Frequent Flier Loyalty Programs and the Law

There is plenty of evidence of FlyerTalk members discussing the rumors of the future of specific frequent flier loyalty programs, only to be frustrated when airline company officials neither confirm nor deny those rumors.

One example is the discussion of the rumor of Delta Air Lines converting the SkyMiles frequent flier loyalty program from its current model of earning award tickets based on miles flown or earned to a model based on spend. Based on anecdotal and circumstantial evidence, FlyerTalk members have been discussing this rumor ad nauseum for at least two months, with no comment by officials at Delta Air Lines — and rightly so.

It indeed can be frustrating to not know what the future holds regarding your favorite frequent flier loyalty program — especially when rumors portend a negative impact potent enough for some customers to extirpate their efforts of qualifying for elite status in the frequent flier loyalty program for the following year. However, what some FlyerTalk members do not understand is that premature activity — even if the activity is merely premature disclosure of some aspects of rumored upcoming changes — involving the frequent flier loyalty program of an airline can violate federal law imposed by the United States Department of Transportation and can result in penalties that could include fines or even time in jail.

You read that correctly — jail time, as confirmed by several of my highly-reliable sources who tell me that even mere discussion of the repercussions of violating federal law is discouraged.

One example is highlighted earlier today by Seth Miller of The Wandering Aramean weblog at BoardingArea.com, where he has been following the story of the re-birth of PEOPLExpress airlines, a low-cost airline which was popular in the 1980s and whose flights were based out of Newark, New Jersey. PEOPLExpress will use Norfolk, Virginia as its hub when it inaugurates passenger service, but it has already encountered legal trouble even before its first flight.

According to Seth, when it was announced that the PEOPLExpress brand was working to get back into business, it also included an announcement about a new frequent flier loyalty program called Club Travelati, where you could sign up as a lifetime member for only $19.00 and receive such benefits as a souvenir pin, access to significantly discounted sales, and deals from the carrier once it actually launched its first flight. Although admitting no fault, PEOPLExpress reportedly agreed to pay a $10,000.00 fine imposed by the United States Department of Transportation as a result of this promotional effort, and all content related to Club Travelati was removed from its official Internet web site.

“At issue is whether selling access to discounts is permissible given that the airline cannot actually legally operate flights yet,” wrote Seth. “By enticing customers with discounts for fares that they cannot actually sell the DoT felt that the company violated a couple CFRs. The company has stated they disagree with that position but that they are choosing to avoid litigation in an effort to not derail their pending operational certificate application.”

With rare exceptions, I eschew posting rumors at The Gate partly for the aforementioned reasons.

Comments (Showing 2 of 2)

  • sethb at 3:58pm June 07, 2012

    Was People Express actually selling the discounts? In that case, I’d agree they were wrong; however, if all they did was note that they intended to have a program where people could purchase the discounts, once they were actually selling tickets, that would be different.

  • DivaDawn at 8:07am July 02, 2012

    Actually Club Travelati is not a frequent flyer loyalty program. I am a member of Club Travelati. It’s a last minute travel “getaway” club similar to Spirit $9 club, kind of. The loyalty program for PEOPLExpress is called SMARTbank, according to the woman I met at the travel show I went to.

    I don’t think PEOPLExpress misled anyone or advertised something they shouldn’t have. They were very clear that the travel club would only begin once they were approved to fly. The “charter members” also get a limited edition lapel pin, which is great for airline memorabilia collectors like me. I would have paid the $19 just for that. They offered a refund after the DOT fine but I said I don’t want my money back. If they never fly, the pin will be worth even more money. 🙂

    DD

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