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Canadian travel spectrum was rife with speculation after the announcement of Air Canada’s new loyalty program (in June 2020) and with that a divorce from Aeroplan. The news sent the 5 million members of Aeroplan in a tizzy, wondering about future of their account balances. But I argue that Air Canada’s new loyalty program is a good thing.
Facts
- Air Canada’s agreement with Aimia for Aeroplan remains in place until June 29, 2020.
- Before the new Air Canada program launches in June 2020 members can earn and redeem Aeroplan Miles for Aeroplan Rewards, including flights with Air Canada and our Star Alliance partners.
- All Air Canada and Star Alliance activity after June 2020 will be earned into the new program.
- Aeroplan Miles earned up to June 2020 stay in Aeroplan accounts and may be redeemed for Aeroplan Rewards.
- Beyond June 2020, Air Canada expects to continue making Air Canada flights available for Aeroplan redemption. Star Alliance partner rewards will only be available through the new Air Canada program.
Why Air Canada’s new loyalty program is a good thing
- Air Canada has a huge cache of data and loyalty program experience/expectations build through its Aimia contract. In building a program from scratch, we can expect them to offer a compelling package for members to join in. A program that will capture the attention of its competitors and loyalty of its members. As per Air Canada, “a program that will best serve the long-term interests of customers, shareholders and employees”.
- Anytime there is a new player in a market, they do their absolute best to lure new members with exclusive perks and swathes of incentives. In fact, in their press release Air Canada noted that the launch of new program would come with “enrolment bonuses and incentives for new members as well as existing Aeroplan members”. Yay us.
- Other than actual “butt in seat” miles, the best way to earn large number of miles is through credit card bonuses and spends. Once the new program is ready to hit the road, we can expect that the new credit card partnerships would yield another wave to enrolment bonuses from the credit card companies as well.
- I also expect Air Canada’s new program to offer direct status matches from other competitor programs. They could use this strategy aggresively to earn potential membership and loyalty from other alliance members and non-Canadian residents.
- Currently, Air Canada does not allow its members to upgrade seats using their miles. With a new program and complete control over its management, I expect that Air Canada would open this option to its membership. Another perk that will position the new program well against their North American competition.
- Most airline programs make large profits by selling their miles in bulk at subsidized rates, something Air Canada hasn’t dabbled much with its Aeroplan/Aimia partnership. I expect this to change going past June 2020.
- Last but not least – With complete control of its inventory and award seat management, Air Canada is in a tremendous position to make a huge impact in the loyalty space.
Aeroplan has seen significant devaluations in the past few years and members have been frustrated with black outs dates and unavailability of awards seats on desired dates. If played right, Air Canada can really hit it big in solving the award availability issues.
Take Away
Credit where its due – announcement of Air Canada’s new loyalty program in June 2020, allows Aeroplan members 3 full years to assess and adapt to the changes and new developments. If you are sitting on large Aeroplan balance, 3 years is a good amount of time to seek and book your dream vacation. Competition is a good thing, and I couldn’t be happier for a new player to ruffle the Canadian loyalty market. I can’t wait for my inbox to be flooded with new Air Canada program bonuses and credit card offerings.
To discuss these possibilities and more, I was lucky to be featured in a couple of media engagements;
CBC News (web edition) – “Which side of Air Canada-Aeroplan split should you be on”
The National – Skip to 5:22 of the video for the Air Canada-Aeroplan bit.
16 comments
My main concern is that the Mini RTW will be vanish
There will be some give-take with AC’s new program, we may lose some AP strengths (generous routing rules etc.) and gain on other fronts (Award availability, Upgrade using miles, buying miles at better rates etc.)
you are wise to think this.. time to re imagin points collection options
AC’s new program may be wonderful, but it’s 3 years before it kicks in. In the meanwhile, everyone is going to be rushing for the exit to use their Aeroplan miles up before Aimia goes bankrupt. Even if Aimia and Aeroplan survive this, I really expect the value of any remaining Aeroplan miles to be greatly devalued. Aeroplan will lose access to the fixed mileage price rewards and only be able to offer something similar to the current inflated Market Fare rewards, which require anywhere from 2 to 10 times the points for most flights. So to recap:
– Great difficulty in booking the already limited fixed mileage price rewards for the next 3 years as everyone tries to use up their Aeroplan points before devaluation
– Devaluation of 50% to 90% of your remaining points
– No way to start collecting on Air Canada’s new shiny frequent flyer program before 2020 (assuming we buy the marketing hype about how good it will be and it doesn’t turn into a clone of Delta’s incredibly stingy FF program).
I decided to switch credit cards as soon as I heard the announcement. I set aside my Aeroplan VISA and now I’m using my MBNA Alaska Airlines MasterCard as my primary non-AMEX card, and I plan to cancel the Aeroplan VISA before the next annual fee comes due. I’ve got 200,000+ Aeroplan miles to burn and it’s probably going to be difficult to use them up on trips I really want before they get horribly devalued or Aimia goes out of business.
I do think there is a substantial chance that Aimia does enter bankruptcy before 2020, which the resultant elimination of billions of Aeroplan miles. First off, with the realization of Aeroplan’s looming devaluation, a lot of collectors will switch their focus to other loyalty programs, cancelling credit cards, etc. So Aimia starts selling a lot less Aeroplan miles, decreasing revenues. Secondly, flight redemptions ramp up (although this is limited to some extent by the limited number of fixed mileage award flights) expenses increase. Unless Aimia has huge financial reserves so it can handle an effective “run on the mileage bank”, they could end up in bankruptcy, which drives the value of an Aeroplan mile to zero. This is going to be a massive PR issue to convince their member base that the Aeroplan program can survive and still offer good value for points–something that will be difficult to do absent the Air Canada partnership.
Hi Barry, thank you for sharing your thoughts and apprehensions. Unfortunately, I agree with some of your concerns around AP devaluations (but certainly not by 50-90%) and the struggle to book award flights. However, its important to note that AC’s contract with Aimia/AP is still intact until 2020, and they will do their best to not face the PR wrath from the membership. While AC builds its program, they will be sensitive to not be on the wrong side of public opinion. Don’t forget, they will be trying to convince the same 5M AP customers to switch over with them eventually. And they have a large set of expectations to live up to. At the same time, AP will agressively bargain with AC to keep its reputation intact. I see them working their butts off to find new partners that can fill the gap going past 2020.
AP allows award booking 11 months in advance: If I was sitting on 200K+ miles, I would try and book and ticket as much as possible. Either 11 months out or even look for some last minute flights. In the past week alone, I was able to book domestic and international flights worth 150K. But I do understand that not everyones life situation allows them to book that far in advance or even last minute.
There will be some give-take with AC’s new program, we may lose some AP strengths (generous routing rules etc.) and gain on other fronts (Award availability, Upgrade using miles, buying miles at better rates etc.). It definitely won’t be a poster child for the loyalty program, they will align with “industry standards” as much as possible.
Wont be surprised if credit card companies start waiving annual fees to retain Aeroplan customers, so don’t ditch your AP cards just yet.
I know this discussion docent solve your 200K situation, but if you need help with booking awards/routing etc, always happy to help. Send me an email at pointsmilesandbling@gmail.com
Cheers!
Hi Bling, I do appreciate your analysis, but I’ll stand behind my devaluation estimates based on the fixed mileage awards going away and market fare awards being all that is left (market fare are based off the AC cash price for Aeroplan, although I’m sure they are getting a better price because of their volume of purchases). Here’s a quick example: YVR-SYD in business class. I just picked a couple of dates in November. Fixed mileage awards are 160K miles round trip. Market fare is 751K miles. That means you need 4.69 times the number of points which works out to a 79% devaluation of your points. That’s pretty close to the high end of my estimate. Now the depreciation generally isn’t as bad for economy seats, so some travellers might not be as displeased, but for those of us who made Aeroplan our main program to collect points for business class flight, this is pretty much a disaster.
Clearly you have no idea of how loyalty economics actually work! Dying laughing over here. Wow!
Hi Anonymous, feel free to actually make a point here. Thanks for reading anyways..
Get real. AE redemptions levels are going to be devaluated again in the next three years as everyone dumps their points and AC’s new program is surely going to be revenue based. How is any of that good. Good luck waiting for awesome CC bonuses. They are modeling after Delta. Heck even the new livery is a bad copy now. And AE will become a toaster program. This is just all bad.
I agree that AP may devalue in the coming months and will end up being a ‘toaster program’. As for AC’s new program, I am cautiously optimistic – that it will be better than what AP offered. AC Altitude was already revenue based, so no change there.
Winner Winner Chicken Dinner!!
Wow congrats on winning the stupid award of the year!!! Ever heard of dilution? Would recco. you look up the definition then apply it to your ‘analysis’ and think about how the program would be able to utilize this mechanic given its in-house now. Further – devaluated isn’t a word.
Haha, man you spent some time on this page. As I said before, feel free to actually make a point. Are you giving out 2017 awards in 2020? Thanks again, for keeping my grammar honest as well 🙂
AC seems to have found a way aroundbthe ON law that prohibits points from expiring
Haha 🙂 Cheeky!
nope deadly serious