United Airlines CEO Scott Kirby is convinced that a Department of Transportation probe into the frequent flyer programs of US airlines will reveal that customers are happy with the programs and redemptions. Kirby also warned that the bipartisan Credit Card Competition Act would destroy loyalty programs for US consumers.
United CEO Is Not Worried About DOT Frequent Flyer Probe, But Is Concerned About Credit Card Competition Act
Kirby appeared this week at the third annual Global Aerospace Summit hosted by the US Chamber of Commerce and Airbus in Washington, DC on September 11, 2024.
He appeared in a five-minute on-stage interview with Washington Post aviation reporter Lori Aratani. First, he was asked what is motivating the recent Department of Transportation probe into frequent miles and whether there is any merit to that inquiry. His answer focused on the value he claims consumers find in airline loyalty programs:
“I 100% agree with the Secretary on loyalty programs. He said in his press release that consumers love them. That is absolutely true. This summer, over 3 million people flew on a free flight on United Airlines using the Mileage Plus program. That, just for some context, is about 1% of the entire U.S. population, on just one airline, in just one season. So customers love these programs…We’ve known that – that’s why we keep trying to make them better.”
The redemption numbers are impressive and help to explain why United MileagePlus recently was ranked as the world’s third-best frequent flyer program. But redemptions do not necessarily reflect value or whether “bait and switch” through rapid redemption pricing inflation took place. I’ll save that discussion for another time, but volume does not equal satisfaction.
Kirby views the bipartisan Credit Card Competition Act as a death knell to frequent flyer programs:
“The one risk to these programs are legislative initiatives that I’m sure are well-intentioned but would just be bad policy, particularly the Credit Card Competition Act, which would help big retailers but 84% of US consumers have a rewards card in their wallet and as the Secretary said, they love these programs, they love getting those three million miles to travel all over the world, and that act, if it passed, would eliminate that ability to earn miles for all those people.”
As I’ve argued before, The Credit Card Competition Act would undeniably undermine consumer credit card rewards. Capping fees through forced competition would make it impossible to continue to offer the current portfolio of benefits on many card products.
I get the argument that people paying with cash and debit cards are effectively subsidizing folks like you and me who use credit cards (apparently 84% of the country, per Kirby), but consumers would not see any savings if this bill passes. Instead, retailers would likely just keep these savings, passing nothing on to consumers. I’m not in favor of that…if retailers want to offer a cash discount already, they can certainly do so…
In any case, Kirby opposes the Credit Card Competition Act because it would spell the end of the MileagePlus cash cow and greatly reduce the value of the relationship for United’s true best customer, Chase Bank. I oppose it because I think consumers, both rich and poor, would lose, with only retailers benefiting.
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When pressed, Kirby made the same argument again…stressing that the DOT probe presents the perfect case to show how frequent flyer programs are just fine in their current form.
“This is a great opportunity to make everyone realize and appreciate how much consumers love those programs and we should all protect them.”
But why? What makes them valuable?
“I think the evidence speaks for itself.
“The fact that you had three million people travel this summer on the program…the fact that 84% of US consumers have those rewards cards in their wallet demonstrates that people want these programs, love these programs, and value these programs.
“The affinity that loyal people have for these programs is incredible. We know how valuable it is and all the evidence will show that we all appreciate the value and we should protect and should avoid legislative changes that jeopardize these programs.”
That is the mantra: people must be happy because they are redeeming so many miles and signing up for so many credit cards.
Are you convinced by that argument?
You can watch Kirby’s full remarks below.
image: US Chamber of Commerce (screengrab)
