. Because why be so specific for points and not for coupons or gift cards anywhere else? Did he...
None of his proposed 'rules' actually help in protecting customer rights in FFP participation.
The credit card T&C? Something that everyone experiences on any branded credit card and not exclusive to FFP credit cards. This seems the wrong bill to put it on.
The point expiry thing is a bit of an odd one here. Because why be so specific for points and not for coupons or gift cards anywhere else? Did he let a ton of points expire once and is this his 'revenge'? No points expiring is actually a status perk for some FFPs worldwide. And to be honest, if I invent a system with a fictional currency of 'points', and if no one is being forced to participate, then it should be up to me to set the rules for usage, not the government. The only thing here is that I should be held accountable for being open and honest in communications about any changes and assure that those are done in a correct and timely manner.
The rest just seems like a lame attempt to forcibly peg frequent flyer points to the US dollar. And that can only mean one thing: taxes for FFPs.
Now taxing FFPs has been tried in a few different other countries. I know that Norway actually has a policy that points and status earned on business trips but used in private should be taxed. However, as no frequent flier program actually has its points pegged to the Norwegian kroner (with the exception of CashPoints by Norwegian Air Shuttle- a budget airline mostly serving leisure routes anyway), no one, including the tax authorities, actually seems to know how this law should be put into action. This senator closes that loophole by pegging points to dollars. Because as soon as anything you own of value is being expressed in US$, then the tax man will knock at your door.
Let's just hope that this bill fails. A bit more regulation to assure transparency and consumer rights protection would be great, but this one seems to go in the opposite direction.
The goal is to make earning miles and transferrable points from credit cards useless, since the biggest opposition to limiting swipe fees comes from the miles & points crowd. Remove the incentive to earn miles & points and the big retailers that have bankrolled Durbin for decades get their wish to cap what they pay to accept cards and pocket the difference.
How do you do that? You remove the aspirational high-value redemptions. The premium...
The goal is to make earning miles and transferrable points from credit cards useless, since the biggest opposition to limiting swipe fees comes from the miles & points crowd. Remove the incentive to earn miles & points and the big retailers that have bankrolled Durbin for decades get their wish to cap what they pay to accept cards and pocket the difference.
How do you do that? You remove the aspirational high-value redemptions. The premium cabin redemption values are there primarily because of the time/effort most require to accumulate the miles and (to a lesser extent) mileage expiration. Banning expiration, mandating unrestricted mileage transfers, and making miles+cash universal are designed to undermine that (it's no coincidence that SkyMiles is the major program closest to this and also the one with the least possibility for high-value redemptions).
The requirement that no flight can be offered for miles without being offered for cash may well take care of the remaining partner redemptions (since those typically book as partner marketed). If AA miles become heavily battered, expect JL, CX, and QR to stop making anything available to AA.
It should not take 500000 points to Fly from LAX to DXB! It is a SCAM!
If the program you're in feels like a scam, take your business elsewhere. It's called "competition".
Until they collude which is exactly what Marriott, Hilton and hyatt are doing. They're not hiding the fact that they are all using the same software to adjust prices because it's currently perfectly legal to do so. It's the same software backbone that is currently being used to inflate rents and why that industry is being sued to test the legal waters
Isn't this the same kind of government regulation that eliminated rewards on debit card transactions by limiting processing fees to 25 cents? Obviously it's not going to be possible to fix miles to a specific value without airlines eliminating great-value redemptions. That's one of the good things that has come from variable pricing -- instead of a flat 25k for any domestic ticket like the old days, you can find, say, 8k for a flight...
Isn't this the same kind of government regulation that eliminated rewards on debit card transactions by limiting processing fees to 25 cents? Obviously it's not going to be possible to fix miles to a specific value without airlines eliminating great-value redemptions. That's one of the good things that has come from variable pricing -- instead of a flat 25k for any domestic ticket like the old days, you can find, say, 8k for a flight from LA to DC. While the legislation seems well-intentioned, obviously Durbin is clueless about rewards pricing based on route, capacity, time of year, and about how these programs actually work. He needs to start reading this and other travel websites. What's next, hotels? Anyone who actually cares about the value of their miles should email Durbin and tell him to get a clue.
Considering that Durbin (thanks to the money he gets from WalMart) was the architect of the debit fee cap, he knows full well how the programs work
Related, I've seen the hotel worker unions put up websites going after the hotel programs.
I am sorry but I disagree. Having been in the predecessor of Delta's program, I remember when for 2,500 miles on an off-peak flight was the rule. Now it typically 50,000 miles (or more). I got no warning of the devaluations, they just happened. American routinely expires my points (or sends my a magazine subscription).
I am not sure we need the value on every page, but it should be shown on a page...
I am sorry but I disagree. Having been in the predecessor of Delta's program, I remember when for 2,500 miles on an off-peak flight was the rule. Now it typically 50,000 miles (or more). I got no warning of the devaluations, they just happened. American routinely expires my points (or sends my a magazine subscription).
I am not sure we need the value on every page, but it should be shown on a page that you are looking at a flight on (and it may be different by flight).
Delta's complete rework of their loyalty program outraged long-time fliers and resulted in walking back some of the terms.
I agree with the trust of the bill, maybe you can get it amended to take out the offending pieces, but I can live with the rules here, and would prefer Sen. Durbin's bill over nothing.
The offending pieces are the point of the bill. If it was from anybody but the Senator from Walmart, sure, but...
Also as I understand it, airlines were also reluctant to associate a real $ value to miles outstanding on their accounts, lest it be immediately acknowledge for accounting/financial purposes as a concrete liability they have to report.
The next step will be to impose federal taxes on them, at either the airline level, the consumer level, or both. Beware of senators who bear seemingly reasonable gifts.
Start taxing miles earned on OPM as income, or on flights tax-deducted as a business expense.
Assigning a fixed value to points would really help in achieving that
So you all don’t mind FQTV are a scam? I mean unilaterally changing conditions? Would you like your internet provider to be able to do so?
Bottom line FQTV is a scam, not in favour of the customer but you all happy because you like being airline geeks.
Many Americans are against net neutrality, and at many occasions it nearly got overturned, so...
FFPs are not a scam, they're not a bloody right, they're a bonus. No one's forcing you to join, no one's forcing you to participate. If you get any perks or advantages out of it, great. If not, then what exactly is the damage deliberately done to you personally by those pesky airlines and their loyalty programmes?
This proposed legislation is not needed. The end game of this is to make points taxable to the recipient. 1:) Make the airlines assign a value to the miles; 2:) Send 1099s to mileage recipients at tax time. No thank you Mr Durbin.
While most of what Durbin proposes is counterproductive (which is typical for a lot of his legislation), he is getting to what are core problems and misrepresentation with airline loyalty programs.
Airline loyalty programs would be vastly improved for the typical consumer if consumers
1) Knew clearly how many points they need to get to a certain destination
2) Knew how to accrue those points (certain amount of flights taken, credit card spend,...
While most of what Durbin proposes is counterproductive (which is typical for a lot of his legislation), he is getting to what are core problems and misrepresentation with airline loyalty programs.
Airline loyalty programs would be vastly improved for the typical consumer if consumers
1) Knew clearly how many points they need to get to a certain destination
2) Knew how to accrue those points (certain amount of flights taken, credit card spend, etc)
3) Had consistent *availability* to get to a certain destination via simple routings
4) Had certainty their miles would not expire
Basically, none of the programs out there offer this to the typical consumer. A family just wants be able to fly from DFW to CDG or something, directly, in June, on the metal of the program with which they are redeeming, with reliable availability. Airline loyalty programs tend to imply they can offer that, but almost none of them do.
I hear you but isn't the onus of financial literacy on the consumer? I wasn't born into some secret society of miles-savvy frequent travelers—quite the opposite. In fact, I suck at math. But I read the Ts & Cs of every card I open and I made sure when I was starting out in life to educate myself on finance, so I'd avoid the same mistakes my parents made.
I can't think of a...
I hear you but isn't the onus of financial literacy on the consumer? I wasn't born into some secret society of miles-savvy frequent travelers—quite the opposite. In fact, I suck at math. But I read the Ts & Cs of every card I open and I made sure when I was starting out in life to educate myself on finance, so I'd avoid the same mistakes my parents made.
I can't think of a single industry that doesn't put the good stuff up front and bury the details in the fine print.
More govt intervention in my life. Wow! So appealing.
When I think of govts, I think of excellence! lol
Agree with several people here: assigning value to miles is the straight shot to being taxed on all those CC welcome offers
The idea is to make points taxable.
He's from the government, and he's here to help LOL. Some will think it is amazing... until "1099-P for Points" arrives.
So obvious.
"For example, the bill calls on airlines to display on every page of their website what the financial value of one point or mile is, so that consumers can easily compare the value of points from different currencies. I’m sorry, but how are airlines supposed...
The idea is to make points taxable.
He's from the government, and he's here to help LOL. Some will think it is amazing... until "1099-P for Points" arrives.
So obvious.
"For example, the bill calls on airlines to display on every page of their website what the financial value of one point or mile is, so that consumers can easily compare the value of points from different currencies. I’m sorry, but how are airlines supposed to decide on that valuation? Is the idea to force airlines to make their programs revenue based, and for each point to be worth a certain dollar amount toward the cost of a ticket?"
Points earned on flights for work should definitely be taxed.
That is exactly the point of this.
Make every program like DL's.
Durban is too conservative. Harris- will be better. She wants to punish the rich and believes in social justice. Taxing miles and taking away some miles to those with balances over 100,000 (just like she wants unrealized capital gains taxes ob those having more than̈ 100M in wealth) is good. The poor needs some of those miles.
Woo hoo! Go EQUITY! Those rich b**tards who worked for the money to sit in the big fancy chairs on the airplane, with their flashy credit)charge cards stamped out of titanium that never carry a rolling balance, they need to be taxed into oblivion! Cletus and Brandine desperately need those miles to fix the door on their outhouse! Vote Harris! Whooooooooo!!
There should be a clear value (e.g., 1 point = $ 0.01X) and keep it consistent, like SWA does (did?). Devaluations are evil.
Pegging points to a fixed value would be a massive devaluation. At least for some of us.
Fixed value miles makes them worthless unless they can beat 2cpp, due to cash back cards.
I will be happy if we can start getting taxed on all points earned. Oh wait, now you see the perils of “regulation”.
The problem with the OP argument is that it is being viewed from a one dimensional aspect. His.
Credit Card point schemes for airlines are, at best, a Gachapon game that verges on the definition of gambling. Serious regulation needs to be implemented as not every consumer is the OP, or the many who read this blog. In fact, most are not. It's gotten truly out of hand as to devaluations and availability. Airlines...
The problem with the OP argument is that it is being viewed from a one dimensional aspect. His.
Credit Card point schemes for airlines are, at best, a Gachapon game that verges on the definition of gambling. Serious regulation needs to be implemented as not every consumer is the OP, or the many who read this blog. In fact, most are not. It's gotten truly out of hand as to devaluations and availability. Airlines managed to turn themselves into credit card companies on the backs of grand promises to consumers. As they lured them to "the game" and hooked tens of millions they then quietly "boiled the frog" to offer less and less in return.
Further, for those more savvy to the game (the 2 percenters), we have been forced to utilize last minute bookings, hidden cities, positioning flights, surcharges, and a growing array of adapaptations to promises once made and then quietly broken. While we may get it, and find ways to adapt, it is not even close to what it once was when we entered these programs.. For the average consumer it is nothing other than a Casino approach towards flashing lights and illusions of wealth to get you to keep pulling that lever. You do it without even knowing how bad the odds are stacked against you. You are now inside the compulsion loop.
Listen to the scripted credit card push on flights these days. Listen carefully to the wording. "In just a few months you can earn a free ticket to your dream paradise: the Caribbean, Europe, or...Hawaii!." This is no different than displaying a new Bentley on the Casino floor and whispering, 'Keep Playing and This Could be Yours!" Consumers are also lured into the idea of banking points with illusions of taking their entire family to Hawaii in First class after a few years of credit card spends. They don't know about devaluations or sudden changes. They don't adhere to earn and burn. They are the majority so airlines can get away with it. Suddenly Joe and Martha think they have enough for the whole family only to realize in that time of saving the airlines now added on another few years for him to need to "save." The compulsion loop is in full array.
The OP in contrast is like a professional gamer in Casinos that know how to effectively play to slightly alter the odds. The casinos do not like him and he is not the 98% of players they are after - that would be Joe and Martha.
Personally, as a butt in seat flyer who balances actual paid flights every week with credit card spend, I can't stand the world the airlines created. They have concocted a scheme for consumers all over this country and turned what was once a nice system that rewarded actual flyers, had availability, returned loyalty, was transparent in redemptions, into a game of cat and mouse and Casino style illusions. Now, No one wins.
And really, the OP? His redemptions take him to random places that availability opens up on rare occasions for review trips. Notice that he is not attempting TATL right now this month. There is virtually nothing. Even the day before. So off to South America alone where a few seats opened up to do reviews. Hardy a person to be lecturing on what is best for consumers and what the Govt. should or should not do. Hardly the person the Govt. is trying to protect.
@ Antwerp -- You make a lot of valid points, and I agree with many of them (though I will say that I traveled to South America not because it's the only place there was availability, but because there were products I wanted to review). ;-)
But let's unpack what you're saying for a moment. Let's use Delta SkyMiles as an example, since the carrier earns the most revenue from its co-brand credit card agreement,...
@ Antwerp -- You make a lot of valid points, and I agree with many of them (though I will say that I traveled to South America not because it's the only place there was availability, but because there were products I wanted to review). ;-)
But let's unpack what you're saying for a moment. Let's use Delta SkyMiles as an example, since the carrier earns the most revenue from its co-brand credit card agreement, and also because Delta SkyMiles probably offers the least ability to get outsized value for rewards.
I don't understand why consumers spend so much on Delta credit cards. It's mind boggling, since a vast majority of people would be better off with a 2% cash back card.
That being said, can Delta really be blamed for their spending patterns? I'm looking at all the marketing materials from Delta, Amex, etc., and I don't see anything that's misleading. They're not saying "oh, your credit card spending in a year will get you a FREE Delta One ticket." They actually make fairly few claims. Yet despite that, people keep spending on Delta credit cards. Am I missing something?
Well Ben, then you and your fellow Card Floggers should be telling "the average consumer" about how good these 2% cash back cards are for them. Instead you all dangle Amex lounges and Chase Protection front and centre on every page on your sites & wax lyrical about how good the perks are. You shouldn't be surprised that consumers are taking on these shiny offers you peddle so hard.
@ UncleRonnie -- I *constantly* talk about how the average consumer would be best off with a 2% cash back card. But this site is largely for those who want to put in the effort to maximize their rewards, and get outsized value. If you're getting cards with bonus categories, you can get a return of much better than 2%.
My point is that the average consumer just using an airline co-branded credit card for all their purchases isn't achieving a return of over 2%.
@UncleRonnie I'm pretty sure that the Average Joe who's looking for financial advise won't be hanging around on a website that's dedicated to aviation and frequent flyer programmes. I don't think it's fair to accuse Ben of not promoting something that's outside of the scope of his website. I mean: you won't go to a fan site about the Twilight Saga to get all sort of information about how to better utilize frequent flyer programmes...
@UncleRonnie I'm pretty sure that the Average Joe who's looking for financial advise won't be hanging around on a website that's dedicated to aviation and frequent flyer programmes. I don't think it's fair to accuse Ben of not promoting something that's outside of the scope of his website. I mean: you won't go to a fan site about the Twilight Saga to get all sort of information about how to better utilize frequent flyer programmes either, would you?
Besides that, I've never seen Ben actually talking down on those cards, to be honest...
What a stupid take comparing it as gambling.
Well if you're smart enough to get any education.
You would realize your comparison could be said that education is gambling.
Those who are smart would get A.
The savvy would get tutors.
The promise of wealth and employment lures you to get a student loan. All the pitch, even from the government itself to be in education system gambling debt.
What else you want...
What a stupid take comparing it as gambling.
Well if you're smart enough to get any education.
You would realize your comparison could be said that education is gambling.
Those who are smart would get A.
The savvy would get tutors.
The promise of wealth and employment lures you to get a student loan. All the pitch, even from the government itself to be in education system gambling debt.
What else you want to compare with casino?
Your government is a casino?
All the politician promises?
Donations volunteers?
Did you hit Blackjack with Biden or Trump?
What about health care?
That's a casino too right?
I am talking specifically about the FA rants on the flights. The Schtick we are subjected to. Listen this week if you are flying. Listen carefully.
Sure, the terms are fairly transparent. But what is on the cover of all these applications? Pristine beaches and glittery European cities. People don't read. Period. Just like Casinos rely on flashing lights, Bentleys on display, and the energy of illusion. They know the odds but the compulsion...
I am talking specifically about the FA rants on the flights. The Schtick we are subjected to. Listen this week if you are flying. Listen carefully.
Sure, the terms are fairly transparent. But what is on the cover of all these applications? Pristine beaches and glittery European cities. People don't read. Period. Just like Casinos rely on flashing lights, Bentleys on display, and the energy of illusion. They know the odds but the compulsion loop takes over and they can't help themselves. It's an addiction.
I highly suggest you study the gaming world related to Gachapon and Loot Boxes. And the controversy world wide they have generated. In fact, resulting in outright bans or regulations in many countries. The stimulant nature of these games is exactly how the airline industry has modeled the new world of FF programs, not just with redemptions but loyalty perks as well. They are all meant to stimulate dopamine and create an addictive pattern. It works.
Take this from someone who made some very good money back in the day on developing online loot boxes in the gaming world. These programs are a mirror to everything we did to get people hooked.
I won't deny that for "the average consumer", there is a gambling element to accumulating points (vs a 2% cash back card). But I do deny that the only way to use points is in ways that the consumer doesn't really want to use them (e.g., last minute flights to places they don't want to go). Every couple of years, I use points to take my family of 2 or 3 (depending on if the...
I won't deny that for "the average consumer", there is a gambling element to accumulating points (vs a 2% cash back card). But I do deny that the only way to use points is in ways that the consumer doesn't really want to use them (e.g., last minute flights to places they don't want to go). Every couple of years, I use points to take my family of 2 or 3 (depending on if the kid comes) on a business-class overseas trip to somewhere we've decided we want to visit. We need to plan well in advance and sometimes take routings than are longer than direct nonstops. However, we go where we want, generally when we want, and if we fly a few hours extra, who cares, it's business class and we all enjoy time on the plane.
The minute this sort of travel becomes impossible, I'm switching to 2% back cards. In the meantime, like anything else, consumers need to do their research and figure out what card is best for them. Just like Ben, I advise friends who ask me how I get all these great vacations for "free" that (a) they aren't free because there's an opportunity cost; (b) it takes a lot of work to figure out how to get the best value; (c) there's an element of luck, and (d) if you aren't comfortable with any one of the above, then you should get a cash-back card instead and put all of your spending on it. The same advice is available all over the internet in countless posts and forums about miles and points.
I really don't think anyone is being taken advantage of.
It’s an interesting take and I get it. With Loot Boxes and Gachapon people would argue the same a few years back before regulations….”but I won something so there is value.” That still did not stop experts on addictive patterns to see through the testimonials and uncover the truth. Most had no idea what they were spending to be rewarded and the harsh reality of that truth. They didn’t know the odds. Or what it...
It’s an interesting take and I get it. With Loot Boxes and Gachapon people would argue the same a few years back before regulations….”but I won something so there is value.” That still did not stop experts on addictive patterns to see through the testimonials and uncover the truth. Most had no idea what they were spending to be rewarded and the harsh reality of that truth. They didn’t know the odds. Or what it was costing them in the end. The only thing they remembered was that they won something really cool at one point: The Dopamine Trigger.
Yes, you find your tickets here and there as you know the game. Either plan way ahead and jump on seats when the calendar opens OR wait last minute. However, the vast majority (and the airlines know it) are in-between and don’t know this. That’s where they dangle the carrot higher and tease compulsion.
@Antwerp: Sorry, this is nothing like traditional gambling addiction. You are saying that it's the *promise* of amazing awards that entice people to join these programs and then get frustrated that they can't achieve the promised awards. But the way gambling works is that it's the occasional large payout that reinforces game playing. Simply promising a payout is not enough; the payout has to happen sufficiently frequently for the gambler to experience it and develop...
@Antwerp: Sorry, this is nothing like traditional gambling addiction. You are saying that it's the *promise* of amazing awards that entice people to join these programs and then get frustrated that they can't achieve the promised awards. But the way gambling works is that it's the occasional large payout that reinforces game playing. Simply promising a payout is not enough; the payout has to happen sufficiently frequently for the gambler to experience it and develop the addiction. And that is bad for them because in the long run, they lose because the sum of the large payouts they get is smaller than the sum of the many small payments they have to make in order to get the occasional large reward.
But marketing is just marketing. It's not enough to cause you to get addicted. For that, you need to occasionally experience the large payout. With points programs, the consumer has to be aware, just like they have to be aware with any transaction. There is an element of probability in any transaction, but that is not the same as gambling. For example, I recently bought a new TV. There was a vast variety of choices, and even after narrowing it down to 4 or 5, it was a very difficult decision. In the end, there's a probabilistic element to my choice because I have no idea when the TV will die, whether it will be easy or difficult to get the manufacturer to honor its warranty, whether a feature I think I'll like will turn out to annoy me, etc. Even with research, there are just so many variables it's impossible to be sure.
I don't see FF programs as much different from this sort of traditional consumer transaction, like buying a TV. The existence of a non-zero probability of negative outcomes doesn't make the FF "game" gambling. It makes it pretty ordinary.
@snic. While I understand your passionate answer it misses the mark in that I was comparing it to Gachapon and Loot Boxes which, trust me, are more closely related. And an industry I was involved in around 2013-2018. All three - FF programs, Gachapon, and Loot Boxes have "similarities" to gambling in their use of dopamine generation with "prizes" that are achieved through "playing." That was my point. No, it is not gambling, and many...
@snic. While I understand your passionate answer it misses the mark in that I was comparing it to Gachapon and Loot Boxes which, trust me, are more closely related. And an industry I was involved in around 2013-2018. All three - FF programs, Gachapon, and Loot Boxes have "similarities" to gambling in their use of dopamine generation with "prizes" that are achieved through "playing." That was my point. No, it is not gambling, and many people have argued that Loot Boxes and Gachapon in the gaming world are not gambling. But they use exactly the same approach as gambling in developing a conditioned response. And why they ended up being heavily regulated in many markets.
This is not buying a TV, correct. It is however alluding to a prize, asking you to play, providing other prizes as consolations, and you never know or understand when, if, how, or why you might get the dangled carrot.
As I mentioned before, being in that world and benefitting greatly for five years from it, I can assure you that the strategy from a marketing perspective is exactly what the airlines and CC companies are doing now. It's masterful and it is addicting.
Why do you hear everyone refer to these programs today as a "game." Or listen to everyone talk about being on the "hamster wheel of loyalty." Yes, we heard everyone complain about Loot Boxes in gaming. But guess what, they kept playing into it for the hope of that dopamine kicking reward. Because? They were addicted.
I respect your argument and agree on certain levels. But I suggest researching "loot boxes" as there is a great deal written about it - and would love to hear your take after.
@Snic. Let me add something to better explain Loot Boxes and the principles of compulsion loop we developed.
The argument in defending Loot Boxes to regulators (and there was a defense as hundreds of millions of dollars were being made regularly on gaming platforms) is that it was not gambling because you win something every time. This is correct and did keep it from being labeled as gambling in most jurisdictions. However, this in...
@Snic. Let me add something to better explain Loot Boxes and the principles of compulsion loop we developed.
The argument in defending Loot Boxes to regulators (and there was a defense as hundreds of millions of dollars were being made regularly on gaming platforms) is that it was not gambling because you win something every time. This is correct and did keep it from being labeled as gambling in most jurisdictions. However, this in fact makes it somehow even more dangerous. Because you do get something. Which draws people in even more. The dangled carrot is what's called, "The Rare." This is what everyone is hoping for and playing for.
Airlines use the same principle. They dangle caviar and champagne in premium cabins on flights to Paris and Tokyo as "The Rare" and the reason why you play. But what you are mostly "winning" are "The Commons" which are the equivalent to coach seats to Peoria. Sure, you and I know how to game the airlines a bit....guess what, there were loot box addicts that also developed "systems" that slightly changed the odds a bit.
Airlines now do this with loyalty as well in dangling the carrot of upgrades and special perks for regular flyers. Heck, with AA you don't even have to fly. Years ago that payoff was there. Now if you can score an upgrade as a 1K it's a dopamine kicking and addicting pattern. They don't need to do it all the time, just 10% and you are hooked into the hamster wheel in believing that it's going to be like 1998 again with upgrades.
I know the game. It's deception and done specifically to target people's compulsion loop. I made a lot of money on it over a few years. It's not marketing. It's predatory.
This is a really good study that can help people here understand the predatory approach behind loot boxes - using the same principles as FF programs. https://medium.com/@OVI_E-SPORTS/the-psychology-of-loot-boxes-reward-chance-and-controversy-6b975594d1f8. It is a very ABC and a short explanation...easy for the average reader to see the mechanics of the system.
As these studies came out I realized the impact it was having, especially on youth (though adults were just as addicted). This is why I closed my...
This is a really good study that can help people here understand the predatory approach behind loot boxes - using the same principles as FF programs. https://medium.com/@OVI_E-SPORTS/the-psychology-of-loot-boxes-reward-chance-and-controversy-6b975594d1f8. It is a very ABC and a short explanation...easy for the average reader to see the mechanics of the system.
As these studies came out I realized the impact it was having, especially on youth (though adults were just as addicted). This is why I closed my chop shop of developers in Brazil after just five years. I could not consciously do this anymore. Will the airlines do the same? Doubtful.
@Antwerp I never heard of people comparing collecting points to gambling but your argument does make sense. I do put certain spend on cc even though there are fees associated with them thinking in the future when I redeem, I can redeem more value than what the fees were. I would consider myself a medium level redemptionist, ie. I’m not one of those in secret clubs on Reddit or flyertalk but most of the time...
@Antwerp I never heard of people comparing collecting points to gambling but your argument does make sense. I do put certain spend on cc even though there are fees associated with them thinking in the future when I redeem, I can redeem more value than what the fees were. I would consider myself a medium level redemptionist, ie. I’m not one of those in secret clubs on Reddit or flyertalk but most of the time I can get better rate than two cents a point.
Because most US airlines redemption rates are dynamic these days, a better proposal would be every US airlines are required to go back to the last time they had a redemption chart and never allow to revise that chart. This way general public has the time to accumulate points over several years without goal post moving.
Feels like he knows his credit card bill will have opposition from the miles and points gang, so this is an attempt to butter them up and weaken resistance. Govt know that frequent flier programs are very popular with the general public
"I’m sorry, but how are airlines supposed to decide on that valuation?"
Every airline does have to decide on this valuation already, as they need to book a liability in their financial statements for the value of all unexpired points on issue. All this does is make that value public.
@ RichM -- Right, all airlines have their internal valuation, but that doesn't actually tell consumers what their miles would be worth for redemptions. Keep in mind that the bill states that this is intended so that "consumers may more easily compare the value of points across different airlines."
My point is, the internal valuation of a program's currency often has little correlation to the value consumers can get for those miles, and therefore isn't...
@ RichM -- Right, all airlines have their internal valuation, but that doesn't actually tell consumers what their miles would be worth for redemptions. Keep in mind that the bill states that this is intended so that "consumers may more easily compare the value of points across different airlines."
My point is, the internal valuation of a program's currency often has little correlation to the value consumers can get for those miles, and therefore isn't useful with helping consumers compare value.
For example, Bask Bank values AAdvantage miles at 0.42 cents each for tax purposes, but I can get way more value out of them than that, and value the currency at more than SkyMiles or MileagePlus.
So I fail to see any consumer benefit here?
@Ben - a Pro traveller who can drop everything to take an AA award flight at only 47 hours notice is bound to get more value out of your AA points than salaried workers with kids & jobs that only allow us to book flights in advance and at higher redemption rates. Your personal redemption value is skewed.
@ UncleRonnie -- Of course, all of that is fair. But still, how are you suggesting that miles be valued? For example, I booked five business class seats from MIA to MAD for this past summer in American business class for 62K miles per person. I booked a few months out. That represented a great value. Other people redeem for less than a penny of value per point.
What should the valuation be based on?
@Ben - the value of the points should be set by the airline/hotel and published. If you (or anyone else) gets better value out of it, then well done you. Of course as others have said below....once the value is transparent and published, the Taxman will come collecting.
Maybe the future of redemptions is getting more out of a mile than you have to pay in tax and getting our jollies that away?
@B It will force airlines to rid itself of dynamic pricing. Simple. You will then say that this will result in 400K mile J redemptions to Europe like Delta. I say they are bluffing. It will fall because one of them will relent when consumers can properly see what they are getting and stop using these cards. Airlines will be forced to adjust downwards the redemptions or do away with credit card earning all together...which...
@B It will force airlines to rid itself of dynamic pricing. Simple. You will then say that this will result in 400K mile J redemptions to Europe like Delta. I say they are bluffing. It will fall because one of them will relent when consumers can properly see what they are getting and stop using these cards. Airlines will be forced to adjust downwards the redemptions or do away with credit card earning all together...which we know will never happen. It will take a year or so - but when their premium cabins are forming cobwebs and consumers are moving towards cash back and other cards one of them will back down and the rest will follow.
@ Antwerp -- To be clear, even airlines with award charts have dynamic award pricing, since they offer rule buster awards. So are you suggesting airlines will go back to the time where there's saver award availability, and if it's not available, there will be no seats available? Or what would non-dynamic pricing look like?
It would look like what FF programs did before it all changed. How many of us grew to love them. There was a chart. The chart was clear. The seats were available or they were not. Period. It worked just fine for many years my friend, long before when you were probably even imagining a life of flying.
The days when we all knew what we were getting or in turn what we were...
It would look like what FF programs did before it all changed. How many of us grew to love them. There was a chart. The chart was clear. The seats were available or they were not. Period. It worked just fine for many years my friend, long before when you were probably even imagining a life of flying.
The days when we all knew what we were getting or in turn what we were not. Did they release seats a few days out? Sure. But they didn't try to lure you in at higher rates during the in-between of opening the calendar and the few days before. It was fair, transparent, and there was a better level of understanding. You could even fly the Concorde on US Airways redemptions with published charts, :) Those were the days. Long before airlines discovered the dopamine releasing compulsion loop we have now.
That would be a reasonable thought, if the proposal didn't effectively require last-seat availability: as such it effectively outlaws having a fixed award chart. You also miss that the point of this is to get people to stop trying to accumulate miles & points through credit cards, because that's what Durbin's paymasters in Bentonville want.
Publicly reporting the liability companies assign to their points doesn't mean that that value is exactly what every conaumer will get every time.
But it does mean that if a company changes their program to devalue their points, there will be an immediate disclosure that your program has been "enhanced".
So if a company, for example, drops their award charts for dynamic pricing because it increases the points per redemption and reduces the value per...
Publicly reporting the liability companies assign to their points doesn't mean that that value is exactly what every conaumer will get every time.
But it does mean that if a company changes their program to devalue their points, there will be an immediate disclosure that your program has been "enhanced".
So if a company, for example, drops their award charts for dynamic pricing because it increases the points per redemption and reduces the value per point, now they have to tell us how much they're trying to reduce point value, and we can compare that to the value competitors place on their points.
Leave the points alone, but regulate the US credit card industry. Miles Moguls with 30+ credit cards is insane and a 5/24 rule should be applied across all providers and customers. #jealous_euro
Suggestion: YQ is the perfect example of a "junk fee" that needs to be eliminated. I'm looking at you, partners American Airlines and British Airways, on every single award redemption that AA offers to the UK and Europe. Charge me bazillions of points AND $1000 in YQ to fly to London? Fork You...and the horse you rode in on.
I like MOST of the proposed measures, all about transparency and not screwing unsuspecting consumers. I...
Suggestion: YQ is the perfect example of a "junk fee" that needs to be eliminated. I'm looking at you, partners American Airlines and British Airways, on every single award redemption that AA offers to the UK and Europe. Charge me bazillions of points AND $1000 in YQ to fly to London? Fork You...and the horse you rode in on.
I like MOST of the proposed measures, all about transparency and not screwing unsuspecting consumers. I agree that establishing the valuation of points is "highly problematic" (a euphemism for "impossible"). How about simply displaying a MINIMUM value for that, and allow airlines to enable consumers to redeem for greater value returns but not for less than the minimum shown, which is often how things actually work when they're working well (hah hah, sure, yeah I know...).
I don’t know what type of business you all are in. But in my business often something shady will be proposed and someone in the meeting will say, “Yeh, and we’ll all end up in jail.” Airline executives might think, “I can totally make my bonus is we screw over the customers.” And the staff needs to be able to say, “If you try that we’ll all end up in jail.”
There needs to be some fear to counteract the greed - as in all financial transactions.
@ John -- I hear you, but I'm not sure which part of this bill would help with what you're suggesting? Like, having airlines make up a number as to how much their miles are worth and posting it on every page of their website won't do anything to stop greed.
From outside the borders of the United States of America (yes there are such places) this is yet another disgusting example of posturing American lawmakers oblivious to the extraterritorial reach of their flailing. As a Canadian Prime Minister once said to the Washington Press corp, living next to the US is like sleeping with an elephant. Please let you guys be right, let this be election-year posturing, not a serious proposal with wings. If this...
From outside the borders of the United States of America (yes there are such places) this is yet another disgusting example of posturing American lawmakers oblivious to the extraterritorial reach of their flailing. As a Canadian Prime Minister once said to the Washington Press corp, living next to the US is like sleeping with an elephant. Please let you guys be right, let this be election-year posturing, not a serious proposal with wings. If this passed, even in a very watered down form, it would be bad. As in, bad.
If anyone puts a dollar value on an airline point - as everyone does! - there needs to be *some* regulation. Everyone running around worried about points being taxed should write to Sen. Durbin and ask him if that's his intention instead of assuming this is some Deep State conspiracy to tax frequent flyers...
Dick Durbin has proposed multiple "pro-consumer" laws that have been shot down so I wouldn't get too worried just yet.
There is also a good chance that Airlines for America would push this through the legal system all the way to the Supreme Court on the basis that the government is trying to regulate airlines which they are prohibited from doing under the Airline Deregulation Act of 1978.
We all get that no...
Dick Durbin has proposed multiple "pro-consumer" laws that have been shot down so I wouldn't get too worried just yet.
There is also a good chance that Airlines for America would push this through the legal system all the way to the Supreme Court on the basis that the government is trying to regulate airlines which they are prohibited from doing under the Airline Deregulation Act of 1978.
We all get that no one wants to feel like they are being screwed over with points and miles but government interference will only ensure that the programs will become far worse for consumers.
Jumping to Durbin wanting to "regulate airlines" here feels like a big leap...he's trying to build some regulation around loyalty programs in the industry - that's different. Federal laws can still regulate aspects of airline behavior and actions: American airlines cannot several alcohol to people under the age of 18 if they want to; they cannot charge whatever they want to in taxes on tickets; they cannot take off and land wherever they want to...
Jumping to Durbin wanting to "regulate airlines" here feels like a big leap...he's trying to build some regulation around loyalty programs in the industry - that's different. Federal laws can still regulate aspects of airline behavior and actions: American airlines cannot several alcohol to people under the age of 18 if they want to; they cannot charge whatever they want to in taxes on tickets; they cannot take off and land wherever they want to whenever they want to. The ADA of 1978 made it so that STATES cannot regulate the service/pricing/routing of an airline...it doesn't say anything about federal law.
economic regulation of the US airline industry ended with the Airline Deregulation Act of 1978
What he proposes is economic, not safety, regulation
There is only one good element of the proposed law, which is prohibiting negative changes to point values without at least 1 year's notice. I think that is fair: airlines market points as the way to "free" flights, so it's bait-and-switch if you try to accumulate enough points only to have the airline increase the price with no notice. Of course, that leaves open the question of whether airlines could continue "dynamic" award pricing in...
There is only one good element of the proposed law, which is prohibiting negative changes to point values without at least 1 year's notice. I think that is fair: airlines market points as the way to "free" flights, so it's bait-and-switch if you try to accumulate enough points only to have the airline increase the price with no notice. Of course, that leaves open the question of whether airlines could continue "dynamic" award pricing in which award ticket costs fluctuate with the market price and/or other factors.
Everything else in the bill is just silly and makes no sense. And as someone else posted, why focus just on airlines - why not hotels, credit cards, etc?
except that is probably not allowable.
Airlines are prohibited from providing advance notice of price changes and yet the government is asking them to do that for loyalty program redemptions.
Further, many airlines use dynamic pricing which means loyalty program awards are tied to the price for a revenue ticket.
Thus, it is impossible to regulate loyalty program pricing unless you also regulate revenue fare pricing.
Governments always have the best intentions but rarely understand...
except that is probably not allowable.
Airlines are prohibited from providing advance notice of price changes and yet the government is asking them to do that for loyalty program redemptions.
Further, many airlines use dynamic pricing which means loyalty program awards are tied to the price for a revenue ticket.
Thus, it is impossible to regulate loyalty program pricing unless you also regulate revenue fare pricing.
Governments always have the best intentions but rarely understand the industries they are supposed to regulate enough to get their regulations implemented. Add in that there are just as many, if not more, senators and reps that are under the thumb of airlines and credit card companies and Durbin will strike out again.
Points value would be computed in aggregate across all routes and the whole schedule, so no specific ticket price information would be controlled.
But yes, if an airline decided to raise ticket prices 10% across the board they'd have to keep the mileage cost for those flights the same for the duration of the notification period.
Just remember, little Dick Durban has made a career out of successfully taking bills with compelling and agreeable names and making them into laws that achieve the opposite of what they were supposed to do.
Do not trust anything that worm is trying to promote.
I'm from the government, here to help you.
I'm pretty sure that everyone who actually reads this bill would instantly understand that he's just preparing to heavily control ffps and to impose taxes on all its users. That's not exactly rocket science.
I hope this bill doesn't pass. I'd be cheering for any bill that actually protects consumer rights, but it's like tiny Dick isn't even trying to hide that he's doing the complete opposite.
It's hard to tax something that doesn't have value. By forcing the airlines to assign a value to a point/mile it can easily be taxed. Durbin just wants his fair share of your points.
Also his idea of unlimited fee free transfer and pooling of points will only lead to wide(er)spread fraud. Selling of points and miles is already a huge problem. His bill would make it much easier for the scammers.
Mike is absolutely correct. I am a former Capitol Hill staffer. This is the ultimate intent of the effort.
Publishing the value of each point might be a reliable way to determine the taxable benefit due on points accumulated from non personally paid travel. Business travellers beware!
Someone has to pay for all those American weapons in Ukraine and Israel.
@Eskimo- correct. Or we can just pretend like America can successfully be isolationist. That way we can pay even more when we get dragged into an even greater war. If you need references, just read history books.
I do think that something like making airlines publish their historical stats about points devaluations would help people understand how much you should / should not trust an airline.
If I saw that every year, points were being devalued 15% (or whatever it is), and could compare them across airlines, that would force them to think harder about doing it.
@ Eric Schmidt -- In theory I think disclosure like that would be super valuable. The issue is that I'm not sure there are numbers that can easily be disclosed? We don't live in an era where every airline publishes an award chart, and airlines can easily point out that award costs have gone up by X percent.
Instead, virtually all US programs have some level of dynamic award pricing, and many are fully dynamic....
@ Eric Schmidt -- In theory I think disclosure like that would be super valuable. The issue is that I'm not sure there are numbers that can easily be disclosed? We don't live in an era where every airline publishes an award chart, and airlines can easily point out that award costs have gone up by X percent.
Instead, virtually all US programs have some level of dynamic award pricing, and many are fully dynamic. While I'm all for holding airlines accountable, I just question if data on devaluations could be published in a way that's actually useful to consumers.
Maybe average/median miles paid per ticket for domestic, international, etc. award redemptions each quarter?
I suppose the airlines went to dynamic pricing exactly so that (or as a big side benefit) it's now very difficult to say how much devaluation has happened. But it definitely has. Or at least, people have enough miles amassed that they are outbidding each other for the same supply of award seats, and effectively raising the prices.
Most time govt make everything worse. GL everybody
De Nang Dick needs to pipe down before he erodes any good will left for arbitrage with partner programs. Do us all a favor and take a seat.
To your point, curious that it calls out airline programs specifically, and ignores hotels, rental cars, cafes, etc. which are essentially the same (from a consumer's standpoint).
I wouldn't trust this from either political party. More government = bad government.
How long before a very clear valuation of an airline point becomes a very clear tax on an airline point?
Indeed
Let the market decide. We know where there's value and not, and move our dollars accordingly.
Nothing good can possibly come from this.
For anyone.
Seriously. Thankfully I do not think it will pass, and I don't think it's intended to