Aeroplan defends against criticism about value of Aeroplan miles used for fees
The corporate logo of Aimia, formerly Groupe Aeroplan. (THE CANADIAN PRESS)
Ross Marowits, The Canadian Press
Published Friday, May 13, 2016 11:05AM EDT
Last Updated Friday, May 13, 2016 8:30PM EDT
MONTREAL -- New Aeroplan rules that let customers use miles to pay for flight fees, taxes and surcharges have become popular even if they offer less value than when the miles are cashed in for flights, says the head of the company that runs the program.
While cardholders with huge mileage balances have eagerly used their miles for non-flight costs, Aimia CEO Rupert Duchesne acknowledges the program introduced six weeks ago isn't the best financial option for some leisure travellers.
"It's aimed more at the higher accumulator as opposed to the lower accumulator," he said in an interview Friday following Aimia's annual meeting.
"You get much better value if you spend your miles on the flight than on the fees."
Each Aeroplan mile is worth about 0.85 cents when used for fees, much less than for flights, Duchesne said.
Some estimates says a mile used for flights is worth at least 1.5 cents, while Duchesne says they can be worth as much as seven to eight cents in some cases or almost 30 cents for some first-class flights around the world.
He said the value of the miles used for fees is similar to other loyalty card companies.
"We've set the rate at a level that is competitively reasonable," he said.
Travel rewards expert and RewardsCanada.ca founder Patrick Sojka said Aeroplan is one of the first programs to let members use miles to pay for fees and taxes.
While some criticize the poor value, that won't bother members who have racked up hundreds of thousands of miles for flights paid for by their employers, he said.
"It's free money for them."
Still, the bill can cause sticker shock. For example, a round-trip flight from Montreal to Paris costs 60,000 miles and $655 in cash or about 77,000 miles.
Aimia says the program responds to a request for changes from members for more choice on using accumulated miles, especially in combination with the purchase of flights.
The fees program is the latest of a series of changes implemented for the Aeroplan program in the last couple of years. The company also addressed concerns about the ability to access flights by eliminating blackout periods and eliminated the seven-year expiry for miles.
"We have a few more positive steps forward you'll see roll out over the next couple of years," Duchesne said, declining to provide details for competitive reason.
Meanwhile, the sluggish Canadian economy and low Canadian dollar is affecting Aeroplan use. Even wealthier members have been cutting back on spending on Aeroplan-affiliated credit cards, said Duchesne.
Canadians are also redeeming fewer miles for trips to Europe and the United States while increasing travel within Canada as the value of the loonie continues to languish below 80 cents U.S.
The availability of discount fares has also convinced some members seeking leisure travel to purchase flights and save their miles for when fares become more expensive, he added.
Aimia (TSX:AIM) boosted its quarterly dividend by a penny to 20 cents per common share Friday on a positive long-term outlook despite swinging to a $13.1-million loss in the first quarter.
The Montreal-based company lost 12 cents per share during the three months ended March 31. That compared with a profit of $23.4 million or 10 cents per share a year ago.
Excluding one-time items, it earned $23.9 million or 13 cents per share in adjusted profits, down from $30.7 million or 15 cents per share in the first quarter of 2015.
Revenues decreased almost 14 per cent to $570 million from $660.1 million.