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A couple weeks ago the news broke that Air Canada will be acquiring Aeroplan. It may seem odd that the flag carrier of Canada doesn’t manage its own loyalty program, but that’s the way things have been since Air Canada spun off the program and sold it back in 2002. The fact that Air Canada wants it back doesn’t surprise me, as loyalty programs continue to be major profit centers.

Purchase instead of contract renewal

Since the news broke that Air Canada would not be renewing their contract with Aimia, Inc. back in 2017, the future of the Aeroplan program has been uncertain. Things have been business as usual since the announcement, but many bloggers have been encouraging people to make sure they burn through their points balance prior to the June 2020 sunset date.

Now the tables have turned entirely. It was previously announced that Air Canada was interested in purchasing their loyalty program back, and now it looks like that is what will likely happen. The program is actually being purchased by a consortium of Air Canada, TD Bank, CIBC and Visa. But the program will become the “new” Air Canada loyalty program if the deal works out. It’s a strange path, but Air Canada will have its own program again by 2020.

What is Air Canada paying to buy their program back? A whopping $450 million. They will also take on the liability for all the miles currently issued to program members, which is nearly $2 billion. The cash purchase price is $200 million higher than the initial offer, which was rejected by Aimia.

Any more details?

We’ll have to wait and see. The email announcement got me a bit hyped that there might actually be something noteworthy, but there really isn’t. Since all the focus is on finalizing the agreement, I doubt anything about the program is going to change in the near future. Air Canada and Aeroplan expect to come to an agreement sometime this fall. The purchase of Aeroplan by Air Canada will likely result in a very smooth transition for the program, and if an agreement is reached, I would have a high level of confidence still earning and utilizing miles in the program. I have a high level of confidence that things will also be better for those who are frequent fliers of Air Canada, as the program will be under direct control of the airline.

If the agreement falls through, Aeroplan claims that things will be “business as usual” for redeeming your miles. However, the future may look a bit more bleak for those holding miles in the program. I’d proactively make bookings in advance of the June 2020 end date. Air Canada has a few sweet spots, particularly on business class flights to Europe on the subset of partners where they don’t pass on fuel surcharges. They are also a good option for first class awards, if you’re willing to pay the surcharges. Just not on SWISS.

Given that Aeroplan has mile-earning and award contracts with other airlines, it’s definitely possible that the program could survive on its own. The death knell, however, is the fact that flying Air Canada won’t result in earning any miles. For those who primarily earn and/or redeem Aeroplan miles on Air Canada, the program may no longer hold much value. This could be a substantial number of its 5 million members. I’m speculating a bit, but if the deal falls through, I wouldn’t expect Aeroplan to stick around long term. At least I wouldn’t make that bet with my own miles.

Uncertain future for Aimia Inc.

While this likely won’t have any bearing on Aeroplan members, the company that is going to be selling Air Canada its loyalty program back won’t have much left in their portfolio once they do. Aimia Inc. previously acquired and then sold a U.K. loyalty program for a net loss. Their future looks rocky.

If they do hold on to Aeroplan, the program will likely become a shell of what it once was, as I explained above (they still own nearly half of AeroMexico’s program, though). There is the potential for Aeroplan to become a strong counter to Air Canada’s new program by continuing their partnerships with other Canadian Airlines, but they would need to work hard to develop this. Air Canada offers the lion’s share of Canadian flights, but other partners, the airlines serving the Arctic in particular, currently represent great value to program members [SEEThe 4 best uses of Aeroplan miles (updated 2017)].

If Aeroplan could strengthen or develop partnerships with the other Canadian carriers (Porter, Air Transat, WestJet) and maintain the array of Star Alliance partners they have (unlikely, given Air Canada’s departure), they might maintain a decent program in their own right. They literally just announced partnering with Porter (an airline I love, by the way) a few weeks ago. Given the pending purchase of the program by Air Canada, this possibility will almost certainly evaporate if an agreement is reached.

Conclusion

We’ll just have to continue to wait and see what the future holds for this potential purchase of Aeroplan by Air Canada. My hope is that Air Canada will be less stingy about releasing award space once they have the program in-house. But my fear is that they will make negative changes to the award charts. Changes to loyalty programs (especially those couched as “enhancements”) are typically negative. However, if the rumor that Air Canada will be dropping fuel surcharges is true, a modest devaluation might be tolerable. In summary:

  • Air Canada will very likely reacquire Aeroplan and bring it in-house (I expect this to happen)
  • Miles continue to be safe, and I wouldn’t expect any changes to the chart as a deal is worked out.
  • Investing in Aeroplan is probably a safe move, but still not for certain past June 2020 (I’m all about earning and burning, so I don’t even think that far ahead).
  • Aimia Inc. has a hard road ahead no matter what, whether they maintain ownership of Aeroplan and seek to create new partnerships for the program, or if they sell it.

Everything is simply speculation until an agreement is in place and details start to be hammered out.

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