Air Canada to launch its own loyalty program

TORONTO — Air Canada said Thursday it will launch its own loyalty rewards plan in 2020 and not renew its contract with the company running Aeroplan, sending Aimia’s stock plummeting by more than 50 per cent and angering some points collectors.

The Montreal-based airline (TSX:AC) says customers will be able to continue collecting Aeroplan points until June 2020, after which miles earned from flying on Air Canada or its 26 Star Alliance partners will be credited to the in-house loyalty program instead. Travellers will be able to redeem those points for Air Canada and Star Alliance flights.

The airline said it intends to continue allowing Aeroplan members to redeem their Aeroplan points for seats on their flights after June 2020. However, Aimia’s CEO said that isn’t certain yet, as there are still a lot of discussions to be had.

Some Aeroplan members didn’t react kindly to the development on social media.

Some were annoyed their Aeroplan points wouldn’t be carried over to the airline’s in-house program in 2020. Others worried they wouldn’t be able to use Aeroplan points for Air Canada and Star Alliance flights beyond June 2020 and were concerned they’d have to rush to redeem points before it was too late.

This isn’t the only time in recent history Canadians have felt short shrifted by a loyalty program. LoyaltyOne, the company that operates Air Miles, upset consumers when it announced it would change its policy so collectors would lose any miles they don’t use within five years.

The policy, which was to take effect Dec. 31, 2016, was cancelled following a consumer backlash.

Aimia CEO David Johnston said in an interview the company is exploring a range of alternatives for its business after Air Canada’s contract ends, including pursuing other partners.

“This is something we’ve anticipated,” Johnston said in an interview on his first day on the job after serving several months on an interim basis. The company announced Wednesday evening that Rupert Duchesne, who has been on medical leave, is retiring from the top role.

He assured the program’s five million customers they can expect a smooth transition.

“There’s three years left to run on the contract and in that period, it’s business as usual,” Johnston said.

Even so, Aimia (TSX:AIM) shares fell 57 per cent to $3.80. Air Canada’s stock rose 8.5 per cent to $16.16.

Air Canada said in a statement it’s aiming to strengthen its relationships with customers in making the switch. It declined to comment further on the change.

Analysts called the news positive for the airline. However, RBC Dominion Securities Inc. analyst Derek Spronck said in a note that it remains to be seen what the transition costs will be and why Air Canada assumes the net present value of the program repatriation over 15 years to be more than $2 billion.

The airline said it will provide more detail on this at its investor day on Sept. 19, 2017.

Aeroplan was originally Air Canada’s in-house loyalty program. It was spun off as an independent business, now called Aimia Inc., which has expanded its customer base and evolved its services over the years.

The company has 5 million active members, who have a total of about 200 billion miles on their balances.

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