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Study from Law and Marketing Departments Says Airlines Don’t Deliver on Frequent Flier Promises; Next Stop Could Be Court

April 29, 2015
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A new study from by faculty in the School’s law and marketing departments says many airlines do not deliver on the promise of their frequent flier programs and as a result travelers could make a strong case against them in court.  The study, published in American Business Law Journal, says that if in court, frequent flier mile contracts are viewed as contracts of “adhesion,” consumers could successfully sue the airlines for failing to deliver on their reasonable expectations about contract terms.

“We set out to determine, empirically, what the reasonable expectations of consumers are with regard to free flights because frequent flier contracts are written to favor the drafter, which is the airline,” said Ann Morales Olazábal, vice dean and professor of business law at the School.  “The programs’ terms and conditions, the small print, set up ‘take it or leave it’ contract language that allows airlines to dictate the limits on redemption of hard-earned miles, but that doesn’t give an airline leave to make redemption nearly impossible.  A court can and should use the reasonable expectations of the consumer to decide how to interpret contract obligations in such a case,” added Olazábal, who conducted the research with Howard Marmorstein and Dan Sarel, associate professors of marketing at the School.

In addition to studying the airlines’ policies – the researchers surveyed more than 450 travelers about their expectations for free tickets at the lowest award level (typically by redeeming 25,000 miles).  The findings show that more often than not, consumer expectations are unmet. On average, consumers expect to be able to redeem miles for a free flight more than half the time and 30% of them at least 75% of the time.  

According to consulting firm IdeaWorks, whose data was studied as part of this research, 2012 figures show that it’s more realistic to assume that consumers can redeem their miles or points for a free ticket at this lowest award level less than half or one-third of the time – American (45.7%); US Airways (33.6%); Delta Airlines (27.1 %). Further, among domestic legacy airlines, United Airlines was unique in delivering on a free ticket most of the time (80%).  

The study suggests that if reasonable consumer expectations are used as the standard, courts could find that three out of four domestic legacy airlines, including American Airlines, US Airways and Delta Airlines, are not meeting their frequent flier contractual obligations because they entice customers to target purchases with the promise of a free ticket and under-deliver when it comes to redeeming miles.  

“Consumer suits—perhaps class actions—may indeed be successful,” said Olazábal. “Also, the Department of Transportation might do well to consider our findings as it considers new regulations that are more protective of the flying public and, in particular, frequent flyers’ rights.”

 

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