Air Canada Pinpoints The Untapped Potential Of Aeroplan

Air Canada Executive Vice President Mark Nasr understands loyalty and that a primary goal of airline loyalty programs should be to push people to fly the associated airline…a straightforward but increasingly minority position in the frequent flyer world.

Air Canada EVP Understands Frequent Flyer Programs Are Also About Driving More Ticket Sales

It is often pointed out that American Airlines loses money flying and its profit center is in its AAdvantage loyalty program. There’s no doubt that these programs are cash cows for airlines and as stand-alone businesses are highly profitable. But Nasr correctly notes that the original point of these programs was to drive more business to the airline and that is something that I wish more airlines would focus on. Building up a profitable loyalty program and using that loyalty program to increase airline ticket sales are not mutually exclusive.

During Air Canada’s recent Investor Day, he said, “Some frequent flyer schemes may be too focused on selling points to third parties and not as concerned with nurturing airline loyalty. Good programs can do both.” He’s right. A good frequent flyer scheme will incentivize not only using a co-branded credit card but also flying the carrier.

Brian Sumers of The Airline Observer covered Nasr’s talk:

“We all recognize that travel loyalty programs have excelled at driving profits for co-brand cards as well as rewarding frequent flyer behavior,” Nasr told analysts. “Ironically, however, leading airlines have been victims of their own success in this regard.”

Nasr explained that many retailers still use their loyalty schemes to drive sales. But because airline loyalty has become an independent business, some carriers have forgotten the initial reason for these schemes: to put butts in seats at higher fares. “One could argue that travel loyalty programs have not been as successful as their retail cousins,” he said.

LifeMiles is a perfect example of this…there is almost no link between earning and spending LifeMiles and flying Avianca.

One way that Air Canada is using loyalty to sell more airline tickets is with its lounge network. Nasr said twice as many people use Air Canada’s Maple Leaf Lounges than fly business class. Nice lounges not only drive traffic, but drive loyalty and extra spending. View From The Wing points out that these “lounges need to be high enough quality to keep customers loyal and to sell credit cards.” He’s right and Air Canada has realized this. Nasr claims passengers who visit a lounge generate 20% higher spend per booking, even though many fly in economy class. They also pay for Air Canada’s premium credit card, which includes lounge access.

But how can Air Canada and others do even more with its loyalty program to drive more Air Canada ticket purchases?

What I’d like to see from Air Canada (well, from United, but that’s less likely to happen…) is an even more bifurcated approach to earning elite status. Yes, high-revenue passengers should probably be rewarded, even if they do not travel all that regularly. But in terms of loyalty, I would love to see a way for very frequent passengers who might have the flexibility to travel on cheap fares to be able to earn status absent any minimum spending requirement.

Currently, to earn elite status on Air Canada, you must fly:

Aeroplan 25K: 25,000 SQM or 25 SQS, and $3,000 SQD
Aeroplan 35K: 35,000 SQM or 35 SQS, and $4,000 SQD
Aeroplan 50K: 50,000 SQM or 50 SQS, and $6,000 SQD
Aeroplan 75K: 75,000 SQM or 75 SQS, and $9,000 SQD
Aeroplan Super Elite: 100,000 SQM or 100 SQS, and $20,000 SQD

(SQM = Status Qualifying Miles, SQS = Status Qualifying Segments, SQD = Status Qualifying Dollars)

Let’s say Super Elite status was also possible by earning 200,000 SQM without having to spend the $20,000…is it likely anyone could earn that amount of miles without spending the 20K? Nope…but I think many would try and those passengers are the very kind who fill seats that otherwise would have gone empty and whose fierce loyalty to Aeroplan turns them into mini-brand ambassadors for Air Canada.

But most importantly, Nasr should learn from the mistakes of his former colleague Ben Lipsey, now running the Flying Blue program. Devaluations are expected, but unannounced devaluations are unacceptable and greatly undermine trust. Aeroplan is long overdue for a devaluation of its own, but I hope it will be announced months in advance and will not be as severe…don’t kill the goose that lays the golden eggs. Air Canada could soften the blow by offering discounts for those who hold Aeroplan elite status…which would not only bolster Aeroplan loyalty, but push more people to travel on Air Canada. Fly 10 segments on Air Canada and receive a 10% rebate on all Aeroplan redemptions…why not something like this?

CONCLUSION

I appreciate the team running Air Canada and Aeroplan, and I know that Nasr understands the potential of frequent flyer programs in not only generating short-term profit but also long-term loyalty. I hope Air Canada will take that to a new level in a way that will reward those who fly on Air Canada and understand the huge difference between transactional and long-term loyalty, both of which are essential for sustained profitability.