The Future of Aeroplan

AIMIA, the parent company of Aeroplan has come out with a new interview with CEO, Jeremy Rabe where much of the future of the program is laid out.  At first blush, the program sounds fantastic … maybe a little too fantastic?

Over the course of 7:40, many things are defined on how Aeroplan plans on moving forward without Air Canada as it’s major airline partner.  You can watch the entire interview here or you can follow along as we break down each feature of the program and our take on it as well as our score on the likelihood of it coming to fruition.

We’re going to skip over the marketing fluff like how the program will make you feel and how excited you will be and rather focus on what’s important to you as an Aeroplan member.

Aeroplan Redemptions

When you hear things like “redemptions wherever you want and whenever you want”, you need to take it with a grain of salt.

We don’t get a lot of detail in this response but Aeroplan seems to indicate that at least part of the new program will feature a fixed-value redemption.  Other programs that have this feature include the WestJet Rewards program as well as JetBlue’s Mosaic.  In these types of programs, points are valued at a certain dollar value and the number of points required to redeem are based on the actual cost of the ticket.  For example, in the WestJet Rewards program, a WestJet Dollar (WSD) is worth $1 and can be used against the base price of any WestJet flight.  That flight could be on sale or it could be expensive.  The point is you have access to the entire inventory but your WSD is worth $1.  No more, no less.

Rabe further clarifies this point by stating that you will be able to use Aeroplan miles on “any airline, any time, anywhere, and for any seat on the plane”.

What we like about this feature is that you are not bound by the distressed inventory that airlines make available for award flights.  The downside?  Don’t expect to fly Business/First class tickets for cheap.

Fixed value redemptions make a lot of sense for loyalty programs, both from an ease of use perspective as well as a “responsible to the bottom line” perspective.  I have no doubt that the new Aeroplan program will incorporate this feature.

Likelihood: 10/10

Points Transfer Program

Okay.  Wow.  Did I hear that right?

Aeroplan is planning on providing its users the ability to transfer Aeroplan Miles to 20 different airline partners for use within their own loyalty programs.  As a point of comparison, there are two notable transferable points programs in Canada, American Express’ Membership Rewards and the Starwood Preferred Guest (SPG) program.  SPG will cease to exist in August but they were by far the most powerful transfer program featuring 36 airline transfer partners.  AMEX came in second by with only 5 airline transfer partners, it could never hold a candle to SPG’s flexibility.

Aeroplan is making an audacious move and claiming that they will have “up to” 20 airline partners.

One obvious question is what will the transfer ratios be but the fact that there is that level of flexibility in the program is a HUGE plus.

Likelihood: 8/10

I have some doubts as to whether or not Aeroplan will be able to secure transfer relationships with 20 different airlines given that there are 27 airlines in the Star Alliance and I’m sure Air Canada might have something to say to the Star Alliance members that engage in a relationship that would ultimately hurt Air Canada’s new loyalty program.

To me, the number of airlines seems very high but the transfer ratios are the biggest question mark in my mind.  If you have 20 airline partners but deliver poor value in the transfer, do you really have 20 airline partners?

A Wide Variety of Rewards

Ultimately having access to more rewards is a good thing because what may resonate with you as a user of a loyalty program may not resonate with others.  By having a wide variety of rewards, you keep your users engaged within the program, which in turn helps the retail partners of the program.

What piqued my interest is when Rabe mentions the private jet in the video.  I’m sure a lot of you would like to have these types of unique experiences but I’m sure they will cost an arm and a leg.

Programs that offer these types of rewards typically do them at low/no risk.  Much like Amazon doesn’t actually stock this $230K Patek Phillipe watch in hopes that someone buys it, Aeroplan would likely not be on the hook for merchandise or experiences unless someone actually redeems Aeroplan Miles for it.

Likelihood: 10/10

I have no doubts that Aeroplan will be able to secure merchandise from their retail coallition partners to make this a reality.  The only question in my mind is the value you will get from your miles and whether or not they can put together aspirational packages to get people to spend their miles.

Redemption Levels

Here’s where things get really interesting.  Rabe is now on record for saying that redemption levels will be similar to what we have with Aeroplan currently.

Similar?  Didn’t he just quote all the same number of miles for redemptions to North America, Mexico and the Carribean, Europe, and Asia?

Well yes.  But then you hear the escape phrase that he snuck in there … “starting at”.  If you notice the graphics, the redemption rates state “beginning at”.

We don’t know what will ultimately happen to the redemption rates but I always think the worst when I hear things like “limited time” or “free (for the first 2 people) ice cream”.  I want to give Aeroplan the benefit of the doubt when it comes to redemption levels but I’ll be honest, I don’t expect great saver level award availability.

Likelihood of redemptions staying the same: 3/10

Likelihood of redemptions “starting at”: 10/10

Charter Flights?

This is what I would deem as a bold move on Aeroplan’s part.  It could turn out to be a very shrewd move or it could turn out to be disastrous.

Essentially what Aeroplan is proposing is to use its analytical data to determine which routes are the most likely to sell out an entire plane if offered up for award.  I’m unsure of the economics around what it costs to charter an entire plane but one would hope that Aeroplan would be able to stay in the black on the redemption.

Given that AIMIA has been collecting air travel data on Canadians since 1984, I would imagine their knowledge of route popularity is unparalleled.  I would expect AIMIA to offer charter flights on routes they know will 100% sell out.  Think Vancouver to Toronto (almost all the time) or Vancouver to Honolulu during winter.

Likelihood: 8/10

Partial Redemptions

Partial redemptions offer extreme flexibility in redemptions because you don’t have to wait until you have all your miles before you redeem.  Hotels have been in this game for a while with the Points + Cash redemption option.  WestJet has famously allowed for partial redemptions for a long time as well.

Keep in mind that this type of redemption is likely to belong in the Fixed Value Redemption world rather than the regular point redemptions that we have been used to in the current Aeroplan program.  Don’t expect huge value here but expect great flexibility.

Likelihood: 10/10

Conclusion

Everything that AIMIA and Aeroplan are suggesting seems like things that they can definitely deliver on.  While the concept is excellent, the delivery is how we will ultimately judge the success of the program.

I for one am excited about what this new program will deliver to Canadians and I am certainly not as down on the program as I was a few days ago.