Air Canada CEO: Expect an Aeroplan Devaluation in 2020

Air Canada’s frequent flyer program Aeroplan was spun off into a separate public company in 2005. As a separate company, the frequent flyer program makes arms-length transactions with the airline and has a very extensive contract allowing it to buy a minimum number of seats and other benefits.

Air Canada expects to negotiate more favorable terms for the airline compared to the current contract which expires in 2020.

And ‘more favorable terms’ for the airline means less favorable terms for the consumer.

The CEO also hopes to improve Air Canada’s agreement with Aimia Inc., which administers the carrier’s Aeroplan loyalty program.

“We are having good discussions,” he said. “There’s no doubt that Air Canada will make some substantial gains coming out of that.”


Copyright: ronniechua / 123RF Stock Photo

Aeroplan’s parent Aimia purchased over half a billion dollars worth of travel on Air Canada in 2015, and is the single largest Air Canada customer. Aeroplan sells miles to partners like banks who award them to consumers, and sells miles to Air Canada as well. Air Canada paid out about $180 million to Aeroplan for miles it awarded to travelers.

Under a new agreement that’s expected to include a ‘revision’ of some of the terms, the airline expects to “reduce the percentage of seats that it holds for Aeroplan members.”

Hopefully there won’t be a concomitant increase in the cost of Star Alliance awards, which are a much better deal than redeeming Aeroplan points to actually fly Air Canada.

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 Milepoint.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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Comments

  1. I they’d made the announcement publicly and clearly, as you do in this post, it would be tough to fault them for only giving three years notice of the impending devaluation.

  2. I’ve never understood this model. Aeroplan’s owner basically has a gun to its head, what choice does it have with ZERO negotiating power? Go out of business if the two don’t agree? I guess the contract between AC and Aimia has some kind of non-compete provision so AC can’t simply reject the terms and start another new program, but this arrangement is still puzzling. Might make for a good blog post to do a deep dive into the details of how this came to be and how it works financially.

  3. @Chase, it does have a non-compete…. it expires in June 2020 🙂 Hence the negotiations, and AC’s extremely amazing negotiating position. What we say, or we walk.

    A full deep drive would be pages of text, but in short it was a pretty fair deal all around. Emerging from bankruptcy, AC got the money it needed to renew it’s fleet (the cash paid for their original 777s), Aeroplan got contractual rights to a huge number of seats and a non-compete for 15 years, including banning any competition on the CC front. Effectively, they were given 15 years to make a mileage program so strong that no one would ever walk away from it. For a while they did a decent job of it. Lately, not so much, and that’s probably making the negotiations not very much fun.

  4. Aeroplan is already a terrible program.
    There’s absolutely no reason to use Aeroplan these days – no need to wait till the announced devaluation in 2020.

  5. @Tom – 55k for business class to Europe with no fuel surcharges on many carriers seems like a pretty good reason to me. What’s always struck me as odd is that Aeroplan is the worst program to use for Air Canada, given that the surcharges are so high they make British Airways blush.

  6. Gary, is there any advantage to using aeroplan instead of United plus.

    Considering it as part of a Marriott package, as they are giving a bonus of about twenty five percent plus as you reported in the next little while.

    My flights are likely to either originate or end in Canada, and likely would be a combination of air Canada and partners to either Europe or Asia.

    Air o plan does not impose carrrier surcharges on air Canada flights, or do they?

    For me the key factor is availability, I already have a lot of miles in a few programs. I fly coach and book eleven months out when I can (which means on united two redeposit fees for a round trip when I can not travel). I do not have elite status on any airline , and am unlikely to have status again.

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