Aeroplan Links Up with Porter Airlines

Ever since the news broke that Air Canada will not be renewing their partnership past 2020, Aeroplan has been heading towards an uncertain future. It’s now been more than a year since that announcement, and as we approach the fateful date of June 29, 2020, the impending shakeups to the Canadian loyalty scene are a fair bit of buzz.

In recent weeks there’s been a flurry of news about the future of Aeroplan, as well as Aimia, the parent company that owns and operates it. In case you’ve missed some developments, I’ve put together a quick rundown below.

• Mid-July: Aimia CEO Jeremy Rabe shares with members the company’s vision of Aeroplan’s future, including retaining existing redemption levels for certain routes, offering competitive rewards for premium class travel, the ability to transfer points to other programs, and a potential new charter service. 
• July 25: Air Canada, TD, CIBC, and Visa make a proposal to buy out Aeroplan from Aimia in a $2.25B deal, one that’s ostensibly intended to wipe out their future competition. With Aimia having outlined their vision of Aeroplan’s future so recently, the question becomes whether they will stick by their guns and continue working to make that future a reality, or take the money and call it a day. 
• August 2: News emerges that Aimia has rebuffed the advances of Air Canada et al., holding true to their $2.45B valuation of the Aeroplan program; instead, in a surprise move, the loyalty program is in talks with the Oneworld airline alliance over a potential partnership.

I have to admit, my gut feeling was that Aimia would end up accepting the consortium’s terms, and that would settle the question of Aeroplan’s future once and for all. After all, what are Canadian markets known for if not consolidation after consolidation?

That’s why it was surprising and encouraging to hear that Aimia had clearly felt that the terms were less than favourable, and had no qualms about approaching a rival airline alliance in order to survive in the post-Air Canada era.

If yesterday’s news was surprising, imagine my shock at today’s revelations that Aeroplan and Porter Airlines will launch a comprehensive partnership beginning in July 2020. Not “in talks” over a “potential” partnership – this is happening!

Aeroplan & Porter Airlines

You can read the full press release here by Aimia Inc, and I’ve highlighted some key segments below:

Porter Airlines and Aimia Inc. are announcing a comprehensive partnership designating Porter as a preferred Canadian airline to issue Aeroplan Miles on Porter routes effective July 2020. Porter will also become a redemption partner, as of the effective time of the agreement, offering up to 60% of seat inventory for the purchase of flights with Aeroplan Miles at fixed-rate prices. The arrangement includes an extensive cooperative marketing program targeting existing Aeroplan members, with an emphasis on members who travel on Porter routes.

Points from Porter’s existing VIPorter loyalty program will be converted into Aeroplan Miles when the agreement becomes effective in 2020. Porter passengers will then be able to earn and redeem Aeroplan Miles on all Porter flights, plus across the growing Aeroplan collection of more than 75 travel and retail partners. This includes international airlines covering much of the globe.

On today’s announcement, Jeremy Rabe, the CEO of Aimia Inc. was quoted as saying:

Today’s announcement with Porter is consistent with our strategy to further differentiate and strengthen our air offering come July 2020. We’ve committed to our five million members that they will be able to choose any seat on any airline, anywhere, any time with the new Aeroplan program. By adding Porter, Canada’s top-rated airline, as a preferred airline partner as of July 2020, we will deliver our members industry-leading value on many popular routes.

As it stands, June 2020 will be your last opportunity to redeem Aeroplan miles for travel on Air Canada and Star Alliance airlines. Since you can book flights quite far out in advance, that effectively gives you until mid-2021 to travel on Star Alliance using Aeroplan miles. July will herald the beginning of the Porter partnership (and presumably many others as well; see below), and you’ll start earning and redeeming miles with Porter Airlines flights well. 

Furthermore, Porter’s own VIPorter loyalty program – which doesn’t get very much attention here in Canada primarily because its usefulness is limited to Porter flights – will be partially amalgamated into Aeroplan, and existing VIPorter points balances will be transferred into Aeroplan as of that date.

While there aren’t any details on how exactly the earning and redeeming on Porter will work, we can take a few notes from Jeremy Rabe’s recent interviews, in which he revealed a few of Aeroplan’s price points that the program intends to maintain after its relationship with Air Canada ends. These price points are listed below (only the first bullet is relevant):

• North American short-haul: 15,000 miles
• North American long-haul: 25,000 miles
• Mexico and Caribbean: 40,000 miles
• Europe: 60,000 miles
• Asia: 75,000 miles

It would be a stretch to call any of Porter’s current routes “long-haul”, so I imagine we’ll see redemptions priced in the range of 15,000 Aeroplan miles for a roundtrip on Porter Airlines (keep in mind that Porter doesn’t offer business class). 

From a consumer standpoint, this partnership seems completely out of left field. Back when the Air Canada breakup became known, people had speculated that Aeroplan might team up with WestJet, Canada’s second-largest airline, in order to continue delivering a compelling value proposition to Canadian travellers. But Porter? An airline whose fleet consists solely of turboprops, whose route network barely covers Canada’s Eastern provinces and the U.S. Northeast, and whose mascot is an animated raccoon? That’s a genuine surprise, to say the least. 

I imagine that this new partnership might resonate strongly with those who live in one of Porter’s destinations and who regularly fly with the airline (especially Toronto-based travellers who benefit greatly from the convenience of flying out of Billy Bishop Airport), but for everyone else, lots of questions about the future of Aeroplan still remain.

What’s Next for Aeroplan?

From this news, it’s easy to get the impression that Porter will be replacing Air Canada as Aeroplan’s chief Canadian partner, but that simply doesn’t make any sense. The Porter deal has to be the first of many partnerships, as there’d be far too many gaps in the program if it were only partnered with Porter – namely, there’d be no coverage of west of Thunder Bay at all, no ability to redeem miles on long-haul flights, no business class redemptions, etc.

Barring a highly unlikely expansion into long-haul operations on Porter’s part, Aeroplan will definitely need to strike up relationships elsewhere in order to realize its vision of life after Air Canada.

Let’s assume for the sake of argument that Aeroplan’s talks with Oneworld are successful, and that Aeroplan miles become redeemable on Oneworld airlines after 2020 at the “competitive rates” that Rabe has promised. If that were to occur, then on the face of it the final puzzle piece would have to be WestJet, who have a stronghold in Western Canada and, by then, will be offering a competitive international business class product.

In an ideal world, I could see Aeroplan flourishing as a leading Canadian rewards program if it offered members the ability to travel on Porter, WestJet, and Oneworld airlines. 

Nevertheless, Aimia has their work cut out for them if they want to make something like this a reality. WestJet has just recently announced the launch of Ampli, a new loyalty program in conjunction with RBC, so their enthusiasm to get involved with Aeroplan would be minimal, especially at a time when they’re focusing their resources on taking delivery of their long-haul fleet and expanding into a full-fledged mainline carrier. 

For this reason, I don’t view the WestJet angle as very likely, but I also fail to see what other options Aeroplan has if they want to serve Canadian travellers properly – something an airline operating in six Canadian provinces and a handful of US states certainly isn’t going to do.

Another thing to keep in mind is that while the current round of negotiations with the Air Canada-led consortium has broken down, there remains the possibility that Aimia’s $2.45B valuation of Aeroplan will be met. After all, an independent Aeroplan, allied with a comprehensive suite of Canadian and global partners, would be a real thorn in the side of the Air Canada’s newly-launched program when 2020 rolls around.

Make no mistake about it, Air Canada has long been reaping the rewards of its virtual monopoly in Canadian air travel, and won’t be so eager to relinquish its grip over the travel patterns of over five million Aeroplan members, and so they’d be wise not to pinch pennies over the prospect of nipping their future competition in the bud.

Conclusion

It’s great to see Aimia and Aeroplan hard at work as they seek to deliver on their promise of maintaining a high-value program for Canadian travellers. The new Porter partnership will definitely appeal to certain segments of the travelling public, but ultimately only represents a small piece of the puzzle.

One thing’s for sure – for those of us who pay attention to loyalty programs and how to maximize them, we’re living in interesting times. Come 2020, there might be more loyalty programs in Canada than what we’re accustomed to now, or there might be fewer; they might look similar to what we have now, or they might be different… but no matter what, there will always be sweet spots, and I look forward to finding them.