Seat 2B By Joe Brancatelli
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Making Airlines Play Fair With Frequency Plans
February 26, 2015 -- Mother Nature's war on business travelers this month has had it all: thousands of delayed or cancelled flights, snowed-in airports, icy and impassable roads and the odd baggage snafu.

One thing noticeably absent this frigid February? Horrific tales of passengers held hostage for hours on aircraft without food, water or functioning lavatories.

Tarmac holds industry jargon for keeping fliers trapped on aircraft stuck on runways or aprons for three hours or more have mostly disappeared thanks to regulations imposed in 2010 by the Department of Transportation. And in a victory lap earlier this month, the DOT claimed airlines in 2014 reported the lowest number of tarmac delays on record.

Say what you will about the effectiveness of government activity in general, but the DOT's combination of tough rules and punitive fines has bullied airlines into behaving better. They think twice before holding us hostage on the tarmac now. Contemporaneous critics of the DOT's actions have gone silent, too. After all, their sky-is-falling predictions have proven spectacularly and self-servingly untrue.

So here's the business-travel question of the week: Isn't it time the DOT regulates frequent flier programs, too?

Freed by the Supreme Court to manage frequency programs without regard to fair play, good faith, local contract law or common decency, the nation's airlines have been acting like street thugs. They make their own rules, change them as they see fit and treat us like pigeons.

I believe the DOT can fashion a commonsense set of regulations to make airlines to act responsibly when it comes to their frequency plans, which generate billions of dollars of profit each year. Here's how I'd do it.

Miles must not expire

It's duplicitous for airlines to award miles and then tell us that those miles are worthless unless we continue to do business with them. And that's essentially what they say when they claim your miles are expunged if you don't have activity in your account after a certain number of months. Simply put, airlines shouldn't be allowed to put arbitrary expiration dates on the miles we earn. Miles earned must be valid for as long as an airline sponsors the program.

No taxes or surcharges on awards

One of the other things the DOT has done well in recent years is require airlines to advertise all-in ticket prices that include government taxes and mandatory, airline-imposed fees and surcharges. The Transportation Department should do the same thing with frequent flier awards.

Airlines currently have award prices that arbitrarily break out government taxes and they insist your award doesn't cover those charges. Many international awards also are subject to hundreds of dollars of carrier-imposed fees that masquerade as "fuel surcharges" or other dodges. The only reason why airlines do this is to extract cash from you while you're claiming the award you've already earned.

The DOT policy here should be simple: All awards must be inclusive of all government taxes and carrier-imposed fees. There can be no ups or extras of any kind. An award ticket should be handled the same way as a paid ticket. Airlines shouldn't be allowed to advertise an "award price" in miles and then charge you hundreds of dollars just to claim the seat.

No administrative fees

Some airlines play a nasty game with award redemptions. If you don't claim an award a certain number of days before departure, there's an "administrative" or some other kind of last-minute booking fee. That's not fair and it's another example of unfair and deceptive award advertising.

The DOT should insist that the all-inclusive-pricing rule cover administrative fees, too. Airlines should not be allowed to demand cash from you based on when you want to claim your award. If a carrier wishes to charge more miles for an award claimed closer to departure, so be it. But requiring cash payments to claim an award should not be allowed.

Full disclosure of prices and policies

Speaking of full disclosure, the DOT must act to bar the moves Delta Air Lines has made in recent weeks. There cannot be unpublished prices, undisclosed purchased rules and you-don't-need-to-know games of informational chicken.

The DOT should require airlines to disclose in advance the price of every award and publish every condition for claiming that award. The award charts, terms and conditions and other applicable rules must be published on the carrier's website and be easily and perpetually available.

Reasonable notice of rules changes

The main difference between tickets purchased with cash and tickets claimed with miles is that you've already paid in advance for the scrip used to secure awards. Airlines are free to change cash ticket prices without notice because you have no dollars at risk before you make a purchase. It's different with miles because you've earned that credit in advance. Airlines should not be allowed to change the prices of and rules covering awards without notice. That's essentially a retroactive price change.

The simple solution? Regulations that specify the amount of notice an airline is required to give travelers who participate in its frequent flier plan. I'd suggest 60 days advance notice for basic rules changes. For changes that involve your earning abilities and the price of awards, I think 180 days advance notice is fair.

No charges for off-line redemptions

As U.S. carriers shrank and simultaneously filled a greater percentage of their remaining seats, they kept their programs compelling by offering more awards on their international partner airlines. But given the creaky technological infrastructure underlying the programs (and, sometimes, the airlines themselves) not all partner awards are available for online redemption. You often must call to claim a partner award--and then the airline imposes a fee for claiming that award by telephone. That's patently unfair and deceptive. If you can't claim an award because the airlines' infrastructure can't accommodate online redemptions, airlines shouldn't be permitted to charge a fee to claim the award by telephone.

The elephants on the plane

These simple rules would clean up some of the unfair elements of frequent flier programs. They also leave airlines plenty of room to compete without undue regulatory burdens. But I freely admit these regulations do not address two of the elephants in the frequent flier room: the amount of award seats and upgrades available for redemption.

Intelligent regulation of award and upgrade capacity is probably impossible because airlines aren't required to disclose enough information about how their programs work at the granular level. Besides, I'd like to think award and upgrade capacity might take care of itself in the marketplace if we level the playing field surrounding the rules, regulations and basic administration of the programs.

A last-resort thought

In last week's column, I suggested you shouldn't walk away from the frequency game because the costs of the programs are baked into every airline seat and hotel room you book. I do think that is unfair. Airlines and hotels rake in billions of dollars thanks to the frequency programs, they force us to play them for our own financial protection and then they rig the game.

If airlines can't be made to play the frequency games fairly, then I would be in favor of more drastic measures. I'd support an "opt-out credit" that would require airlines to offer a rebate if you chose not to collect frequent flier credits. And I'd twin that with a "cash-out" option to afford travelers a one-time opportunity to trade their previously collected miles for a cash payment.

But those are last-resort remedies. I'd like to think, much as with tarmac holds, that the Transportation Department can make airlines play fair with frequency plans.


This column is Copyright 2015 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright 2015 by Joe Brancatelli. All rights reserved.