Air Canada has always had an interesting relationship with Aeroplan, their frequent flyer program. While most frequent flyer programs are still owned by the airline, Aeroplan was spun off by Air Canada in 2002 and is owned by Aimia, a global loyalty analytics company which also has stakes in other European, Asian, and Latin American programs.
What is Going On?
Today, Air Canada announced that the partnership between them would end after the current contract is completed, in June 2020. They will be rebuilding their own loyalty program from scratch. This is huge news and has been on all the major business and Canadian news networks.
Both companies have a page of FAQ’s for consumers:
It’s important to remember that Aeroplan currently “issues” the points that are redeemable on Air Canada and Star Alliance partners. Major financial partners such as TD, CIBC, and American Express pay Aimia for issuing Aeroplan miles that members earn. From my understanding, Air Canada also pays for these points when awarding miles for customer who fly on paid tickets. Any customer which attempts to redeem their miles, goes through Aeroplan to do so. However, for elite frequent flyers, Air Canada has it’s own program, Altitude, for upgrades and other flight benefits.
Starting June 2020, you will no longer earn Aeroplan miles when flying on Air Canada and other partner carriers – they’ll be the miles of the new programs. As well, Aeroplan miles will no longer be able to be redeemed on Star Alliance partners such as United, Lufthansa, and Singapore Airlines, and likely for the current fixed-mileage redemption rates on Air Canada. In their press release, Air Canada states that it “intends to continue to offer Aimia redemption seats for Aeroplan members after June 2020, with pricing competitive with other third-party rewards programs.” However, given that they’re playing hardball right now, I would not be surprised if Air Canada redemptions will be in different fare inventories (similar to Air Miles) with rates going up significantly.
Hopefully, this new program will make it easier for members who have heavy involvement with both programs. For example, as top-tier Air Canada Super Elite, you still have to pay change/cancellation fees when redeeming your Aeroplan miles. It’s likely that the new program will focus on these valued members and make organizing their rewards simpler and easier. For everyone else, I would recommend utilizing their Aeroplan miles sooner rather than later as it is likely that customers will feel that their Aeroplan will have less value after that June 2020 deadline.
This is quite bad news for Aimia, given that a significant chunk of their operations was their partnership with Air Canada, with most of the redemptions being flight rewards on Air Canada and other Star Alliance partners. Their stock price has dropped close to 60%, which is the intraday largest decline since 2005. With most loyalty programs, including Aimia, the majority of revenues are earned through contracts with co-brand financial partners, which are currently TD, CIBC, and American Express. These contracts are on separate timelines with many extending through the June 2020 deadline between Aeroplan and Air Canada.
I can only guess that employees at these financial institutions will be looking at ways to remedy whatever potential revenues and clients are “lost” given this breaking news, which means further bad news for Aimia. As well, given that Air Canada is launching their own program, it is likely they will be seeking partners to launch their program in three years. I’m hoping that the competition will be fierce, and this will be an overall better experience for Canadian consumers.
What do I think?
I think that it will be interesting. I’m not going to go out on a limb and say that’s positive for anyone, because even though Air Canada is announcing this in advance so they can “take in consideration member feedback”, that statement has always had multiple outcomes. We have no idea how the new Air Canada miles are going to be earned, and how they are going to redeemed. I’ve heard that this was potentially going to happen a while back, but it was only a possibility. It’s kind of a shock that this is actually going to happen, and I’m really excited to see what is going on.
I’ve always said that in terms of loyalty programs and credit card rewards, Canada is a smaller, more oligopolistic version of the American market, perhaps behind a few years. While there is growing competition within our Canadian space, I’ve always been waiting for a “shock” that will cause companies to kick into overdrive in terms of improving rewards and benefits for Canadian consumers. With this news, I do hope that this will jumpstart the current discussion.