How Air Canada Turned to its Loyalty Program to Fill Premium Seats
Plus: Norwegian Air takes another crack at loyalty. And: Zipair has the coolest upgrade program.
Happy Presidents’ Day to my U.S. readers, and happy Monday to others. I have three items today — two from the loyalty space and one from the world’s most innovative low-cost long-haul airline. Let’s start with a nugget from Air Canada.
After the pandemic hit and long-haul business travel dried up, Air Canada went with a playbook used by many airlines across the world. It launched what previously might have been marginal routes to places favored by two market segments — visiting friends and relatives (VFR), and premium leisure.
These travelers can reliably fill about 80 percent of the plane, in economy and premium economy, at decent fares. Up front, it is different. Premium leisure travelers are happy to buy up to business class for a reasonable sum, but they don’t replace revenue from last-minute business travelers headed to Tokyo or London, who may not care what it costs.
Normally, airlines would turn to discounting or marketing to fill business class on a new route like Vancouver to Bangkok. But Air Canada, which recently overhauled its loyalty program, called Aeroplan, sought a different approach. It attracted the miles-and-points crowd.
"As we started to work on the Aeroplan redemption models, we were able to find really good sources of revenue for our premium cabin," Lucie Guillemette, chief commercial officer, told analysts Friday on the carrier's fourth quarter earnings call. This strategy got a mention in the earnings release, with Air Canada saying fourth quarter premium revenues were up 13 percent compared to 2019, "supported in part by Aeroplan."1
Just a few years ago, this could not have happened. In a cash crunch, Air Canada spun off its program in 2005 and lost all control by 2008. For more than a decade, ending in January 2019 after Air Canada bought the program back, the airline neither owned nor controlled the loyalty scheme. It merely had an agreement to sell seats to the company that managed Aeroplan, called Aimia.2
By many accounts, Aimia was not a great steward of the program. Especially in later years, Aeroplan languished compared to other North American frequent flyer schemes, many of which developed new revenue streams, including re-imagined co-branded credit cards and lucrative partnerships with retailers.
Air Canada completed a full relaunch of Aeroplan in late 2020, and now the airline says the program is humming, with membership at an all-time high. This year it seeks to have seven million active members.
“It is difficult to overstate the importance of Aeroplan,” CEO Michael Rousseau said. “It is an attribute that provides a unique value proposition to our customers in a more fragmented airline market.”
More importantly, for those attuned to the bottom line, revenues from points sales to third parties increased nearly 50 percent compared to 2019. Members also redeemed 50 percent more miles last year than in the year before the pandemic, Air Canada said.
We’ll have to see how this Aeroplan strategy for filling premium cabins evolves now that long-haul revenue is returning, though it remains far from pre-pandemic levels.
“What we are seeing is steady growth on corporates for international markets — that has started to return a little bit later than what we were observing for North America,” Guillemette said. “We would like the corporate demand to come back to greater levels, but keep in mind that the pricing environment is also better than it was in 2019.”
Now let’s examine Norwegian’s recent moves on loyalty, and then I’ll tell you about the coolest upgrade program I’ve ever seen.