Long ago, in a galaxy far far away, Air Canada needed cash. To get that cash, it spun off its Aeroplan loyalty program. Many hailed this as the future of loyalty, and other airlines, like Aeromexico and Cathay Pacific, did the same thing. But there is a real downside to spinning off your program, and Air Canada found that out first-hand. It has now brought Aeroplan back under its watchful eye, and the new program details were released awhile back. I meant to get to this back then, but other stories tended up burying this one. But I’m back with it now, because it shows why Air Canada wanted its program back.
When Air Canada spun off Aeroplan in 2002, it was focused on short-term survival above and beyond anything else. It believed there was value to be “unlocked” and it figured it could raise cash. Over the next few years, it sold bits and pieces until 2008 when it was out completely.
At that point, Aeroplan’s owners found themselves in a somewhat challenging spot. They had to maximize the value of the program, but a lot of that was locked into the value that was generated for Air Canada. So, they took the time to diversify into a program that could earn and burn with a variety of partners around Canada. It negotiated credit card deals, and built the thing up, but ultimately far too much of that value was tied to Air Canada.
So in 2017 when Air Canada announced it was going to start its own program, the value of Aeroplan plunged. It plunged enough that Air Canada decided to just buy the program back and revamp it to do what it wanted.
Under the new program details, Aeroplan has been oriented toward providing benefit to Air Canada, something that was much harder to achieve with Aeroplan as a separate entity.
For example, it used to be that redemptions on Air Canada were either at the standard level or at insanely high “market fares.” Now, Air Canada can integrate the program more closely with its revenue management systems. The promise is “every seat, every Air Canada flight, no restrictions,” but what that really means is that Air Canada can properly price awards dynamically so that it will be happy to sell any seat for points, knowing that it can set the price that works for the airline without having to think about the profit of Aeroplan alone.
Aeroplan will also eliminate fuel surcharges for awards on Air Canada. This helps to push people to redeem on Air Canada more than on partners, but it also reflects that Air Canada can set the price right in number of miles so that it can provide what appears to be a very consumer-friendly change. Further, with miles valued properly, Air Canada will take miles to pay for taxes and fees if travelers prefer.
Now, in general I’m not a fan of variable pricing of awards from a consumer perspective, because it makes it hard for travelers to save up for something. But Air Canada is at least putting some brackets on this to set expectations. It has put out an award chart that gives travelers the range they’re likely to encounter when trying to redeem.
The chart breaks the world down into regions, and then it has expected pricing in mileage bands from there. Here, for example, is the Atlantic.
Let’s say you want to fly Business Class from Los Angeles to Copenhagen. That’s 5,624 miles so it falls into the second band which says the base level is 70,000 points, but Air Canada can range up to 180,000.
Of course, if you spend 180,000 miles on that, you’re probably making a mistake, but Air Canada can at least make that offer when it controls the program.
This also makes any points+cash offers easier to put out there. This is all about Air Canada optimizing its revenue, no longer about Aeroplan trying to maximize its revenue regardless of the benefit to Air Canada.
Points as a currency become even more useful. Air Canada can price upgrades, wifi, or really anything else in points as it sees fit. It becomes a part of regular business as opposed to a negotiation with a vendor.
We haven’t even touched on the elite program. Air Canada Altitude was the elite program, but it was kept at arm’s length from Aeroplan. Even customer logins were different, and the benefits were less integrated. Now, the same tiers exist, but it’s firmly part of Aeroplan. Elite members will get discounted redemptions for travel on Air Canada, and points earned outside of flying can also count for status qualification.
There’s also a whole suite of credit cards which will directly benefit the airline instead of benefiting Aeroplan and then having some benefit passed along to Air Canada.
What becomes very clear is that the loyalty program has tremendous value for the airline, and when you separate the two, they start working toward different goals. Aeroplan had been built to provide as much benefit for its owners as possible, but Air Canada decided it needed a program that would actually benefit itself in more than just a transactional way. This new program shows that.
