Opinion: Regret over the aeroplan spin off
 

Is air canada better off from having spun off aeroplan? Are we as consumers?I would venture to say no, and no. I even found an interesting article from back in 2007 looking at the spin off, and that's when the economy was pretty good. http://www.thestar.com/Business/article/288832.

Given a general observation that loyalty programs seem to be keeping airlines afloat and drive a lot of the business that they do, do you think that AC regrets spinning off theirs? Don't airlines make a ton of money annually selling miles to credit card companies? I know as a customer I definitely feel worse off, since the goals of each don't feel aligned (try calling Air Canada about an AE reservation on their plane, or vice versa).

The most recent round of increases to YQ seem to highlight this further for me, along with AE saying "it's not me, its AC".

On the other hand, there are a myriad of ways as a consumer to get AE points, where you likely would not have similar methods if it was still owned by AC (you'd likely have online malls, credit cards and flying), so earning miles has never been easier.

So while I think we're worse off and so is AC, you might think otherwise.

I know this is not a new topic, but given the interesting changes I'm observing which seem to be pushing people to A3 and TK, and the recent change to the Asiana reward charts, I was just musing aloud.

I doubt Aeroplan would be successful as it is today if it was still under AC, but I can sure bet AC regrets it.

stock quote
Aeroplan Inc. (AIM) 11.90
Air Canada (AC-A) 1.02

They need each other. Aeroplan needs a differential from the Air Miles program and Air Canada needs a travel points program for loyality.

"Successful" depends on who you ask................... :D

From a hardcore FF, successful means BIS miles and no mileage accumulation from lifestyle activities (Sobeys, Esso, eStore, Nestle etc....)

From a mileage collector/junkie and occasional traveller, successful means having more opportunities to collect mileage.

As a shareholder of AE I am happy to see it hived off from AC. The whole point of the Milton Plan for AC was to spin off the profitable businesses so the airline, which seldom if ever made money from its own operations, could remain cash poor so the unions would have nothing to claim. Milton ensured that ACE shareholders received shares in most of the spun off divisions and those who bought into AC when it was spun off knew what they were getting. The whole bankruptcy enterprise was to find investor payback for those who bailed the new AC out. AE saw more prospects in the loyalty marketing world than the airline one, and has taken advantage of its new independence to pursue these.

Aeroplan is a lot of things, but a Loyalty Program isn't one of them.

From a business perspective, decoupling the loyalty program from the airline has a couple advantages... most of them mentioned already. AE can realize much more lucrative returns as they focus maximizing the marketing of their program in all sorts of new ways without being associated with a legacy airline.

From a customer perspective, it's the opposite. AE now is a separately entity, so fuel surcharges and other shenanigans (and even potential bankruptcy of the program) will have no legal repercussions on AC. AE has effectively created a firewall that allows them to take much bigger risks from a business perspective with almost no downsides.

The price of the share is not a clear indication of the success.. One would have to look at Market Cap, # of shares, ROE/I, and the growth rates since spinoff..

I concur, that AE is doing quite well, but due to some of the key policy changes such as 7 year expiry, 1 year account inactivity, etc that takes liability off their books.. and unfortunately, that affects those who collect points on a regular basis..

Plus this YQ, is a bit of a landmine situation to step around.. but some of the promos such as book Business for Economy points promo, helps with the pain..

Aeroplan is just yet another of these crooked operations that make something out of nothing, and with zero value for society as a whole.

For AC, however, it is probably their No. 1 customer. AC no longer has seats with zero marginsl value that it could use as essentially free stuff to allocate to rewards.

Instead, Aeroplan has turned into a way for AC to sell these seats ahead of time at a contracted price. Which may not be high, but is high enough that nowadays they price it so that FF awards come across as expensive.

Bottom line, AC now has to account for FF benefits in ways that make these compete with Aeroplan.

The crooks win, honest people such as you and I lose. Welcome to the 21st century.

In the past few years, I've been wishing that AC would ditch Aeroplan and start a proper frequent flyer programme. One can dream, can't they?

Not a fat chance. Aeroplan is their top customer.

As a separate entity, Aeroplan has no reason to foster loyalty to Air Canada -- only to foster loyalty to Aeroplan. In that sense its a one way relationship other than Aeroplan being a large customer, but they could get this with their own loyalty program.

I'm Canadian, our credit card signup bonuses generally suck. And you really don't have much other choice other than Aeroplan as loyalty program. So I'm kinda stuck.

In the past year AC/AE has removed the AE bonus from Aircanada bookings, slashed the award chart, added fuel surcharges to almost all airlines, made domestic first class bookings fall into Y for most airlines, and now redone the 2013 tiers.

I was always faithful to AC even when their fares are higher. They have a great hard product, and I felt I was well rewarded for the relationship through Aeroplan. In 2012 I started to fly other *A airlines when cheaper (largely US Airways), but I still credit back to Aeroplan as we don't have much of a choice up here.

Aeroplan hasn't lost a thing, they still have my loyalty. Yet Air Canada has started to lose out because of their loyalty program. Seems counter productive to me.

Not true. You have a variety of other loyalty credit card programs available (including other airlines).
http://rewardscanada.ca/choosing-a-t...edit-card.html

You've got that backwards. AE is in no fear of going into bankruptcy and we have been told it was AC that "forced" AE into adding the surcharges on other airlines' tickets. What it has affected is AC's ability to satisfy elite members, and for that reason after passing those responsibilities onto AE under contract recognized the downside and last year re-established its own elite program management. BTW CIBC is the buyer of the most AE miles, even greater number than AC buys each year.

While AC now has a way to "sell" empty seats ahead of time at a contracted price, AC also has to "pay" Aeroplan for every aeroplan mile earned on flights.

Obviously I don't have any numbers to back up my point, but if I were AC I think I'd rather have the program in house in order to:

• avoid paying 3rd parties for miles (other than *A FFP's)
• being able to keep all of the revenue that comes from CC partners, hotel partners, etc.

Now, many of the miles earned in Aeroplan have nothing to do AC. People may earn on a CC and redeem for gift cards, toasters, etc. The AE program is also much larger now than when it was spun off.

Aeroplan is a profitable company. I'm sure AC would prefer it if Aeroplan was a subsidiary that could contribute 100% of its profits to AC's bottom line instead of just the portion of the miles that are redeemed for flights (which Aeroplan takes a cut of anyways as Aeroplan will have a markup on every mile bought and sold).

Clearly I meant airline loyalty, and not general loyalty cards. But I will stand corrected, I wasn't aware of the RBC offerings for BA and Cathy Pacific. The Alaska Air MBNA card disapeared from the MBNA site a few weeks ago. Its still listed on Alaskaair.com but the link no longer works.

So if you largely travel within North America, that leaves you Aeroplan or Capital One with Delta. On the chart you linked to, 50% of the airline cards are Aeroplan cards. If you take a look of the signup bonuses for the other cards, and compare that to the US variety and bonuses and you can see why most of us stick with Aeroplan just the same.