Aeroplan points won’t take you as far

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This article was published 16/04/2011 (5477 days ago), so information in it may no longer be current.

MONTREAL — Aeroplan is making it costlier starting this summer for its members who travel business class or in economy to exotic destinations to cash in on free flights.

Groupe Aeroplan (TSX:AER), the loyalty points program operator behind the popular Aeroplan card, said Friday it’s boosting the required number of points by an average of just under five per cent starting July 15.

Economy flights within North America and to Europe, which accounts for the vast majority of its business, are unchanged.

“More than 70 per cent of all of our rewards issued won’t be affected,” marketing vice-president David Klein said in an interview.

The changes will include increasing the points needed for a long-haul business-class flight within North America to 50,000 points from the previous 40,000 points on Air Canada flights.

The required number of points to fly business class to both Middle Eastern and Australian destinations will rise by 20,000 points to 135,000 points.

Flights to Africa, however, will decrease to 135,000 from 150,000 points effective immediately.

There were smaller changes to economy class point requirements as well, with a flight to Mexico on Air Canada rising to 40,000 points from 35,000. Economy travel to Hawaii, southern South America, the Middle East and Australia will also be more costly.

Klein said the decision to revise the points requirements will help manage the higher costs of rewards in recent years. Points operators have felt the pinch of rising gas prices, which have driven up the costs of each airline seat.

It also aligns the mileage levels for Air Canada flights with those of the other carriers that are part of the Star Alliance.

Klein insisted Aeroplan will continue to offer flight rewards that are among the best value in the industry.

“Our members understand that prices go up, they understand that we haven’t touched the grid hardly at all in 26 years.”

Since most members won’t be affected by the change, Klein doesn’t believe the Aeroplan brand will take a hit from unhappy customers.

Neil Linsdell of Versant Partners expects the Montreal-based company may face a small hit as marginal members decide it’s no longer worth it to pay $120 a year for a CIBC Aerogold credit card.

He believes part of the reason Aeroplan is making the change is to reduce the wave of redemptions before December 2013 when miles earned at least seven years earlier expire.

“I think this is basically them prepping for that cash drain that’s going to happen,” he said in an interview.

Linsdell believes there will be four waves of redemptions before that date in which members may have difficulty finding flights of their choice. The first of these “relatively small” rushes will take place before the July deadline.

Linsdell said the mileage changes will increase Aeroplan’s revenues and profits by about five per cent after July. He added that increasing the required mileage could be a pre-emptive move before the contract with Air Canada is renegotiated at a higher cost.

Neither Air Canada nor Aeroplan would disclose details of the confidential cost agreement which expires in mid-2020. Aeroplan said it is also making improvements to its flight booking program.

— The Canadian Press