AIR MILES Raising Redemption Rates for Flights

For the first time in five years the AIR MILES Rewards Miles program is raising the amount of miles required to redeem for flights with the programs partner airlines. According to AIR MILES the increases are due to increased operating costs that are necessary to continue to bring you more partners, choices, and destinations. The average increase in flight redemption rates is 8%, with some categories only increasing 4% while others will increase as much as 14%. The increases will come into effect on Feb 12, so if you were planning to book a flight with AIR MILES, do so before then to lock into the current redemption rates.

It does not come as a huge surprise though that they are raising the levels. With the increase AIR MILES may be banking on the fact that there will be less people redeeming for flights and more for merchandise or gift cards from their reward catalog. At this time approximately 8-9% of all AIR MILES redemptions are for flights, with this increase that number is sure to drop a bit more. (I am really curious to see what the number was 10 or 15 years ago, I would bet that it was a lot higher). Of course, what they don’t tell you is that they would rather have you redeem for merchandise or those gift cards as it is well known in the loyalty industry that these items are a much better profit center then flights.

What is interesting is that for flights, most of AIR MILES competitors, that is frequent flyer programs (Aeroplan, Mileage Plan, etc) have not raised redemption levels in as many years as AIR MILES, they may have put on other restrictions like expiry dates and access to all seats or peak season seats for more miles, but the base redemption rates have not changed. Many of these restrictions like the expiry dates are easily avoidable and AIR MILES has always had higher redemption rates for peak season flights. These frequent flyer programs have also expanded their reward offerings to merchandise and gift cards. The program may be going out on a limb here with the increase as the only comparable increase recently was RBC Avion’s long haul North America flight redemption increase last year.

Was this a smart move by AIR MILES? Not necessarily, they will definitely alienate some of their members but AIR MILES strength is in the number of shopping partners they have, no other program can match them and for some members they cannot justify a move to Aeroplan, AIR MILES primary competitor. However Aeroplan may actually benefit somewhat as the AIR MILES increase is starting to make its way into the press and on the Internet, many with readers comments leaning to the negative side. The other major impact AIR MILES may see with this increase, is that WestJet will launch their reward program very soon and the people who use AIR MILES primarily for travel may find the WestJet program more lucrative.

WIll AIR MILES continue to be successful? Absolutely, as stated above, flights only represent a small amount of the AIR MILES business, in fact the program probably shouldn’t even be called AIR MILES anymore but the branding is there so why change? The sheer number of members, partners and redemption options will keep the AIR MILES program the success that it is, even if they raised the levels even higher on flights and on their merchandise catalog.

How will this play out? Much like when Aeroplan made the expiry issue in 2006, it will be in the press for a couple of weeks, people will be mad and claim they will change but in the end they will continue to use their program of choice as Canadians have an affinity for loyalty programs and find it hard not to collect points or miles on their everyday spending.

You can find all the details about the flight redemption increases on the AIR MILES Website. You are also encouraged to leave your comments on these changes below.