The frequent flyer program Aeroplan was spun off from Air Canada 13 years ago. It’s a separate, independent business that’s part of Aimia, a loyalty company with several other interests as well (like a 49% stake in Aeromexico’s Club Premier).
Air Canada and Aeroplan couldn’t come to an arrangement to extend their 15 year deal post-spinoff. Air Canada lost direct control over member communications. They couldn’t come to terms on economics to offer benefits to their best customers like waiving change fees on award tickets. And they saw an opportunity to derive ongoing profit from their marketing program with co-brand credit card partners, rather than incurring costs with Aeroplan.
So Air Canada announced last year that they were going to start their own program and no longer work with Aeroplan in 2020. However rather than start from scratch with a new program last month Air Canada, along with Aeroplan’s banking partners CIBC, TD, and Visa, made an offer to buy Aeroplan from Aimia.
Buying Aeroplan would give Air Canada its members to market to right away, and it would eliminate expected new major competition between the two from the marketplace before it even begins.
Aimia rejected a deal 3 weeks ago, but we also learned that Air Canada had increased its original offer. I wrote at the time that I believed Air Canada would still buy Aeroplan. And it looks like the parties have come to a deal. Aimia will sell Aeroplan to Air Canada and its partners for $450 million and assumption of $1.9 billion in program liability.
Air Canada is expected to run Aeroplan in the meantime once the deal closes and then launch a new program in July 2020, with points transferred in 1:1 from Aeroplan.
For some time Air Canada has been saying this is going to be a better program. No doubt there will be things they can do managing the program themselves, and starting from scratch, that they couldn’t do with the loyalty program operating as a separate business and without direct contact with their customers. I have to think some of the pain points like award change fees for top tier elites, that Aeroplan wanted Air Canada to pay for to accomplish in the past, go away.
- I believe this means greater value for existing Aeroplan points balances than what things would look like under a standalone program in two years.
- I also believe that fewer competitors means that Air Canada won’t need to be as generous as they would both having to build their membership from the ground up (they would start with contact infrormation for Aeroplan members who had flown Air Canada and booked directly) and having to win over business from a large established loyalty program.
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Aeroplan had shared broad strokes of what their program would look like beginning in July 2020. That’s no longer relevant. They started adding future partners like Porter Airlines, I hope Porter insisted on a breakup fee.
Air Canada hasn’t shared with us what their new program will look like. However they tell me that they plan to do so once this transaction closes. As much as I’m dying to know, I would not share the details yet either until I was certain I wouldn’t be competing against Aeroplan — since program details could be different in a world of competing against Aeroplan and not having to be as competitive.
Assuming the transaction closes Aeroplan members will still have an Air Canada relationship in two years, and access to Star Alliance in two years. And this gives Canadian members more of the certainty they’re looking for.