Money

Air Canada ditches Aeroplan reward miles to pilot own rewards program

THE CANADIAN PRESS

An Air Canada passenger jet takes off from Halifax. THE CANADIAN PRESS/Andrew Vaughan

An Air Canada passenger jet takes off from Halifax. THE CANADIAN PRESS/Andrew Vaughan

TORONTO — Air Canada said Thursday it will launch its own loyalty rewards plan in 2020 and not renew its contract with the company running Aeroplan, sending Aimia’s stock plummeting by more than 50 per cent and angering some points collectors.

The Montreal-based airline (TSX:AC) says customers will be able to continue collecting Aeroplan points until June 2020, after which miles earned from flying on Air Canada or its 26 Star Alliance partners will be credited to the in-house loyalty program instead. Travellers will be able to redeem those points for Air Canada and Star Alliance flights.

The airline said it intends to continue allowing Aeroplan members to redeem their Aeroplan points for seats on their flights after June 2020. However, Aimia’s CEO said that isn’t certain yet, as there are still a lot of discussions to be had.

Some Aeroplan members didn’t react kindly to the development on social media.

Some were annoyed their Aeroplan points wouldn’t be carried over to the airline’s in-house program in 2020. Others worried they wouldn’t be able to use Aeroplan points for Air Canada and Star Alliance flights beyond June 2020 and were concerned they’d have to rush to redeem points before it was too late.

This isn’t the only time in recent history Canadians have felt short shrifted by a loyalty program. LoyaltyOne, the company that operates Air Miles, upset consumers when it announced it would change its policy so collectors would lose any miles they don’t use within five years. The policy, which was to take effect Dec. 31, 2016, was cancelled following a consumer backlash.

Aimia CEO David Johnston said in an interview the company is exploring a range of alternatives for its business after Air Canada’s contract ends, including pursuing other partners.

“This is something we’ve anticipated,” Johnston said in an interview on his first day on the job after serving several months on an interim basis. The company announced Wednesday evening that Rupert Duchesne, who has been on medical leave, is retiring from the top role.

He assured the program’s five million customers they can expect a smooth transition.

“There’s three years left to run on the contract and in that period, it’s business as usual,” Johnston said.

Even so, Aimia (TSX:AIM) shares fell 57 per cent to $3.80. Air Canada’s stock rose 8.5 per cent to $16.16.

Air Canada said in a statement it’s aiming to strengthen its relationships with customers in making the switch. It declined to comment further on the change.

Analysts called the news positive for the airline. However, RBC Dominion Securities Inc. analyst Derek Spronck said in a note that it remains to be seen what the transition costs will be and why Air Canada assumes the net present value of the program repatriation over 15 years to be more than $2 billion. The airline said it will provide more detail on this at its investor day on Sept. 19, 2017.

Aeroplan was originally Air Canada’s in-house loyalty program. It was spun off as an independent business, now called Aimia Inc., which has expanded its customer base and evolved its services over the years.

The company has 5 million active members, who have a total of about 200 billion miles on their balances.

5 things to know about Aeroplan points and Air Canada

Here’s what that means for the five million Aeroplan members earning rewards for flying Air Canada and redeeming points for flights with the national carrier:

1. What happens to my Aeroplan points?

Nothing. Your Aeroplan balance remains intact, unless you choose to redeem points for flights or other rewards.

What changes is how you’ll earn points after June 2020 and, possibly, what you can buy with those points.

2. I’ve booked a flight in the future on Air Canada using Aeroplan points. What happens to my booking?

Members who have already planned trips and booked flights with their Aeroplan points will still be able to travel as planned.

3. What points do I earn when I fly on Air Canada?

Until Air Canada’s contract with Aimia expires in June 2020, miles earned for travel on Air Canada flights will be credited to travellers’ Aeroplan accounts.

After that, travellers who fly on Air Canada will earn points towards the company’s own loyalty program.

The same applies to travel on Air Canada’s 26 Star Alliance partners, including Air China, Lufthansa and United.

4. Can I still use Aeroplan points to book Air Canada flights?

Members can use their Aeroplan points to book Air Canada and Star Alliance flights until June 30, 2020. Aimia says it won’t stop offering flight rewards before then.

After that, the answer is unclear.

Air Canada said in a statement it intends to continue allowing Aeroplan members to redeem points for seats on Air Canada flights after that time.

However, Aimia CEO David Johnston said in an interview that isn’t certain yet, as there’s still lots of discussions to be had. He said the company continues to work on alternatives for after Air Canada leaves the program, including the possibility of new partners.

5. Does this change anything about my Aeroplan credit card?

Three banks offer Aeroplan credit cards: TD, CIBC and American Express.

Those contracts expire in 2024, Johnston said, adding he’s not worried those companies will choose to follow Air Canada’s lead.

He said the majority of Aeroplan members earn points not through flying but rather through the dollars they spend shopping while using these affiliated cards.