Air Canada Is Launching Their Own Loyalty Program (And Dumping Aeroplan) In 2020

There’s some huge news from Air Canada today. Over a decade ago Air Canada spun off their loyalty program, which is known as Aeroplan. Air Canada’s contract with Aeroplan is expiring in a few years, and Air Canada has decided to discontinue their relationship with Aeroplan and take over their loyalty program as of that time, allowing them to build a program from the ground up. I guess you could say they’re promising to Make Canadian Loyalty Programs Great Again.

Air-Canada-New-Livery-1

Why Air Canada sold their loyalty program to begin with

About a decade ago, Air Canada made the difficult decision to sell their loyalty program. This was after 9/11 and the SARS crisis, which hit Toronto especially hard. Given that loyalty programs are often airlines’ most profitable divisions, spinning off the program got them some much needed cash that they could invest in new plane orders.

Loyalty programs are also huge profit centers, so now that Air Canada is in a better financial situation, they want to take over their program again. Air Canada anticipates that the net present value of the program repatriation over a 15-year period will exceed $2 billion. That’s a lot of money!

What’s the current relationship between Air Canada and Aeroplan?

In Facebook relationship terms, I’d say “it’s complicated.” To explain it as simply as possible:

  • Aeroplan is an independent rewards program, and there are many ways to earn miles with them, including by flying Air Canada, transferring points from Amex Membership Rewards, etc.
  • Air Canada frequent flyers can earn and redeem miles for Air Canada and Star Alliance flights through Aeroplan
  • Air Canada presently operates their own elite program (known as Altitude), so the status you earn that gets you upgrades, etc., is directly with Air Canada

For now it’s business as usual

Air Canada’s contract with Aeroplan is continuing through June 2020, so until then it should be business as usual. You’ll continue to be able to transfer Amex Membership Rewards points and Starpoints to Aeroplan, etc. (though I suppose partnerships could also be terminated at some point).

Air Canada is announcing this three years in advance so that they can give a lot of advance notice of this change, and also so they can build a new program based on member feedback. I don’t remember the last time a mature airline of this size had the opportunity to build a loyalty program from the ground up, so that’s pretty exciting.

What happens in 2020?

Starting after June 2020, miles earned from Air Canada and Star Alliance flights will be credited to the new program, rather than to Aeroplan.

Aeroplan miles earned through June 2020 will stay in Aeroplan accounts, and won’t be transferrable to Air Canada’s new program. However, Air Canada intends to continue offering Aeroplan members redemption seats after June 2020, with “pricing competitive with other third-party rewards programs.” In other words, if you have Aeroplan miles you’ll want to redeem them before then, as I imagine we’ll see a significant devaluation.

Why Air Canada taking their program in-house is a good thing

I know what many people are probably thinking. “Great, Air Canada is going to enhance the heck out of the program.” In reality, however, I view this as a positive. Or at least it has the potential to be a very big positive. Right now there are so many limitations for members due to the loyalty program being run by a third party:

  • It makes it complicated to take care of passengers during irregular operations
  • It creates a complicated system, because members have separate accounts with the airline and loyalty program, requiring them to visit two websites, etc.
  • Often members have to make two calls when making award reservations that involve special requests — one call to Aeroplan, and one call to Air Canada
  • There’s no way to use Aeroplan miles to upgrade on Air Canada, presumably because they couldn’t come up with a mutually beneficial way to do so

I had the chance to speak to senior sources at Air Canada this morning, and they assured me that when the program is brought back to Air Canada we can expect mileage upgrades, the ability to redeem miles for ancillary products, award mix & match opportunities, etc. Now that they run their own program again, maybe we’ll also see them introduce some interesting co-brand credit cards.

So while I obviously can’t make any guarantees about what the future of the program will look like, an airline has more opportunities to create a rewarding and interesting loyalty program if it’s offered in-house rather than through a third party.

What does this mean for Aeroplan?

They’re obviously in trouble now, as Air Canada was their biggest “customer.” I suppose they can continue to operate an independent points program, much like Avios is a general points currency in the UK. However, I doubt it will be anywhere near as interesting as it is now.

Unsurprisingly, Aimia (the parent company of Aeroplan) put out a press release indicating that this wouldn’t be in the best interest of customers, and urging Air Canada not to do this:

Aimia and Air Canada have been engaging in discussions and the tenor of the very recent discussions leads Aimia to the belief that Air Canada does not currently intend to renew its partnership with Aeroplan on its expiry in June 2020. The existing agreement and Air Canada’s purchasing commitments to Aimia remain in place until June of 2020.

Aimia strongly believes that a renewal of the company’s long-term partnership would be the best and least disruptive option for both companies’ customers, in particular Air Canada’s frequent flyers. While Aimia remains open to further discussions with Air Canada, the company’s strategic planning had already contemplated other post-2020 alternatives in parallel with the goal of ensuring that Aeroplan members retain access to a strong redemption offering around air rewards in the future. Given the state of current discussions, we will continue to pursue these alternatives actively.

There are a lot more questions than answers

This is the very first step of what will be a very long process. It’s impressive that they’re giving three years notice of this, and in general I’m excited to see what a big airline does when they have the opportunity to build a loyalty program from the ground up. We should learn more about the future of the program over the coming months and years, though for now just be aware that Aeroplan will no longer be Air Canada’s frequent flyer program as of mid-June 2020, so you’ll want to redeem your Aeroplan miles before then.

There are probably two questions that some people are wondering — what does this mean for Aeroplan’s relationship with Amex Membership Rewards and other financial partners, and will Air Canada’s program impose carrier imposed surcharges on award tickets, as Aeroplan does for many redemptions?

To answer the first question, I was told that Air Canada will consider all kinds of partnerships going forward, and hasn’t decided on any particular ones yet. So only time will tell if Amex Membership Rewards will be an Air Canada transfer partner.

As far as carrier imposed surcharges go, I was told that they’ve certainly heard the feedback from members about general frustrations with these fees on award tickets, and will take that into account when designing the program.

Air Canada: you have a great opportunity to build a great program. Don’t screw it up. 😉

What do you make of Air Canada taking their loyalty program in-house? What would you like to see from the new program?

Comments

  1. Looking forward to a solid loyalty program. I have been Super Elite for 9 years in a row and plan to stick with AC even though I am American (living in South Florida) which is not the most conducive to flying on AC to Europe. Really looking forward to seeing the changes.

  2. AC is not a service-culture company. There’s no reason to believe their inhouse program will deliver much better member experiences, for us or for “civilians” in the points world. AC is interested in their bottom line and they’re very adept at calculating what they can “get away with” in all areas of their business.

    Canadians will put up with a lot and AC knows this better than anybody.

    This reader is NOT optimistic.

  3. Late last year, the AC CEO hinted at potentially splitting with Aimia in Report on Business magazine (The Global and Mail). There are a few problems, using AC history of “enhancements”:
    1) there is like a 90% chance that Aeroplan miles won’t go 1:1 from Aimia to AC
    2) He has indicated that the current 8% of available seats for redemption (which most people think isn’t even accurate) is too high
    3) And remember AC’s motto “we’re not happy till you’re not happy”

    Still too early to see what will happen but most folks would not even remotely confident that this will be fair since it’s already difficult redeeming miles with Aimia and AC’s 1970’s IT systems!

  4. I’m not too excited about this.

    On one point, it might be good to for frequent flyers to have the loyalty program managed by the airline.

    On the other point, I’m scared that accumulating miles for award redemptions will be even harder that it already is. With Aeroplan, you could earn with so many partners. I just hope that we see some good partnerships that make it easy to accrue miles in the new program with ways other than flying. What scares me is if I end up accumulating the same amount of miles during a year, but spread out over two programs.

    Maybe 2020 will be the year Canadians see some huge sign-up bonuses in when Air Canada will all want us to switch to their co-branded credit cards?

    But hey, I have plenty of AC shares, so if it helps the bottom line, I can earn a free flight much faster than I can earn miles for an award!

  5. @Luck – perhaps you can offer some insight into whether this means that all star alliance carriers will no longer be bookable through aeroplan. If all of them are bailing then the program becomes effectively useless since I’m not aware of any non-star alliance aeroplan airlines. But if it’s just AC leaving then there are still a lot of great uses (EVA to asia is a great redemption)

    Thanks

  6. On a somewhat related note — looks like Swiss (and some other airlines) are no longer bookable using Aeroplan. The change appears to have taken place about 3 weeks ago, without any prior notice. I can see LX award seats on United website, for example, but not on Aeroplan; these are all for direct flights from Zurich. The only choices available seem to be those airlines (e.g., LH, AC) with costly “taxes and fees”.

  7. Just curious. Since Aeroplan and air Canada are separate is it possible to earn elite status on Air Canada while crediting your flights elsewhere? Or is earning on aeroplan required for AIR Canada status. I ask because it would seem possible that moving forward many Air Canada elites would not be interested in banking their miles in what will become a worthless currency at some point (and yes I know thst aeroplan will still have some accsss but will they have star alliance access as well?)

    Fdw

  8. @ Flyingdoctorwu — You do actually have to credit your Air Canada flights to Aeroplan to earn elite status, as it is linked. Good question, though.

  9. @ kr — While it probably depends on the specific circumstances, I suspect that the space United is showing is actually phantom, and that Air Canada’s site is just accurate. Or were you able to ticket the space through United? United showing phantom Swiss space has been a problem for a long time.

  10. @ The Reverend — For some amount of time after June 2020 it should still be possible to redeem Aeroplan miles for travel on Star Alliance, even though it’s not something Air Canada has to allow (but they don’t want to totally screw over their members). However, it will likely be at much higher cost. Meanwhile Air Canada members will have full access to Star Alliance availability.

  11. @ Marc — Keep in mind that the whole reason loyalty programs are so profitable is because of all the partnerships they have. So I see no reason that they wouldn’t have a bunch of partnerships that make it easy for members to earn miles through various non-flying means, since it’s a source of revenue for them.

  12. AIMIA’s annual shareholders meeting takes place in Toronto in about an hour. Should be an interesting gathering under the circumstances. Heading over shortly as I received some AIMIA shares when AC’s holding company ACE spun the former division off. One wonders about AC’s timing though I believe its ASM is also this month.

  13. @ Denbigh Patton — I generally share your skepticism of big airlines, and usually assume that their path to profitability includes cost cutting and stingy benefits rather than creating a compelling value proposition. All I can say is that I know many of the people who work in loyalty at Air Canada, and they’re all people who are incredibly passionate about the program and industry. So call me naive, but I really do believe they want to create a program that’s unique and rewarding for members, because frankly I think they’d be bored creating a crappy program. I could certainly be wrong, but I’m optimistic…

  14. @ DavidB — Interestingly Aimia made this “development” public before Air Canada did, so I think the timing is on them. Should be quite a meeting — please report back!

  15. Swiss flights are not phantom in united it’s bootable

    Aeroplan is having an issue booking Swiss for 2 weeks now

    I’m surprised you don’t know this

  16. @Lucky – a story on CBC this morning doesn’t offer a lot of hope for booking star alliance carries after 2020

    “Any Aeroplan points they already have, however, will still be available to exchange for Air Canada flights, “with pricing competitive with other third-party rewards programs.”

    That’s not the case for flights on Air Canada’s Star Alliance partners, which includes United Airlines, Air China, Lufthansa and many more. After 2020, rewards for flights on other Star Alliance partners will only be available through the new Air Canada program.”

  17. I have been Super Elite for seven years on AC and have surpassed the one million mile mark on AC several years ago. I live in a non AC hub city in Canada, meaning most of my international travel involves a flight to an AC hub city to catch an AC international flight. I have seen the benefits of having status on AC continually erode over the years. The one good thing that hasn’t, has been the ability to easily use aeroplan points when one wants to book points travel. I have millions of points. Because I already have to travel to another city (hub city) to catch international flights, I’m already looking into getting status with other airlines as I know AC will erode all the benefits I obtained through my patronage. AC has NEVER improved anything in their status program in the last 15 years. They always “erode” the program under the guise of “alternative facts” such as descriptions such as “enhancement” or “restructures”. I have no hope that they will do anything different in the future.

  18. BA’s executive club UK programe had also been sold for a short period of time a private company in the late ’90-’92/’93 and you had to get your free flights issued by a company called Airmiles. Was a real pain in the arse, as the British say. No changes allowed, it was bad.

  19. I can also confirm that it’s not UA phantom space. ANA and LM also show LX space. Aeroplan admits it’s an issue that they’re “working on” for over 3 weeks now. Pretty frustrating if you ask me.

  20. @ kr @ Joe @ JoshR — That’s my fault. We’ve been dealing with/researching that for a few weeks, but our respective schedules have been ridiculous and I forgot to loop Ben in 🙁 . Whatever the issues is impacts more than just Swiss, but it’s very difficult to get any useful information out of Aeroplan. Hopefully it doesn’t end up being a multi-year problem like with Air China.

  21. Another reason they’ve given 3 years notice is to account for the mass redemptions that will surely follow. As you can see, few of us are enthused (or trust AC) with this decision.

  22. A brave face was put up even as the stock was tumbling by more than half at the same time through the morning. The other big news was that CEO (and “founder” of the company after the spin off — and before that AC VP of Aeroplan) Rupert Duschene, who has been on sick leave for the past several months, was resigning/retiring effective yesterday’s board meeting. Only one member of the AIMIA senior management team remaining from the AC days is Liz Graham.

    The preemptive announce the from AIMIA was a decision made at yesterday’s board meeting. It was stressed that the company has shed money-losing subsidiaries and paid down debt and was looking to improved results from its remaining overseas operations and stressed that the two banks (CIBC and TD) and Amex were its biggest buyers of points now well surpassing AC. The view is that Aeroplan is sustainable as a consumer loyalty program with a high income revenue base of 5 million members. That its data mining of members has yet to be recognized as a valuable asset. Over the past two years, it has created its own elite tiers with unique benefits and can compete (though in Canada without a grocery partner) with Air Miles, the country’s dominant shopper loyalty program (10 million members, but lower income demographic). In conversation it was admitted the AC decision was not unexpected after the airline established its own elite program under the Altitude brand and started reducing the number of award miles issued on most fares. It was over a decade ago that Aeroplan began separating its branding from just being AC’s FF program and establishing its own image in Tangerine, a name that never really caught on other than establishing the AE card/logo colour. Other internal reorganization and refocusing has supported viability post-AC in management’s mind.

    In spite of the bad news today, the board declared a 20-cent dividend for this quarter, which now on an annualized basis given a $4 share price is a 20% return, though of course factoring in the old share price in the $8 range (all C$s) and collapse is hardly reassuring to long time shareholders who might have paid $12 at the IPO…though holders of ACE units/shares would have gotten their shares for almost nothing when considering the overall returns distributed over the years, including the more successful regional airline spin off.

  23. I recently signed up for the Aeroplan TD VISA Infinite card due to some easy and generous sign up bonuses along with a simple way of avoiding the annual fee (be a TD banking customer and maintain a 5K balance to get the card and a suite of other goodies). For Aeroplan miles, I suppose I’ll just spend ’em as fast as I earn ’em, and then switch to whatever card and program AC goes to in 2020. No big deal.

  24. The problem here is AC is the only national carrier so even with the new AC program they don’t really have to step things up and can continue to offer a shitty program like Aeroplan.

  25. @Lucky, What kr is mentioning above regarding Swiss award space is actually a real problem currently.
    Even Mathew spoke about it here,
    http://liveandletsfly.boardingarea.com/2017/05/02/aeroplan-tech-issues/

    In short any idea why all the interesting partners of Air Canada have been removed from Aeroplan?
    I was looking forward to buy a award ticket from France to Boston on Swiss and finally ended up buying with my United points and not Aeroplan miles.

    This is very sad because i have a lot of Aeroplan miles which currently i dont know how to use.

  26. It creates a complicated system, because members have separate accounts with the airline and loyalty program, requiring them to visit two websites, etc.: This is absolutely not true. You simply go online to aeroplan.com and all the options you need are presented and your eticket is on its way once you have made your choice. Should you want to make any changes after the fact you deal directly with AC once you know you AC PNR.
    IROPS coverage I have never experienced so cant comment.
    There’s no way to use Aeroplan miles to upgrade on Air Canada, presumably because they couldn’t come up with a mutually beneficial way to do so: funnily enough you can use them for u/g s on all other STAR partners.
    Now the negatives: AC has once again demonstrated their inability to deal satisfactorily with customers in IROPS situation. The latest fiasco was leaving a 15 year old minor all by himself overnight in YYZ for which they blamed the airport and neither of them even wanted to give the kid a hotel room or meals after AC cancelled their flight.
    Ben Smith’s comment the 8% of Aeroplan seats are too high is a joke particularly on premium seats. They have 40 J seats on their 777s which means there are 3 seats available to Aeroplan. It gets worse on the 788 where only 2 seats are in J. He thinks this is too much?
    Unless their Executive management changes I will be enrolling in another STAR carriers loyalty program come 2020 or earlier.

  27. Aimia has a market cap of $511 million after today’s drop. Air Canada calculates an NPV from the formation of their own loyalty program at $2 billion… So couldn’t this just be a strategy to purchase back Aimia at a discount to previous market price? Easier to take Aeroplan back into the fold and make desired changes rather than upsetting their whole client base!

  28. Could this be the beginning of a hostile bid for Aeroplan by Air Canada? It could be cheaper for Air Canada to re-establish themselves as a rewards provider than to start their own program. And Aeroplan could be in a week negotiating position.

  29. Lucky:

    I agree with much of what you say, but your indications that Aeroplan points will have any value in the new AC program seem very optimistic. AC themselves have said that they will not be transferable, and while they will still be available for using AC flights, there is no knowing how or at what exchange rate. One should note that Aimia also own Air Miles in Canada, a revenue-based loyalty program, and there is more likelihood of them wrapping these two together than anything else.

    The real issue, as I see it, is what to do now. I have more than sufficient Aeroplan points to last for a couple of years, and can’t see any reason to accumulate a single additional point. Similarly, travellers who are trying to reach a goal that involves non-Star carriers after June 2020 (and these will grow in number as we get closer) have no way to achieve this other than to join another Star program. Accumulating Aeroplan points on Air Canada flights for other than immediate gratification seems to be pointless, and there are options. I am looking at Aegean – a lower Star Gold threshold (45K points), good accumulation and easy to join. I, and many other Canadian readers, would appreciate it if you could offer a brief competitive run-down of the Star carriers

    Aeroplan is having issues with LX now; and it is not phantom space. Similarly there is no space with CM, CA or AV … I suspect that the primary reason is that Aimia is not an airline, and in negotiations with the carriers has no “trade goods”. I just wish that the Aeroplan staff were not forced to say that “it is an IT problem that we are working on”. One suspects that one by one the other Star carriers will fall by the wayside and we will be left with AC and LH with their massive surcharges.

    The final issue is whether or not Aimia itself is strong enough to survive. Losing 60% of its stock market value in a day is an awkward position to be in. With fewer folks collecting as we switch to other credit cards and carriers, the road ahead is rocky; a collapsing program with the disappearing billions of point-liability might bring smiles to the stony-hearted board of Air Canada, but it won’t do much for their loyal customer base.

  30. Great move Air Canada. Aimia sucks! Aeroplan is going downhill and giving a bad name to Air Canada. Lousy customer service, heavy fuel/scam surcharge, often lack of available seats for certain regions, scam market seat vs. fixed seat redemption…..See you Aeroplan. The divorce should have happened long ago.

  31. I don’t hold out much hope of a great new loyalty program coming out of this. AC is in a dominant position in Canada and they’re the ONLY airline loyalty program. I think it’s a monstrous abuse of power on their part. They spun this off for a huge amount of money, I don’t remember exactly but I’m sure it was between $1B and $2B and the bulk of that came in 2008 so effectively leaving the investors with a mere 12 year deal. Now they’re putting a gun to Aimia’s head and either will pull the trigger by starting their own program or coerce them into selling it back a huge discount. I suppose it’s their own fault for pouring a billion or two into this for a mere 12 year deal and I think they should have insisted on a deal through to 2032 (25 years). But hey, that’s the corporate world I guess, if you can screw someone, then you just do it and that what AC are clearly doing. I don’t think Aimia can re-invent Aeroplan, most of their members will flock to AC because they want an airline loyalty program. Besides, Airmiles have the market sewn up so it would take a huge investment to be able to compete and keep their members. Not sure they can survive this in the long term.

  32. @ Max Johnson – Aimia only owns Air Miles in the Middle East, not in Canada. However, I do think a merger of the 2 programs in Canada may be likely.

  33. This does not bode well for us. I use Aeroplan for international travel accumulating points on my CIBC and AMEX credit cards. Next redemption is on SAA and EVA. Never ever fly AC internationally after realizing that YQ was making the AC international flights totally ridiculous in price.

    At this point I will concentrate on AS and partners. Hopefully AC will look at a good rewards program and adopt the good with the bad. However – experience with AC over the last 50 years is that they will screw the competition and then screw the customers (examples include Wardair and Canadian Airlines). Without the total support of the Liberal Government perhaps they will not be able to screw over other private concerns like in the past but they will certainly try.

    Aeroplan is not great but Air Canada will definitely be worse. Mark my words.

  34. Lucky and Tiffany,
    Here is a data point. About seven hours ago, I was able to book three business class award tickets on LX, for India-ZRH-MIA on LX using United miles. Not available on Aeroplan, and I know this was available until April 15 or so.

    Also, just a check, I tried multiple days for the India-ZRH-US cities today. On the United website, I was also able to see quite a few other days, from October to February, with availability on LX. None of them showed up on Aeroplan.

  35. I can only speak for myself here, and my accumulating habits, but this does not look promising at all.
    Like azamaraal said above, most of my redemptions have been done with Aeroplan points gained mostly through credit card spending (CIBC, Amex, etc). I suspect there are other business owners out there or individuals with very high monthly credit card spending who were able to collect Aeroplan points this way and redeem for flights.
    In addition, like other readers commented above, there were several Aeroplan partners for other everyday spending such as Esso gas, grocery stores, hardware stores, etc which also contributed to my Aeroplan accumulation.

    I am guessing it will be smart of AC to partner with a bank / credit card right at launch in 2020 but which will it be? AIMIAs partnership with CIBC and TD doesn’t end till 2024, so for 4 years will one of them have 3 kinds of “travel” reward cards: their own points (TD points, CIBC Aventura points), Aeroplan cards AND new Air Canada points co-branded cards…possible but unlikely.
    Amex currently has among other cards, both Airmiles and Aeroplan (with their AIMIA contract expiring next year), so that is a possibility.
    BMO has AirMiles and they are pushing their own World Elite Mastercard very hard (which is rated as one of the top travel credit cards btw and accumulates lots of points sure, but the flight redemptions are horrible – every time I compare their business class flights to Aeroplan, for a similar flight redemption I would have to spend 3-4 times the amount on the BMO credit card than what I have to spend on CIBC or Amex and redeem with Aeroplan)
    Will AC join RBC or ScotiaBank ? Uncertain

    Even if we get a satisfactory AC loyalty program , and a credit card partner right off the bat, how long until we have other decent AC loyalty shopping partners, like gas, grocery etc?

    There are many questions to be answered in the next three years but I have a feeling that for the short term this will be a loss for many people.

  36. Lucky, any thoughts on what to do with Canadian Membership Rewards now? I’ve always transferred them to Aeroplan. The other options are Avios, Alitalia MilleMiglia, Asia Miles, Delta SkyMiles, and Etihad Guest. (Aeropaln and Avios are transferred at 1000:1000, while the others are at 1000:750).

    Avios are appealing because I’m moving to London, but I’m worried about the taxes/fees. I’ve traditionally had good experiences with Aeroplan and finding Star Alliance long hauls with low taxes/fees.

    Interesting times ahead!

  37. I cross the pond on average 20 times annually, surprisingly i gave up my aeroplan acc rest over a decade ago and never looked back. upto 5 yrs ago one needed TWICE less asia miles for the same YYZ-LHR tickets on BA AA (via US) than aeroplan or LHs miles & more) currently one needs TRICE less VS flying club miles for the same US-UK roundtrips than aeroplan delta sky miles and TWICE less miles than aadvantage miles) …though with the same OUTRAGEOUS YQ surcharges. just think one can get a NORWEGIAN UK-US ow fare for aprox CAD$200 while with BA avios 13000 + CAD200 taxes or VS 10000+CAD200 taxes or the notorious aeroplan 30000 +CAD200 taxes.makes any sense to you guys? because it doesnt to me at all. while I never collected aeroplan, and just got rid off my avios am still stuck with VS flying club miles which apparently am using on NZ or SQ or DL redemption flights because it doesnt make any sense for VS flights whatsoever.

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