Showing posts with label Air Canada. Show all posts
Showing posts with label Air Canada. Show all posts

Friday, June 9, 2017

Aeroplan, Air Canada and Aimia: Part II

The Aimia/Aeroplan saga trundles along as it will for some time to come, with a regular diet of smiles and positivity coming to us all from Aimia. This, of course, is to be expected, but there are certain elements of the future that are far from defined, and far from comforting for those of us with a substantial investment in this particular scrip.

Currently, Aimia are promoting a piece written by the respected and well-informed Jeffrey Kwok from his blog www.loyaltymatter.net. This is an interesting and well-informed blog, and he is well versed in the vagaries of the world of points, but I would like to take him up on a couple of elements in his piece.

Nothing is changing this very moment”, is the fist claim, and while he is correct in fact, in practice this claim is a touch disingenuous. With no clear and beneficial future, those of us sitting with millions of points, and there are many folks who have such numbers, are deciding to stop collecting and start using.

Many of these collectors have operated small businesses via a credit card for years, amassing huge numbers of points. These points, allowing for the inevitable inflation, have been earmarked for people’s retirement travel. I know at least four whose collection is over 10 million, and many others with several million Aeroplan points to their name. Now, they feel that they have two years to burn them, and the allocated award space is going faster than usual. One can expect an acceleration as we near the end of the Star Alliance alliance, and this feeling of urgency is a new phenomenon.

“You can still redeem like you did before” is true, but with diminishing returns. Certainly there are “exciting merchandise opportunities”, but unless you have been collecting points in order to get a new barbeque, this is not a really comforting option.

I would not be surprised if Aeroplan finds some other international alliance partner for which to redeem miles”. This is the crux of the whole problem; while I am sure that Aimia will find some outlets, the question is simply at what rate of exchange.

Remember always, that loyalty points are a massive currency with no central bank to back their value.

They, Aimia, are not an airline. As such they have no ability to trade seats with other carriers or groups of carriers as the airlines do. They will become a completely revenue-based loyalty program, and thus will have to buy seats, as the Avion, Air Miles and other non-airline programs do. This will in turn limit the price that they can pay, and any chance of Business or First Class rewards will disappear. And for this collecting Aeroplan in bulk, this opportunity, the aspirational seats, is the sweet spot.

Few collectors care about a low season ticket to Europe that still carries a $700 “service fee”; no, the aim is value, and in this regard the airline plans excel; they are able to trade Big Seats with each other, and not have to assign a cash price.

There will be other options, but until the exchange rate is confirmed, I do not believe that they will be of any significant interest.

“Will I still be collecting Aeroplan Miles? Yes”, says Jeffrey, and I wish him well. However, for those of us with a million miles or more, many are deciding to switch to a carrier where the attractive Big Seat options are available.

And here lies the rub.

As with every business, the 80/20 rule applies. 80% of Aimia’s revenue is generated by 20% of their clients. As revenue is generated by the sale of points to credit card (and other) companies, if the big-hitters stop collecting and change tack, this will hit Aimia’s cash flow very hard indeed. And at that point, collectors will have to start worrying about the longevity of a business who has already lost 65% of its market value.

I feel sorry for Aimia, although they knew that this was coming, or should have done, but there is no apparent Plan B, and serious collectors are now starting to burn their points in earnest whole there is still the opportunity to do so.


Sorry, Jeffrey, but this time I disagree!

Friday, May 12, 2017

Aeroplan and Air Canada

Aeroplan’s slow demise started months ago, and Air Canada’s announcement yesterday that they were going to intervene in their headline program was simply an inevitable conclusion to a slow motion drama. That Air Canada did not own their primary trade-brand has come of a bit of a shock to a lot of people.

First, some background. American Airlines, back in 1981, had a brilliant idea; reward your best customers with free flights. Their program, American AAdvantage continues to this day, but the simplicity of the original concept has been lost in an ever-growing, and completely unregulated, jungle of scrip. Air Canada’s program started in 1984, and has been a powerful marketing tool ever since.

The real benefit of airline points
However, “points” are simply a currency; their value lies in people’s belief that by accumulating them, a benefit will arise. There is no central bank, the closest is an organisation called points.com that for a massive fee will exchange one kind of point for another, and there are no exchange rates. Issuers simply print more and more, and the inevitable inflationary pressure this creates causes the redemption rates to rise rapidly. As more people have accumulated these points by the millions, the liability that airlines carry for their redemption has got completely out of hand, and something needs to be done.

That the system is out of control is indisputable; how a managed deflation will occur without annoying millions of customers is a tricky path to determine. Air Canada have struck the first blow, and are, if fact, to be commended.

The devil, however and as always, is in the detail.

There are two types of points in circulation. The first are those offered by airlines and hotels, and are backed by the promise of access to their (and their partners’) products. One gets sufficient airline/hotel points and one can claim a seat/room. To expand their attractiveness, they join alliances, and thus Aeroplan points were usable on the seats of all of their Star Alliance partners.

The second type of points are the loyalty points that are offered by Air Miles, the TD Bank "Infinity" and RBC “Avion”  programs. These represent money, and are simply individual accounts that a portion of the money gained through merchant fees is assigned for future use by the cardholder. Thus when one has reached a certain spend threshold, say 60,000 points with RBC, one can get a ticket to Europe, but with the caveat that there is a maximum value of $1,300 that is applied to the fare only, and not the taxes/surcharges. In this case, one can see that the value per point is 2.1% - spend $60,000 and get a (maximum) $1,300 value. Other programs are less valuable, some only offering a value of 0.5%.

If you wonder why the value is applied only to the ticket bear in mind that the actual “fare” can now comprise less than 50% of the total cost, and the “fare” often carries a substantial commission from the airline that again lowers the actual cost to the bank.

The difference is significant. Aeroplan is not owned by an airline, it was sold to a private company Aimia to raise money in 2002-5, and now, while the carrier has a management relationship with Aimia, they are not the operator. This is a very significant difference, and one of the factors behind the change, I believe.

While partner airlines can trade seats between each other, Aimia can not do so; and recently, Air China, COPA, Avianca and now Swiss have been blocking their seats from Aeroplan redemption. Will more carriers follow suit, thus further devaluing Aeroplan’s attractiveness? The points’ utility is decreasing, Aeroplan staff have been told to say that “it is an IT problem”, which it is not, and the service is faltering. The currency is devaluing and Air Canada are faced with the problem of how to rescue their loyalty program. Their decision was powerful, and a strong enough signal to cause Aimia’s stick price to drop by over 60% on the day.

The future:

We know little. We have been told that after June 2020, Aeroplan will no longer be the Air Canada (and thus local Star Alliance) program and any accrued points will be the responsibility of Aimia. There will be a new program, but one cannot accrue points in it now, and Aeroplan points will not be transferred into it; difficult if one is saving for a Star Alliance redemption beyond June 2020.

For those many, many people who already have sufficient Aeroplan points to last them for a couple of years, given today’s information, I would suggest the following. Enroll in another Star Alliance program, Aegean Airlines if one wants to travel to the Mediterranean, United Airlines' program for those looking to visit the US, Lufthansa/Swiss for a more global reach and accrue the Air Canada miles on those programs. Switch credit cards to one that offers miles in a known program (MBNA has an Alaska Airlines card that I use, the miles being good for a wide variety of carriers), there is British Airways card available, and the American Express cards offer a few redemption options. There is also, of course, a WestJet card, but this is really only good for travel on their network, and is again, revenue-based.

And wait and see. Having successfully knocked $1 billion off the market price for Aimia by a slight flex of muscle, perhaps Air Canada will simply buy Aeroplan back, recalibrate the program and continue as usual – this would be a fine outcome for everyone. And perhaps they will decide that they can comfortably rid themselves of the massive liability of accrued points by letting Aimia die and move on to a brave new world.

One thing is for certain; one can be pro-active or reactive, and given all of the signals that are currently in the air, I will wait for a week or so and then make my move.


And, at the same time, use up the points that have been stored away for a rainy day.

Thursday, June 18, 2015

Why airlines dislike (most) of their clients.

Mark my words, airlines and their clients are rarely in the same boat.

The aviation industry has always been peculiar, and it is, indeed, a very difficult one to regularly make a profit. It is said that the cumulative financial results of the world’s international airlines from the end of the Second World War is a nett loss. Currently this may be changing as the US carriers finally make money, and serious piles of the stuff, but if history is any guide to the future this will change.

Change happens for many reasons, but today’s attitudes of airlines and their staff really takes the cake. Forge the sycophantic “Thanks for your business, we know you have a choice” message one hears upon landing, they know that in general, there is no choice. Depending on where you live, there is a single dominant carrier with pricing of a level of predation that would make a bald-eagle blush.

Most city pairs can be flown by one of the three major carriers; the determinant factor is, however, the number of flights available. Yes, one can travel from Minneapolis to New York with Delta, American or United, but only Delta offers a non-stop service, and prices it accordingly. The others will offer various levels of discount depending on the day of the week, how individual flights are selling at any given moment and a variety of other factors that feed the pricing algorithms that they all operate. 

This is, of course, fair enough, but not inclined to make the public believe that the airlines care about them one iota; and on non competitive routes (Winnipeg/Minneapolis), fares are simply disgraceful, and cynical in the extreme.

And then they get you; having found a reasonable fare, now there is the fight over baggage, flyer points, boarding sequence, refreshments and so on. The airlines spin doctors like to tell us that this is all a wonderful utopia designed solely for our “choice”, but the sad truth is rather different.

Airlines seem to be the only business whose heavily advertised product is deliberately made so dreadful that we will pay anything not to have to use it as described.

Unless one is one of a carriers’ most favoured clients, and here we are looking at only the top 20th percentile, one can be expected to face a cynical barrier of auto-responses and disinterest in response to any and every irregularity. Dealing with impossible call centres in distant lands solves no problems; hiding behind veils of inaccessibility allowing such gems as “The computer says no” to become the stock answer, and the pretence of the fusion of Alliances to help travellers mask a rapidly growing corporate contempt for their customers.

Airlines are behaving like governments; disinterested and too big to fail.

But why? I believe that they are simply too big. Senior executives, and even most middle managers, have never bought a plane ticket in their lives, and have absolutely no idea what the customer interface with an airline is all about. They have “Interline Desks” and travel free; other airline staff help them because they all know and participate in the same game.

I don’t begrudge them the pass benefits at all, but I do wonder how it is that an entire industry has evolved that is run by people with absolutely no practical knowledge of the customer/industry relationship. Senior folks in the grocery industry have often purchased milk themselves, or go to a Home Hardware store; they know what expectations of service are. Airline executives have simply no idea whatsoever.

They have no concept of the lunacy of the ticket restrictions when trying to piece together a complex vacation, or the difficulty in corralling three friends or family together to plan a trip. And when they do, suddenly they offer a “lock in the fare” option for (only) another $75! They simply don’t understand the vast range of motivations for purchasing their product.

And herein lies the glimmer of hope. Pride, as we know, goes before a fall; sadly, falls don’t always follow pride, but we can’t have everything.

Airline profits are slim on a percentage basis, and one that returns 3 - 4% is considered quite spectacular. This implies, of course, that 97% of their income is spent operating the business, and this leaves a dangerous group of passengers who are basically ignored. For many, travel is completely discretionary, and the choice of airlines is too. For those living at gateways, those with choice, market share of the local dominants is being slowly eroded by the newcomers. Witness the extraordinary vitriol being spouted by the normally diplomatic CEOs of Delta and United over the growth of the Middle Easter Three: Emirates, Qatar and Etihad.

They know that they are losing, and spitting blood over “subsidies” is a poor substitute for raising their service to a point that people will actually want to purchase their tickets.

And while we are on the subject of subsidies, US Government requirements for thousands of employees, contractors and others to travel on a US carrier, and pay vast fares for the privilege generate billions of dollars of revenue for the airlines in a hidden subsidy.

The contract for the US Mail is another major source of subsidy; original awarded to Pan Am to allow it to operate the first long-haul routes to South America and Africa, this tool has long been a well-used part of the government’s arsenal of support.


It is time that airlines realised that their passengers doubled as human beings, and would react positively to good service off the plane. Air Canada’s service on board is exemplary, but it does not mirror the off-line support offered by their baggage folks, airport staff, sales staff and most certainly the reservation desks. If carriers are to secure their now-found financial stability, ensuring clients’ loyalty by delivering an attractive service from beginning to end rather than by forcing loyalty through geography and nicely designed web tools would be a good move.

Monday, June 8, 2015

Here we go again! A new airline in Canada

As if the Canadian skies weren’t crazy enough, we now have a brand new airline (well, actually a small but established airline (Flair Airlines) with a new and marginally catchy name “NewLeaf Travel Company”) starting in Winnipeg.

The lessons of Greyhound, JetsGo and Canada 3000 are learned, says their new CEO, and they are ready to do for the travelling public what no other carrier has successfully done before. Challenge the might of Air Canada and WestJet, and the depth of their pockets.

And money is only the starting point; Air Canada is a public company with a soaring stock price; WestJet's shareholders include the Ontario Pension fund. Neither like competition; they don’t even like each other, although they do use each other to fly their crews around, and start-ups are a menace. They might take business, and this needs to be stopped at all costs.

We will see predatory pricing; we will see additional shots of the travellers’ cocaine, Frequent Flyer Points, and we will see some pretty demanding advertising. We will also, soon enough, hear the cry of the stranded passenger seeking somebody’s assistance to bring them home in the event that NewLeaf Travel fails to deliver.

I would love to see new, low cost carriers survive; however, they regularly do so only in highly populated environments with an average flight-length of about one hour. Charter flights are, of course, a different matter, firstly because the risk is shared with the tour operator, but stand-alone scheduled airs service is not for the faint of heart. It is a high-risk and basically low-yield business.

It is very difficult to wean regular flyers from their preferred carrier/alliance, and the passengers who are driven completely by cost are about as fickle as any market can be; they will be off to an alternative as soon as a piece of bait is tossed their way, and will only look to pay as little as possible. Adding car rentals and hotels is a nice idea, but it took EasyJet and Ryanair, the doyens of this genre of airline,  many years and much investment capital to do so.

And they didn’t start their business life in Winnipeg. We may be a singularly cheap city, but we still remain a long, long way from anywhere. The key to a successful low-cost operation, apart from the obvious lack of legacy costs, pensions, ultra-highly paid executives and so on, is the ability to fly often; with an average on a one-hour flight, one can offer twice as many rotations as one can with an average flight of two hours in the air. This makes a huge difference.

When WestJet first started, they operated on the Vancouver, Calgary, Edmonton, Kelowna routes; all short and all popular. They started a Calgary / Winnipeg route, but soon abandoned it, realising that it took five hours to get the aircraft from Calgary to Winnipeg and back, during which time they could have flown three or even four legs in their familiar environment.

We will, of course, happily allow ourselves to be seduced again; but remember Zoom, Astro (yes, who remember their four months of scheduled service to Winnipeg), Nationair, Roots Air and of course Royal, the reincarnation of JetsGo.


I do wish NewLeaf success; I just don’t want the travel community, and the community at large to have to pick up the pieces.

Wednesday, October 6, 2010

The New Air Canada Crew(ing)

Far be it from me to whinge or complain about anything, but I do have a question.

I have just flown from Winnipeg to Toronto, a two-hour flight in the late morning, and witnessed a rather circumstance, that hearkens back to the Old Days of Air Canada.

Air Canada today, I have to say is pretty darned good. Much improved, both in equipment but mostly in attitude. Gone, fortunately for both their customers and shareholders, are the evil days of predominantly gnarly flight attendants glaring and challenging the slightest whim that a fare-paying passenger might have; gone are the days that none regard as Good-Old, where passengers were to be seen and not heard, and the imperious glance of a “stewardess”, for that is what they were then called, had one apologising before the crime could be committed.

Until today.

I was fortunate to be sitting in business class (AC 264 / 11 Oct for anyone who cares) among the crème of the airline’s passengers. A grand each way is the cost of this cosseting, and judging by the full cabin, there were several who paid their way; some were like me, travelling on points, some upgraded through their continuous use of the airline and some presumably company employees squeezed in at the last moment. However, all in all, we were a pretty valuable bunch to Air Canada.

The flight time is a shade under two hours, and for the first hour and a bit all went swimmingly. Then, our two attendants decided that it was their lunchtime, and service stopped. Not only stopped, but should a passenger happen to venture past their curtain and return leaving it possible to glance at the attendants eating and reading, the curtain was slammed shut.

As soon as the aircraft started its descent, they came to life. When I asked what they had been doing, and why I/we had not been offered a further sample of their delectable Malbec, I was advised in absolutely no uncertain terms that they had no lunch break scheduled on the ground, and so this was it.

And so I ask, perhaps rhetorically, but perhaps an Air Canada or union executive might care to enlighten me, why on a two-hour flight, it seems reasonable to take a thirty-minute break? Should we, the paying passengers have got a discount because of the abandonment caused by the crews' inability to make the two-hour journey without sustenance? And what of the pilots? Were they, too, forced to work on growling tummies, needing to abandon their duties for a feed?

Really, this is not good enough. I have sympathy for hungry flight attendants, but they should simply not abandon their charges, and whether I drink too much or not is hardly the question here, I might have wanted water for a life-saving pill. Yes, we could have rung the bell, but being well-trained to expect the withering look this action elicits so perfected by flight crews over the years, nobody dared.

It is a pity, because just as we started to revel in the New Air Canada Caring Mode, out popped a glimpse of the old cloven hoof. The situation is by no means irreparable! A single abandonment among hundreds of Caring Moments does not indicate a complete relapse.

It is, however, worrying that on a two-hour flight, a thirty-minute lunch-break can be scheduled.