What Will Be the Outcome of the Aeroplan - Air Canada Saga?
Aeroplan’s future was murky until the last few weeks, when new airline partners were announced, negotiations began with airline mega-alliance Oneworld, and Air Canada offered a surprising bid to take over Aeroplan. How will these recent events affect the future of Aeroplan, and by extension, Canadian travellers?
Why Is Air Canada Trying to Buy Aeroplan?
If you’re not caught up on the recent Aeroplan developments, here’s a quick historical breakdown to summarize:
1984: Air Canada creates the Aeroplan program in an effort to increase its number of frequent flyers
2005: Aeroplan is made publicly tradeable, eventually evolving into Aimia
2008: Air Canada sells the last of its Aeroplan/Aimia holdings, making Aeroplan/Aimia legally independent from Air Canada
May 2017: Air Canada announces plans to sever its Aeroplan partnership and create its own new loyalty program in 2020
July 2018: Air Canada, TD Bank, CIBC, and Visa Canada offer to buy Aeroplan for $250 million. Aimia scoffs at said bid.
- The bid is bumped up to $325 million. Aimia rejects this as well.
- Aimia begins talks with Oneworld as a new potential Aeroplan partner. Oneworld includes American Airlines, British Airways, and 30+ other airlines and affiliates.
- Aimia signs Porter Airlines, Flair Airlines, and Air Transat as Aeroplan partners
It may seem odd that Air Canada has made a bid for Aeroplan after deciding to leave the program just over a year ago. But currently Aimia has major Aeroplan Miles liability: there are $2 billion worth of Aeroplan Miles that Aeroplan must honor for its members. This is a huge problem considering that Aeroplan only has $500 million in cash on hand. If Air Canada were to leave, and Aeroplan doesn’t have new partners lined up, Aimia would face a cash crunch. Air Canada’s offer includes taking on that liability, and their hope is that they could acquire Aimia for relatively “cheap” while Aimia struggles with its finances.
On the flip side of things, Air Canada may have realized that splitting from Aeroplan could end up hurting them in the long run, since they’d be losing out on five million loyal customers. Without Aeroplan, Air Canada would have to build up its own in-house loyalty program from scratch. Air Canada isn’t used to being #2 or #3 in any category of the Canadian travel ecosystem, so the thought of starting from the bottom of loyalty may have caused them to rethink their strategy.
What Will Happen If Oneworld Joins Aeroplan?
Oneworld consists of nearly 40 airlines and affiliate airlines, including British Airways, American Airlines, Cathay Pacific, Qantas, and Finnair. A Oneworld-Aeroplan partnership would allow Aeroplan members to use their points on airlines and routes that were previously unavailable to them. But Oneworld is an international airline conglomerate that doesn’t offer flights within Canada itself, and with Air Canada out of the picture it would be difficult for members to use Aeroplan Miles for domestic air travel.
That’s where the new partnerships with Porter, Flair Airlines, and Air Transat make things interesting. Porter is a small airline that serves only parts of eastern Canada and the U.S., but it consistently gets rave reviews for its service. Flair Airlines is a small discount carrier based in Edmonton, but they do fly to many major cities in Canada. Finally, there’s Air Transat, which flies to 60 destinations around the world including North America, Central America, the Caribbean, Europe and the Middle East.
All of a sudden, a new Aeroplan network of Porter, Flair, Air Transat, and Oneworld doesn’t look too bad. Heck, the partnerships could be downright scary for Air Canada if they come to fruition.
What If Air Canada Makes a Successful Bid for Aeroplan?
The cynic in me wonders if Aimia’s Oneworld negotiations and their recent partnerships with these small airlines are just an elaborate pageant to bait Air Canada into offering more money. But if these tactics work and Air Canada does end up buying, I think it would be the most beneficial outcome for Canadian travellers overall. The July 2020 deadline for the Aeroplan-Air Canada split would no longer be relevant, and it would just be back to ‘business as usual’ for Aeroplan-Air Caanda—no dealing with an awkward integration of Aeroplan Miles into newly-partnered airlines. Air Canada might also try to extend the publicity bump they’ll get from the purchase by making much-needed improvements to the Aeroplan program.
Aeroplan members consistently complain about the lack of seats available or the number of points required when making a redemption (we see this pop up regularly in our readers’ comments). The current status quo is that Aimia owns Aeroplan, which buys seats from Air Canada at a discount. If Air Canada owns Aeroplan directly, in theory it would be easier for them to make more seats available and improve the overall value of the Aeroplan Miles. This could win back disenchanted ex-Aeroplan members that flocked to competing programs like WestJet in the past year, which gradually made improvements to its own loyalty program after Air Canada originally announced the Aeroplan split.
What Should You Do with Your Existing Aeroplan Miles?
Regardless of the outcome, my general advice is as follows: with any loyalty program, always operate under the assumption that your points/miles could be devalued at any second. Once you have enough points/miles racked up to buy something worthwhile, buy it. Don’t hoard the points for a rainy day.
As I said, if Air Canada buys Aeroplan hopefully they will try to make the Aeroplan program more attractive so it can win back members. But there’s never a guarantee that things will improve for members after a merger or takeover. And if Aeroplan ends up partnering with Oneworld who knows if existing Aeroplan Miles will be transferable at a fair value. Then there’s Porter, which has its own VIPorter points program; no announcement has been made yet about how points will transfer or merge.
Aeroplan currently offers a very competitive value for its Miles when members redeem for long-haul flights: 25,0000 Aeroplan Miles will currently get you a round-trip ticket in economy to anywhere in the continental U.S. or Canada (generally about $500-$700 market value). For these long-haul flights, GreedyRates estimates an Aeroplan Mile’s value at about $0.014. But Aeroplan gives a less generous value to its Miles when they’re redeemed for short-haul flights: about $0.0062 per Mile. So let’s say you have only 15,000 Miles, enough for a short haul flight within Canada and the continental U.S. The market price of that ticket is comparatively low, so using your Aeroplan points is likely not worth it after factoring in any taxes and fees you need to pay.
So, to Recap:
25,000 Miles or more? Book your next trip.
Less than 25,000 Miles? Get your popcorn ready and wait to see what happens with the potential Air Canada purchase vs. Oneworld partnership.