On his first day as Air Canada’s loyalty director four years ago, Mark Nasr asked his team to conduct introductory meetings with three banks that issued the airline’s credit cards. To his surprise, a manager immediately gave him bad news. “You can’t do that.”
How strange. Nasr had come from United Airlines with its massive and powerful loyalty program. When United executives wanted to speak to colleagues at JP Morgan Chase or other financial institutions, they met.
“Our brand is on the card and we are providing the services,” said Nasr, asking for clarification. ‘What do you mean that I can’t do that?’ He said, “No, no, I’m so sorry. But you can’t do that. We have to ask for permission. ‘”
Approval would have to come from Aimia, the publicly traded company that owned Air Canada’s frequent flyer program, Aeroplan. More than a decade earlier, the airline spun it out for cash. It held control for a while, but when Nasr stepped in, Aimia Aeroplans was the sole owner and controlled almost everything connected with it, including the credit card portfolio and access to card company executives.
“I still remember my first conversation with Legal,” said Nasr. “The nice lawyer on the other side of the phone said, ‘Hey, welcome to Air Canada. I heard you joined. ‘I think I cut him off at that point and said, “My team told me I couldn’t speak to an issuing bank that had a credit card with our name on it. Is that true? If it’s true, how is that possible? ‘”
From then on, Nasr suspected that the agreement could not last. Frequent flyer programs had become big business for most of the major airlines, and Air Canada wanted its own share of the profits. To do this, Air Canada would have to run the program internally.
There was a drama. Initially, Air Canada announced plans to start its own program from scratch when the Aimia contract ended in 2020. The airline was committed to it, but it would have been a challenge as customers would likely have lost their miles and points. The airline would have lost access to valuable customer data. After extensive negotiations, Air Canada eventually bought the program.
Air Canada has already introduced many of the new program features. The new Aeroplan will officially start on November 8th.
We spoke to Nasr before the big day. Here is some of what we learned.
Aimia put Air Canada at a disadvantage
When Aimia ran the program, it generated most of the profits, leaving Air Canada with a significant valuation deficit compared to its peers.
Rather than taking money direct from credit card companies like most airlines, Air Canada generated revenue primarily when Aimia bought seats on its planes at a significant discount. Aimia would give these seats to customers who redeem frequent flyer points
Still, the problems are broader than the lost revenue, said Nasr.
First, Nasr said, Aimia spent little time or money updating publicly accessible parts of the program, resulting in a clunky user experience. For example, passengers could not use points as intended, for example to upgrade to better seats.
Second, while Air Canada had essentially outsourced a significant portion of the airline, many customers didn’t know. They couldn’t understand why they were receiving such incoherent service, and they often let the airline know of their displeasure.
“The digital channels were completely separate, the phone channels were separate, and there were operational, technical, and work blocks that added to that separation,” said Nasr. “They’ve had customers who didn’t know who to call or what website to go to, and that’s obviously frustrating. They also had customers who, depending on what they wanted to do, had to speak or visit two sets of contact centers and two sets of websites. “
This program should be more user-friendly
Most major airline loyalty programs trace their history back to the early 1980s when forward-thinking airlines first introduced programs. They have evolved since then, but they still run on old legacy systems. They are neither as nimble nor as agile as customers expect.
With the new program, Air Canada wanted to make technology a priority. Customers may not notice any major changes – there is no noticeable technology – but the system is designed to provide a seamless user experience.
“A lot of people outside of the industry, or outside of large legacy companies, may not realize that IT, as I would say most of the time, is the biggest limitation preventing great ideas from actually seeing the light of day, especially in this industry” Said Nasr, “Not the department, just the ability from a technological point of view to deliver and operationalize something.”
Search results are an example. Global airlines usually have many partners, and customers can use miles to book a ticket for one of them. A customer wants to search for a Maldives award ticket and see dozens of results in a matter of seconds. However, it is not that easy to deliver up-to-date and bookable results that quickly. Loyalty freaks often complain about “phantom availability” or options that appear in search queries but cannot be booked.
On the new Aeroplan, Nasr said he was optimistic that the search results will be quick and accurate.
“The thing about the technical details is when they are resolved in the back end. All you have to do is click on search and get a reasonable set of results. That is actually magical,” said Nasr. “Sometimes the most amazing things are the most unremarkable things, things that just work, have more optionality and more flexibility.”
Super users get huge rewards
Air Canada’s program aims to win the loyalty of all travelers, including casual flyers looking for just enough points to fly one free domestic trip each year. But Nasr and many members of his team are loyalty freaks who love telling stories of their own epic redemptions.
Once, he said, he and a few colleagues from a former employer redeemed 40,000 miles for a first-class ticket in Asia. It sounds normal, but this program had a loose definition of Asia – it included Russia – and allowed people to fly very cumbersome routes. As he recalls, they booked a round-trip ticket from Moscow to Hong Kong, with particularly long connections to Frankfurt, Cairo, Istanbul, Hong Kong, Singapore, New Delhi and Zurich.
It was for fun. They were in their twenties, the program allowed it, and they were enjoying the arbitrage opportunity.
“The game was how close we could get to each city in 24 hours so we could enjoy it,” said Nasr. “I think in Cairo, if I remember correctly, we have 23 hours and 26 minutes or something on the ground.”
This type of itinerary can be expensive for an airline as it has to pay its partners for each trip. And Air Canada will have better technology than the Nasr airline program it used years ago, so some of those gimmicks will be blocked. But Nasr said consumers who are interested in playing the system will stand a chance because some of that ridiculousness can generate loyalty. Anyone redeeming this type of ticket must really like the program, Nasr said.
“When you’ve managed a program to have sweet spots, it creates target value and can create a buzz,” said Nasr.
Covid will not change the loyalty proposal
This is not a good time for an airline, and Air Canada is no exception. In the second quarter, sales fell by 89 percent. And with Canada still more locked down than the United States, recovery is not imminent.
At some point, people will want to travel in real numbers again and ticketing revenue should increase. The future of loyalty programs is less clear.
Will consumers still be obsessed with miles and points? Or are you just looking for the lowest tariff? And will they continue to apply for Airline brand credit cards? Or do they prefer simple cheap cashback cards that grew in popularity during the pandemic?
Unsurprisingly, Nasr expects most of it to come back.
“While I’m sure it won’t be the same in the future, I think there are certain elements that we can rely on,” he said. “People enjoy these programs and find a lot in them.”
Programs have now flourished for four decades. With that track record, he said, they are unlikely to go away or even become less relevant.
“One of the bloggers says American AAdvantage was the greatest marketing innovation in the history of the world when it was launched, and I really think that’s true,” said Nasr. “You think of the amount of interest and value that has been generated, and you also think of constructs that translate globally, such as: B. Travel loyalty in every corner of the world. It really is a remarkable thing, and it all happened within 10 or 15 years. “
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Photo Credit: Air Canada has revamped its loyalty program. One of the business class cabins is shown. Air Canada