Under mounting criticism for refusing to provide refunds on cancelled flights, Air Canada recently announced that they will be rolling out a new flexible rebooking policy. 

Instead of receiving a non-transferrable travel credit with two-year validity, customers may now request a fully transferrable voucher with no expiry date (equivalent to an Air Canada gift card), or to convert the remaining value of their ticket into Aeroplan miles at 65% higher than the usual rate.

(In addition, customers who have booked refundable tickets may also request a full refund to the original method of payment – that hasn’t changed.) 

While Air Canada’s Ready for Takeoff page mentions these additional new goodwill options, it provides precious few details on how the conversion process into Aeroplan miles actually works in practice. I therefore decided to book a couple of refundable tickets for a test run. 

Let’s Take It for a Spin

I booked two refundable fares with Air Canada and see what refund options I’d be offered when I choose to cancel: a Calgary–Vancouver flight for $257.38 and a New York–Montreal flight for $261.96.

As a general rule in North America, for the first 24 hours after your booking, you’re able to cancel for free and get a full refund back to your original method of payment:

Then, shortly after 24 hours had passed, clicking the “Cancel Flight” button led me to a new screen to choose between one of three options: a full refund, a flexible Air Canada Travel Voucher, and a conversion into Aeroplan miles.

I was especially curious how the number of Aeroplan miles would be calculated.

Recall that the standard rate at which Aeroplan sells miles is 3 cents per point (cpp) (CAD), and that when they first launched the Buy Miles feature, there was a bonus of at least 65% attached to the purchased miles.

With a 65% bonus, the effective rate at which you were buying Aeroplan miles was 1.8cpp (CAD), so that’s the rate that I would expect to be used for calculating the conversion from your Air Canada ticket under this goodwill policy.

Nevertheless, Air Canada’s website uses somewhat confusing language to describe the process:

Aeroplan Miles – Convert and transfer the remaining value of all tickets and associated services, minus any taxes, into Aeroplan Miles, and get an additional 65% bonus miles.

What exactly does “minus any taxes” mean? Does this refer to the taxes and fees associated with the booking (as opposed to the base fare)?

The answer is no: the full amount of your ticket – including the base fare, the government-imposed taxes and fees, the airport improvement fees, and any other miscellaneous fees bundled into the all-in price – are all included in the refunded amount.

Instead, “minus any taxes” refers to the sales tax on the Aeroplan miles that you receive as part of the conversion.

After all, when converting the unused value of your ticket into miles, what you’re effectively doing is using the money that you’ve paid towards a ticket to buy Aeroplan miles at 1.8cpp instead. If you’re a Canadian resident, you’d have to pay sales tax on that purchase, just like you would when you buy miles from the program directly.

Let’s forget about my test-drive bookings for a second. Someone I know, an Alberta resident, had sent me the following screenshot when he refunded his own Air Canada ticket and got the value converted into Aeroplan miles:

You’ll see that, when calculating the number of Aeroplan miles to be converted, the 5% Alberta GST is “backed out” from the total remaining value of the ticket.

In essence, when you use a total sum of $1,942.38 to purchase Aeroplan miles at 1.8cpp as an Alberta resident, you’d pay $92.49 worth of GST and receive $1,849.89 worth of actual miles. (The specific math here is 1,942.39 / 1.05 = 1,849.89.)

Then, that remaining value of $1,849.89 is used to calculate how many Aeroplan miles you get. If $1,849.89 is equivalent to 184,989 Canadian cents, and we’re acquiring Aeroplan miles at 1.8 cents per point, then we need to divide 184989 by 1.8 to arrive at 102,771 miles – or 102,770 miles when rounded down to the nearest 10 miles, which seems to be the standard practice.

The Alberta resident effectively paid a 5% GST. I imagine that an Ontarian would have 13% HST backed out from their total, a Nova Scotian would have 15% backed out, and so on.

How is your province of residence determined? My feeling is that it’s based on the address in your Aeroplan account. Indeed, I myself happen to have my US address listed in my Aeroplan account, and going back to my test bookings, I was pleasantly surprised to discover that there was no tax being backed out:

If we take the full ticket value of $257.38 and divide it by 1.8cpp, we get 14,299 miles – or 14,290 miles when rounded down to the nearest 10 miles.

The same was true for my second test booking: take the full value of $261.96, divide it by 1.8cpp, and round down to the nearest 10 miles, and we get 14,550 miles:

Indeed, non-Canadian residents will benefit from the highest rate when converting tickets into Aeroplan miles – this is equivalent to how you don’t get charged any sales tax when you use a US credit card to buy Aeroplan miles directly from the program either.

I decided to follow through with one of the test bookings and convert the ticket into miles. After all, as long as I redeem these miles for higher than 1.8cpp later, I’m coming out ahead.

The confirmation page states that it may take up to four weeks to receive the miles in your Aeroplan account, so don’t count on being able to redeem these miles instantly:

Should You Buy Aeroplan Miles at 1.8cpp?

One consequence of this new policy is that the Aeroplan Buy Miles promotion has effectively never ended – the ability to purchase Aeroplan miles at 1.8cpp is essentially still widely available. What’s more, unlike when purchasing miles directly through the program, there are no limits to how many Aeroplan miles you can buy.

On the surface, this means that many flights and itineraries would be easily bookable at a fraction of their usual cost. For example, an Aeroplan Mini-RTW in business class begins at 150,000 Aeroplan miles, which would cost only $2,700.

Nevertheless, my usual warnings about buying miles still apply: there’s plenty of uncertainty in the travel landscape these days, so it wouldn’t be prudent to acquire a huge chunk of miles now with a view to use them over the next few years.

Moreover, also consider how many miles you currently have or can easily earn via credit card signup bonuses – there’s no sense in spending cash to buy miles if you’re already sitting on a large pile.

Only if you don’t have a meaningful amount of Aeroplan miles right now, but would like to earn a large sum for immediate use, would it make sense to consider acquiring them at 1.8 cents apiece.

What About Tickets Issued by Travel Agencies?

Currently, the ability to convert the unused value of tickets into Aeroplan miles at a rate of 1.8cpp is only enabled for bookings made directly with Air Canada, rather than bookings made via travel agencies (which includes tickets issued by other loyalty programs like American Express Membership Rewards, CIBC Aventura, Air Miles, etc.)

A recent communication with American Express Travel on the matter returned the following:

Air Canada’s Ready for Takeoff page continues to say: “For customers who booked through a travel agency, Air Canada is working to make these options available. Please contact your travel agent for more information.”

Meanwhile, the website pegs June 15 as the date on which several other features relating to the new goodwill policy are expected to be enabled, so perhaps the travel agencies will also receive their instructions on that date.

I’ve reached out to Air Canada to see if there’s an expected timeline for bookings by travel agencies to receive this functionality, and will update this space when I hear back.

Conclusion

While Air Canada’s new rebooking and cancellation policies still fall short of fulfilling their obligations under the law to provide refunds on cancelled flights, they at least open up something of a sweet spot in allowing customers to convert the value of their tickets into Aeroplan miles at an effective rate of 1.8cpp.

The online conversion function is relatively smooth, with provincial GST being applied on the amount for Aeroplan members with Canadian addresses, and a four-week timeline for the Aeroplan miles to arrive in your account.

I expect that a good chunk of customers with cancelled flights will end up choosing this option, especially if they’re confident in achieving higher than a 1.8cpp return on the Aeroplan miles when it’s time to redeem.