It was a big deal when Air Canada spun off its frequent flyer program. And it was probably a good idea for the time because Air Canada needed the cash. But times are different now, and Air Canada is in stronger shape. It makes sense it wants to control its own program.
Roughly 15 years after making its frequent flyer program a separate company, Air Canada is calling it quits, saying Thursday it will create its own program in June 2020, after the conclusion of its contract with the company that now controls it.
The loyalty program, called Aeroplan, is owned by an independent company called Aimia. After Air Canada creates its own new program in three years, Aimia will continue to own Aeroplan, though it’s not clear what the company will do with it after the relationship ends. Aimia also owns Nectar, a UK-based loyalty program, which allows consumers to collect points at various retailers.
Air Canada began spinning off its loyalty program in 2002, and it was fully independent by 2008. Selling it helped Air Canada raise cash during a difficult financial time for the airline — it filed for bankruptcy protection in 2003 — but in doing so, it lost control over some of its relationships with passengers.
Air Canada now knows less about its customers than many of its competitors, and unlike many airlines, it doesn’t have lucrative co-branded credit card deals, since those belong to Aimia. Credit cards are branded as Aeroplan.
The relationship has been confusing to customers, with many not understanding Aeroplan is part of a different company than Air Canada. A customer might have an issue with Aeroplan and be frustrated when Air Canada cannot solve it. Sometimes, a passenger flying on a reward ticket must call Air Canada for certain questions, and Aeroplan for others.
One vexing issue for passengers is frequent flyer status. Aeroplan has its own status program for its best customers, with three tiers — silver, black and diamond. But Air Canada has a similar program, called Altitude, with five levels. Air Canada’s program is not a traditional loyalty scheme, since Altitude elite members don’t earn miles from Air Canada toward free travel — they still get miles in the Aeroplan program — but they get perks directly from the airline for being loyal, including free upgrades.
Ultimately, Air Canada decided it wanted to control everything, in part to make messaging to customers more consistent. The airline has not decided what the program will be called, or exactly how it will operate.
In a statement on its website, Aimia said Aeroplan will operate normally until 2020, with customers still earning Aeroplan miles for Air Canada flights until the last day of the contract. It suggested the program will continue in some form after that, telling customers, “We are currently exploring a range of options beyond 2020.” It noted that the company fulfilled more than 700,000 non-air rewards last year, including hotels and car rentals.
Aeroplan has five million members, according to Aimia. They can book air travel on Air Canada, and all airlines in the Star Alliance.
When an Aeroplan member member makes an award booking for flights, Aimia pays Air Canada, an arrangement that makes Aeroplan, “Air Canada’s largest single customer and generates significant cash flows to Air Canada,” Aimia told investors recently.
Members may lose their ability to use Aeroplan miles on Air Canada and other Star Alliances when the contract ends, but that’s not a sure thing. It is possible Air Canada and Aimia will strike a deal to allow customers to use leftover Aeroplan miles for travel on Air Canada. But at that point, Aeroplan no longer will be Air Canada’s official loyalty program.
Over the years, Aeroplan has also become popular among travelers who never fly Air Canada. The program allows customers with points in many other loyalty programs, including American Express Reward Points, Marriott Rewards and Hilton Honors, to transfer those points to Aeroplan. After the transfer, consumers can use the points for travel on Air Canada or any Star Alliance airline.
Like most frequent flyer programs, Aeroplan also has credit cards. The program has deals with TD, CIBC, and American Express. In its statement, Aeroplan told customers, “nothing has changed” for credit cards — at least for now. “You can absolutely keep on earning Aeroplan miles and redeeming rewards as you normally do with your financial card and at our other partners,” it said.
Photo credit: Just a few months after introducing a new livery and uniforms, Air Canada now says it will start its own frequent flyer program. Air Canada