One of Canada’s brightest loyalty program stars in the 90s and 00s was AIR MILES. It took Canada by storm when it launched in 1992 and quickly became one of the biggest programs in Canada and a favourite for consumers.
However, it was on this day in 2011 when things changed and the program began its downward spiral which culminated in its parent company declaring bankruptcy early in 2023.
On December 28, 2011 AIR MILES announced their plans to split their currency into two – Dream Miles and Cash Miles with the latter allowing for instant redemption at participating AIR MILES partners.
Whether this was a positive or a negative for the program is up for debate, I tend to lean to the negative side. But it wasn’t this currency split that was the big news that day, it was the couple of sentences at the bottom of the press release announcing another change that would bring the worst of the issues the program faced in the future.
Dream Miles and Cash Miles introduced
This was done for several reasons, the first being that many collectors simply could not collect enough miles to redeem for merchandise or travel as you always had to have the full amount of miles. And when they did get close it would seem like AIR MILES would raise flight and merchandise prices! In fact it wasn’t until the summer of 2023 that AIR MILES finally introduced part miles part cash payment option for flights!
The second reason was for those collectors who weren’t earning enough for the big redemptions but were earning enough to redeem for gift cards. AIR MILES had a huge gift card catalog with dozens of merchant options beyond their partners and that didn’t make the existing AIR MILES partners happy.
Here’s what I wrote back on December 28, 2011:
This option will effectively create a second account or an account within an account for Air Miles members to redeem instantly at Air Miles sponsors. This is key, you will only be able to instantly redeem at Air Miles sponsors and it makes total sense. Up to now, Air Miles members could collect at many sponsors but then redeem for items like Gift Cards for stores, restaurants etc that were not sponsors, so basically the non-sponsoring companies earned money from miles paid for by Air Miles sponsors and this practice had to be curbed by Air Miles to keep its sponsors happy (it may also explain the shrinking of the gift card rewards you can redeem for)
At the time this may have seemed like a good move on AIR MILES part but I do feel it hurt them in the long run as they didn’t provide an option to transfer miles between the two sub-currencies. Collectors could choose what percentage of miles earned would go into each but many collectors ended up with stranded miles not being used as their dream miles earned previously would be stuck if they switched to 100% cash.
Further down the road after the 2016 debacle (see below) many retailers chose to leave the AIR MILES program and quite possibly the most popular one for the Cash Miles redemption, Empire grocery stores (Sobeys, Safeway, IGA etc.) made the move to Scene+ in 2022.
This effectively left Shell, Metro and a couple regional partners across Canada as the only Cash Miles partners outside of some online e-redemption options. Cash Miles was basically done and that left many collectors with stranded Cash Miles balances and again, leaving a sour taste in the mouths of collectors.
The good news in all this is that late in 2023 AIR MILES began trialing transfers between Dream Miles and Cash Miles with select members already being offered the option. All members should receive this option in the near future and the program has promised that sometime in 2024 they will do away with the two options and return to offering only a single currency type.
Expiring Miles
The Cash Miles + Dream Miles announcement in 2011 wasn’t the major factor that led to AIR MILES downfall. No, in fact it was the one or two sentences at the very bottom of that December 28, 2011 press release that ultimately dug the biggest part of the hole the program fell into.
Not only were the AIR MILES changes announced during the holiday season when news was less likely to be picked up but they also buried some really bad news at the bottom of this press release that was touting the new Dream Miles and Cash Miles options.
It was in that release that AIR MILES announced their miles would have a five year expiry date. It was not an inactivity rule but an actual time stamp on miles that would have them expiry in 5 years from the month they were earned in. This meant all those collectors who were saving up miles from 1992 to 2011 would see all of them expire on December 31, 2016.
AIR MILES wasn’t the first program to do this, a lot of programs had time stamp rules and in fact Air Canada’s Aeroplan had already put in place the same rule in 2006, albeit their lifespan was set for 7 years. However, it wasn’t long before Aeroplan had a class action lawsuit on their hands and the 7 year rule was dropped by 2013.
So if AIR MILES wasn’t the first to do this why did it play such a major demise for the program? Personally, I feel it is due to how and when it was announced. Being buried at the bottom of a press release during the holiday season meant it went unnoticed. I covered it on Rewards Canada (you can read that article here) but many of the major news outlets did not. Honestly, had I not met with AIR MILES to discuss the changes in the weeks prior to Christmas I may have missed it as well! Basically, due to the way it was announced, the majority of collectors had no clue this rule even existed from that point forward.
And it was that lack of news coverage that came back to haunt AIR MILES in 2016. In March 2016 I was a guest on the Informed Traveler show where we actually discussed the topic but it wasn’t until the spring of 2016 when a large news outlet published an article about AIR MILES expiring that all hell broke lose from that point on. It spread like wildfire across the media outlets for months on end. I was doing TV, radio, print and online interviews left, right and centre for the better part of the year!
Critically, it had collectors panicking and there were no signs of AIR MILES budging from their rule. Here you had tens of thousands of collectors who had been saving up miles for dream vacations or merchandise and now those balances were threatened. They scrambled to use them up rather than lose them and get nothing in return. They ended up redeeming for things they didn’t really need or want but wanted to get something back for all those years of spending their hard earned cash at AIR MILES partners.
Collectors were pissed. They let the media know, they let AIR MILES know but they also let the merchants who were AIR MILES partners know. I heard stories of cashiers at stores being yelled at (unfairly of course) about the news and really it was these merchants who were the front line to the collectors frustrations.
This went on for more than half of the year and in fact it garnered so much attention that the Ontario government proposed and then later introduced legislation around expiring miles. Quebec followed suit not much longer after Ontario with their own legislation.
All of this negative news, the proposed government legislation and the overall collector frustration eventually led to AIR MILES reversing the expiry rule at the beginning of December 2016 stating that miles would not expire on December 31 of that year.
It was too little too late. Many collectors had redeemed their miles in the months leading to the announcement that nixed the rule. Collectors were now asking about returning items so they could get their miles back but that didn’t happen so they remained in a furious state towards AIR MILES.
Merchants were also now seriously contemplating their continued role in the program due to its tarnished reputation and it didn’t help that new technology was emerging that would allow many retailers and merchants to launch their own loyalty programs at a fraction of the cost of what AIR MILES charged.
Losing partners
In the years after 2016 AIR MILES began losing major partners including Gap/Old Navy, Rona/Lowes and Staples just to name a few but then the biggest hit came when Empire Group announced the move to Scene+ for their grocery stores. Here you had one of AIR MILES original partners from 1992 (well Safeway at least) departing. And when you looked at AIR MILES’ parent company’s financials, Empire Group was their biggest source of revenue outside of Bank of Montreal. With the grocery stores leaving and no new major partners coming on board it could only lead to the inevitable.
Bankruptcy
That leads us up to March 10, 2023 when it was officially announced that AIR MILES parent company Loyalty Ventures had filed for bankruptcy. The news actually broke on March 9 and now it was 2016 all over again as collectors scrambled to redeem their miles in fear of losing them all and getting nothing in return. AIR MILES pulled merchandise and other redemption options from the site to curb the run on miles. They did return those after a short while but then the website repeatedly crashed with all the traffic. In the end they got everything up and running and members could redeem their miles.
It didn’t take long for further news to come out on March 10, 2023. BMO announced they were offering to purchase AIR MILES from Loyalty Ventures. They needed to save the program as AIR MILES made up a huge portion of their overall credit card portfolio and they stood to lose a lot of revenue if the program ceased to exist.
In the end, no other suitors came along and the courts agreed to BMO’s purchase of the program a few short months later.
Rebirth of AIR MILES?
With the financial backing of the new owner the AIR MILES program has done a 180 from March of this year. The program has a reinvigorated feel to it and they are doing everything to climb out of the deep hole that they had started to dig on this day twelve year ago.
We’ve seen them revamp the AIR MILES Travel site as they try to shift some focus back onto what they became famous for. Flights and travel. I mean their name is AIR MILES right? Back in the 2010’s when they were on the downhill slide, less than 10% of all redemptions were actually for flights! Now they award a lot of miles for booking travel with them (AIR MILES is one of Canada’s largest travel agencies) but more importantly they introduced Cash+Miles for flight and travel redemptions. This means collectors no longer have to wait until they have the full amount of miles. They can use miles to essentially provide a discount on flights and other travel.
Recommended reading: AIR MILES Travel now offers new earn rates & a cash + miles redemption option!
The program has also been doling out the miles like crazy to collectors! They are doing what they can to engage their collectors, new and old, to use the program, to come back and give them another shot. There have been very lucrative Flash Miles offers provided almost every week since late summer, the 2023 Shop the Block promotion was one of the easiest yet and they introduced the new AIR MILES Receipts option.
Recommended reading: The Ultimate Guide to AIR MILES Receipts
So they’ve got the earn side of things ramped up, but one does have to wonder how long that can remain. They’re giving out miles like there’s no tomorrow. In some ways they remind me of a new start up who are fresh from receiving their venture capital funding and are spending it to attract as many customers and attention to the business as possible.
In the end though there’s only so much of that you can do without eventually having to devalue the program. That’s something the program cannot do. They can’t devalue now. There’s no way as they’d drop back to bottom of the deep hole. Granted, with all their travel reward options being dynamic there really isn’t a need to devalue those as long they can still be profitable maintaining the approximate value of 10 to 10.5 cents to collectors. So I feel we are safe in that regard, at least for the time being.
What would help AIR MILES in their rebirth is bringing on some new major Canada wide partners to give collectors the feeling of the old glory days. That is very unlikely to happen though. There aren’t a lot of everyday retailers out there that are left or likely willing to join a program like this. They’ve either gone to other programs or they’ve launched their own.
It’s a tough space to be in when you’re a third party program like AIR MILES in that you need merchants to fund your model. You don’t have an airline to fall back on like Aeroplan. You don’t have your own stores like Triangle or PC Optimum do. Even Scene+ has their own grocery stores and movie theatres as Empire and Cineplex are part owners. The only partner AIR MILES can rely on 100% right now is their owner, BMO. So if all else fails (which is highly unlikely) AIR MILES could count on being a credit card reward program.
Wrapping it up
AIR MILES has had many ups and downs since its inception in 1992 with a lot of ups in the first two decades but then it was mostly down from this exact day in 2011. Who knew when AIR MILES released program changes during the holiday break in 2011 that it would have such a long lasting and wide effect on the entire Canadian loyalty industry? I mean it was enough to spawn government legislation and eventually lead to their bankruptcy! I’m pretty sure that’s not what AIR MILES or Loyalty One would have thought would have happened!
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