The news, when it was released was surprising but in reality it it makes a lot of sense for this consortium of four companies to attempt the buy out of Aeroplan. Here are just some of the reasons why:
- With the programs splitting you have a lot of loyal Air Canada frequent flyers who are sitting on hundreds of thousands of Aeroplan miles that they will not be able to use as they have become accustomed to come July 2020. If the takeover works Air Canada has explicitly stated that Aeroplan miles will convert 1:1 to their new program. They would be taking away the factor of having a lot of PO'd members now having 0 mile balances in a new program and tons of miles in a program they may not want to use. We mentioned in the past that Air Canada would maybe have to dole out some miles in the new program to these elite frequent flyers to appease them and this would negate the need to do so
- It essentially lets the new Air Canada program start with 5 million members rather than starting from 0.
- With Aeroplan's promising announcement from the week before and the majority of Aeroplan members not being Air Canada frequent flyers, Air Canada stood at a place where they may not have been able to attract those members over to their program. Again it goes back to starting from scratch and not having an attractive membership base
- It removes the necessity to compete against Aeroplan
- The credit card issuers will also have access to those 5 million members rather than the small amount Air Canada would initially see and they won't worry about having to lose cardholders to the new Air Canada program should Air Canada choose to go with a different bank and perhaps a Mastercard as their co-brand card. Both TD and CIBC have a lot invested in Aeroplan so it makes sense for the banks to try to keep all those customers.
If this deal does go through there are both pros and cons for consumers. The pro is not having to burn all your Aeroplan miles before 2020 and being able to continue to use them on Air Canada, Star Alliance and other airline partners for Economy, Premium Economy, Business and First class redemptions with the latter premium classes still providing an out sized value for the miles redeemed. Members could relax and continue on as normal with their earning and burning of miles. The con to this deal is the loss of that potential competition. We've stated quite a few times over the past year with the introduction of a new Air Canada program the market in Canada will boom with offers for the consumer and not just from Aeroplan and Air Canada, from other programs looking to take advantage of the split and there is also one other potential huge con or loser in the deal and it is the one piece that many people did not cover and that is where is American Express in all this. Currently American Express' contract with Aimia will run until June 29, 2020 and there is a very good chance that may not be extended after that date if this proposed takeover happens. Seeing that you have two major banks combined with Visa looking to buy the program, chances are they will not want a competitor who can offer richer rewards to be part of it. Of course if Aimia does not accept this or any future offer and continues on the split course then chances are Amex will still be part of Aeroplan's and/or Air Canada's future plans come July 2020.
That's about it in a nutshell, we just have to wait two more days to see what happens with the continuing drama of the Air Canada Aeroplan saga. Speaking of saga be sure to check out our resource page that covers everything and anything of the Aeroplan Air Canada split.
