Canada: Air Miles reverses expiry decision

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By: RickFerguson |

Posted on December 2, 2016

Canada: Air Miles reverses expiry decision Bowing to public pressure, coalition loyalty program Air Miles yesterday announced an immediate cancellation of its expiry policy that would have seen millions of collectors lose miles older than five years beginning on January 1. With an immediate hit on profitability and bruised relationships with collectors, the company's work to mitigate the damage is just beginning. By Rick Ferguson Air Miles' move, while not unexpected in the face of withering criticism from collectors and the media over the date-stamping policy, seems prompted in large part by the impending vote by an Ontario legislative committee on a proposed bill to restrict loyalty program providers operating in the province from expiring points. By summarily killing its expiry policy, Air Miles executives hope to temporarily halt passage of the bill and allow time for further discussions between the government and program operators. Money quote from LoyaltyOne President and CEO Bryan Pearson from the Globe and Mail:

"We're hoping that by dealing with the expiry issue, foundationally, we are eliminating something that has been a concern to some of our customers - I wouldn't say all of our customers... And we're hoping that it will lead to more productive conversations between government and industry."

While the move will certainly be seen by Air Miles collectors as an overall positive course correction, the company will now contend with collectors disgruntled for a different reason: thinking their miles were set to expire, many collectors saving up for flights and other big-ticket rewards instead redeemed miles for lower-cost redemptions before the expiry date. Typical was this tweet posted by a disgruntled collector:

As if their bruised public image isn't bad enough, the company will also take a substantial financial hit: at least a $200 million reduction in 2016 revenues. The ongoing hit to revenues from keeping all of those points on the books in perpetuity may force LoyaltyOne to, as it said in a financial disclosure released on December 1, devalue the program's earning structure. Money quote #2:

"Going forward, LoyaltyOne will adjust the value proposition to collectors to offset the lost economics ... and to maintain, as closely as possible, the economics of the AIR MILES reward program prior to cancellation of the expiry policy."

While speaking before the Ontario legislative committee, Aimia President Vince Timpano told a similar story of lost profits when the company's Aeroplan program was forced to reverse its own date stamping decision in 2013: "This decision cost us money; both a sizable one-time hit, and an ongoing impact on our profitability," Timpano told the committee. If there's a lesson here, its that Canadian consumers will strike down with great vengeance and furious anger anyone who attempts to take away their reward points. There's also plenty of learnings for Air Miles executives to take away in terms of how they might have better handled their year of living dangerously. As much as Air Miles might wish a do-over of 2016, however, let's not forget that the program is one of the greatest success stories in the history of loyalty marketing. After nearly 25 years of operation, the program has become ingrained in Canadian life, providing millions of Canadians the opportunity to live their dreams through free travel, merchandise, and one-of-a-kind experiences. We've no doubt that the company will bounce back from this troubled period, and continue to offer value to its collectors and partners. Long live Air Miles. Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.