Will I Still Be Collecting Aeroplan Miles?

Since Air Canada announced they would split from Aeroplan, there has been a lot of noise about what to do.

What is Happening to Aeroplan?

Source: AIMIA

Source: AIMIA

Air Canada announced they would be creating a new program after their contract with Aimia (which owns Aeroplan) after their current contract ends in 2020. Roughly 15 years ago, Aeroplan, was spun off by Air Canada to raise funds due to financial difficulties AC had been going through. Aeroplan is owned by Aimia, a loyalty and data analytics company based in Montreal. In addition to owning Aeroplan, Aimia operates several other programs including Nectar in the UK. They also have stakes in Aeromexico’s Club Premier and AirAsia’s BIG loyalty program. These are much more minor than Aeroplan, which essentially is the largest airline miles program in Canada.

Today, the Globe and Mail ran an article where the new CEO, David Johnston states that “the market has overreacted.” It also provided a few points of data: Aeroplan constitutes 59% of revenue and 72% of income for Aimia. 80% of aeroplan rewards are for flights, but Air Canada only accounts for 11% of Aimia’s billings (the vast majority would from financial issuers and other programs/partners). CIBC and TD, the two main Aeroplan co-brand issuers have their contracts run past 2020. I doubt there are clauses in the contract permitting an opt-out, so those deals should stay.

Source: The Globe and Mail

Source: The Globe and Mail

Why is Aeroplan not screwed?

I tend to agree with the article because it makes some very salient points.

First, since Air Canada is starting their new program from scratch, they’ll have absolutely no information on the current members that are part of Aeroplan – not their non-flight habits, not their spending behaviours, and many other metrics that come from analytics. The information that Aimia has in terms of his customer base is huge. On top of that, regardless of what happens, Aeroplan as a brand name still has value. A lot of people not too familiar with this would say that Aeroplan points and Air Canada miles are one and the same.

In that article, he also says that the company purchases around 700 million dollars worth of seats. That provides some huge negotiating power when Aeroplan does want to switch airlines or programs from which to buy flights on. Westjet might not want to work with Aimia, and none of the other airlines in Canada have any significant loyalty program, but I would not be surprised if Aeroplan finds some other international alliance partner for which to redeem miles for. Any star alliance partner FFP can redeem their flights for Air Canada. In fact, programs like Singapore Krisflyer and Turkish Miles and Smiles do have lower rates when redeeming on those same Air Canada flights. So even if Air Canada doesn’t provide good rates with Aeroplan (think market fares) – and that’s not something I’m even sure will be happening – I’m sure someone at Aimia corporate strategy can figure something out.

Market Fares require a lot more miles!

Market Fares require a lot more miles!

Here’s the most important point, though. Nothing is changing this very moment. Even though share prices have dropped 60% Aeroplan’s balance sheet hasn’t suddenly weakened to that extent. Sure, they might have lost some forecasted value had the contract been extended, but it’s very unlikely that they’ll suddenly be unable to pay their partners. Although a bit dated, One Mile at a Time provides semi-reliable figures of what the internal reimbursement rates are for international business class redemptions. These redemptions would cost Aeroplan members upwards of 110,000 miles roundtrip.

Source: One Mile at a Time

Source: One Mile at a Time

From my understanding, domestic/transborder flights on Air Canada and/or United cost magnitudes less. Work out the math – the average amount financial issuers pay for Aeroplan (and generally other airline miles) are around 1 cent per mile. Given a coach or business class continental North America redemption is 25,000/50,000 miles, and are the majority of flight redemptions, Aeroplan will continue to make healthy margins whenever members utilize their miles.

Furthermore, for the consumer, you can still redeem like you did before the announcement. Redeeming on Air Canada and star alliance partners will not change until 2020, and by then, Aeroplan should have other options to replace Air Canada if necessary. You shouldn’t be hoarding points right now, but as long as you can spend down your balance between 2019 and 2020, you’ll be fine. What also might be a positive is that I am guessing competition will increase significantly, now that Air Miles has a horrible reputation in Canada, and both Aeroplan and Air Canada will be trying to win market share.

So to answer the question – Will I Still Be Collecting Aeroplan Miles? Yes. If there’s a promotional where it’s beneficial to earn Aeroplan miles, I’ll do that.

Aeroplan - AMEX Transfer Partner

Aeroplan – AMEX Transfer Partner

But for credit cards, I will be using AMEX, which provide Aeroplan as a transfer option – but you’re not locked in. American Express currently has four charge cards earning Membership Rewards with improved bonuses – which are all historical highs.

Check out the Globe and Mail article here.

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  1. You wrote: “Aeroplan will continue to make healthy margins whenever members utilize their miles”.
    I’ll say! Charging $440 in scam charges plus 55,000 miles for a Lufthansa YVR-Europe one-way redemption in J makes sure that they make a fat profit on those redemptions.

    It’s not Aeroplan that is screwed, but we as clients!

  2. I’m really hoping that Aeroplan rebrands itself with other partners who do not charge the ridiculous YQ surcharges imposed by Air Canada. I use Aeroplan but never use AC outside of Canada.

    Wouldn’t it be nice if they partnered with SQ, ANA, United, Swiss and told the rest of the *A to take a short flight to nowhere.

    Dream on I guess.

  3. It’s not like Aeroplan can be a member of Star Alliance and have access to tickets. You redeem Aeroplan points for flights not for junk (hence the name “areo”). Aeroplan is great on redemptions on United, SAS and until recently SWISS (which you still cannot book online) and a few others. Basically any without surcharges. I’m a lurking American here. So the Canadian specific parts of the plan don’t really register with me. I can’t imagine that AMEX would want to partner with Aeroplan if you can’t redeem for flights.

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