Air Canada’s Irregular Operations Insurance: A Clever Gimmick and a Bad Deal

CrankyFlier gives a gold star to a new Air Canada program where passengers can pay in advance with their ticket to have weather-related irregular operations treated the same as events within the airline’s control — entitled to transportation on other carriers, hotels and meals, etc.

While it’s certainly creative on Air Canada’s part, I wouldn’t call it the ‘win-win’ that Cranky does (except in the limited way that any voluntary market transaction is win-win for the participants, since each enters in it only to the extent that they perceive themselves as better off).

Air Canada is selling insurance not against catastrophic losses but against relatively low cost risks. Think extended warranties at Best Buy — only electronics warranties are likely easier to collect on than the alternative transportation that Air Canada is offering.

First, in the event of weather delays at a departure or arrival city, it’s going to be very difficult to get accomodated on other carriers. Those carriers are stranding their own passengers, and Air Canada passengers will be competing against the passengers on all other routes including those willing to buy their own new tickets. In most cases, it’s just the weather delays that are affecting Air Canada’s route system more generally (the questionable delays, clear skies, but weather in some destination related only by where your aircraft happens to be coming from) that will see meaningful benefits for passengers with this new program in terms of rebooking on other carriers… Those are the instances where other carriers are likely to have seats available for Air Canada to put passengers onto.

Second, insuring against low cost, low probability events is simply a bad deal. There’s a reason that electronics retailers have been said to really be in the insurance industry, offering gadgets as loss leaders in order to sell warranty products. Customers are almost always better off saving the cost of Air Canada’s insurance, and using the funds to self-insure against irregular operations events. Then take the money and use it to just buy their own new flights, hotels, and meals as necessary without having to go through Air Canada. And since these sorts of delays happen to most travelers relatively infrequently, this approach is likely to make customers financially better off, if they’re sufficiently disciplined to put that cash into savings every time they don’t purchase the insurance from Air Canada (or if they simply have the resources to pay the marginal cost of alternative accomodations themselves).

Even if you manage to qualify for and take advantage of Air Canada’s offer, it’s going to mean flying on the (granted, extensive) list of airlines they work with (no options to fly the airlines not on their list, like you could with your own cash) and staying if necessary at the hotel they offer you.

I prefer the flexibility to solve my own problems. For hotels, an internet connection and priceline or some hotel points are all I need. For flights, I do have a large stash of points if I’m paying for the trip out of pocket. When the fare suggests it’s worthwhile, most airlines that I have mileage balances with offer last-seat availability for a high cost number of miles. In a way, my miles and points are an insurance policy — and I don’t have to give them up to Air Canada every time I book a ticket in order to have some peace of mind.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I would agree that this isn’t the right product for someone like you. You have a ton of points, you’re internet savvy, and you can probably get further using your own knowledge than any Air Canada rep can get you.

    But think about this from the point of view of regular casual travelers. They hear all the horror stories, they get stressed out. This is a relatively low fee for peace of mind. And, if they do get stuck, they aren’t going to have the same resources you have to get out of a jam. How nice to be able to just call the 800 number and be taken care of?

    Though it may not end up paying for itself often in a pure dollars and sense way, the value you put on peace of mind could easily make this worthwhile.

    (And no, I’ll never buy the electronics store warranties.)

  2. “Though it may not end up paying for itself often in a pure dollars and sense way, the value you put on peace of mind could easily make this worthwhile.”

    In other words, sometimes you have to buy the warranty on the dishwasher to show your spouse you care about the home… even if it doesn’t make economic sense to do so.

    Miles and points and savvy aside, you’re still better on net net saving the money and buying a new ticket (and in many cases refunding the cancelled flight) if need be.

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