29 November 2017
While Aeroplan is still bullish about its future in public, its reality is likely to be much closer to the situation of Air Berlin’s topbonus program. That’s why the folks in Montreal are well advised to watch closely what is happening in Berlin these weeks.
The parallels between the two cases might indeed be limited. On one hand, you have a program, which became the victim of regular strategy changes at its parent airline under the influence of a kind of clueless investor. Air Berlin was regularly 1 or 2 releases behind the current applicable strategy since they kept on changing it so rapidly.
On the other side, you have a program, which became the victim of its own greediness, but which has three full years to prepare for its new future.
But both Frequent Flyer Programs will end up (or are already there, in the case of topbonus) finding themselves in the delicate position without airline partner affiliations, which remain nevertheless the core of an FFP – even if credit card earnings might surpass the number of miles earned on flights. While Aeroplan members will continue to be able, at least for some time, to use their miles on Air Canada flights, the program won’t be the same anymore for members without the possibility to earn or burn miles on partners. Many Aeroplan members are only in the program in order to burn miles on the likes of ANA, EVA Air or Singapore Airlines – without even evoking the situation of members abroad.
Aeroplan members still have 2.5 years to burn all their miles under the current scheme and that is certainly what most will do. While not the most generous of all programs, members know at the least the value of what they can get now. But in order to have a visibility regarding their post-separation reality, they will indeed need to wait until much closer to the D-Day. Burning miles now and waiting for the new Air Canada program will become the standard behaviour for frequent flyers among Aeroplan members. And Air Canada with its new scheme will do all the necessary to ensure that at least that segment of the membership basis will shift quickly to its new program – incl. for its non-air activities -, putting the Aeroplan program immediately in an insignificant role of a retail program nobody will really care about.
At much smaller scale, that is what is happening to topbonus. It can be considered a miracle that the program is still up and running at all more than one month after Air Berlin ceased flying. The program remains with a handful of earning partners (including Etihad), but redemption offers are less stable and occur on an opportunistic basis since topbonus – technically in bankruptcy – needs obviously to watch closely its cash-outs. Offers also included redemptions on Etihad in Economy Class for flights to/from Germany and Switzerland during a limited time window. Unlike Aeroplan, topbonus members had no opportunity to plan the winddown of their mileage balances as they were caught by surprise by the bankruptcy of Air Berlin in the middle of the busy summer season.
While the topbonus management continues to fight for keeping the program up and running, it is clear that the program with its current earning and redemption possibilities is too weak to have any chance for survival in the market, notably next to the presence of Miles & More and two major retail coalition programs in Germany. And probably the topbonus management is much more realistic about its corresponding chances – in a sharp contrast to what can still be heard from Aeroplan at this point. While there are successful retail loyalty programs out there, they are actually ways ahead of FFPs in terms of loyalty techniques. The attempt by an FFP to transform itself into a retail program without airline affiliation will not succeed for that very simple reason – even not if you are among the leaders in the FFP space in that regard as it is the case for Aeroplan.
If the revenue potential is not an asset of the program anymore, what is remaining? Obviously the customer data. At the end of the day, this is the true value of any loyalty program, already during its time up and running normally. Access to a database of millions of travellers and above average consumers is definitely valuable, not necessarily limited to direct competitors.
Depending on the situation, the outcome of such an asset sale can be different. While WestJet might be interested in buying into the much larger Aeroplan database one day (by 2020, they will have taken delivery of all their Dreamliners and won’t be too far of Air Canada’s size today…), the interest of Lufthansa to do so with topbonus risks being very limited since it already covers the majority of topbonus members anyway on its own. But from financial partners to the German railway operator (whose program is interestingly enough much smaller), different options can be thought of.
It is clear that the next weeks will be decisive for topbonus and based on the events of the last few weeks with several interesting initiatives from the topbonus management, a final surprise is not unlikely, drawing the final line under the Air Berlin story.
Aeroplan, have a close look at what’s going on there and learn the appropriate lessons from it. After having expected that everybody will learn lessons from you (okay, they did, but not in the way you’ve imagined…), it is now time for you to learn from others. Born from Air Canada’s need to sell off assets, there is a fair chance that your final fate will be the sale of your assets in not too a distant future. Call it irony of history.
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