How to best exploit Aeroplan
Posted in Best Of, Commentary on May 25th, 2006 by Sacha PeterAeroplan used to be Air Canada’s frequent flier program, but the company was spun out and has gotten more into consumer marketing in general. Their approach is to be a generalized ‘loyalty card’ business and charge businesses money presumably because they would gain customers by people wanting to earn aeroplan miles. Anybody who shops strictly on the basis of points or miles should get their heads checked, but when the numbers are significant enough it actually warrants some careful thinking.
So over the past couple years I’ve racked up 70,000 aeroplan miles in my account and was just wondering what the most efficient way of liquidating them since all of these points programs dilute their value over time. They do this either by increasing the number of points/miles to earn a reward, or they make reward availability so restrictive that it makes cashing in such points difficult, kind of like a communist regime. Since inflation is so high with these programs, it’s best to liquidate early and liquidate often.
There are two types of reward categories that are worth considering: flights and anything else. With respect to flights, assuming you can earn them, aeroplan will pay the price for a round-trip ticket, but you have to pay everything else, including taxes and fuel surcharges.
For example, if I wanted to go from Vancouver to London and back, it would (currently) cost me $923 for the round trip plus another $271.91 in taxes, fuel surcharges and other garbage fees. You can also “buy” the $923 component for 60,000 aeroplan miles, assuming the flight was available which it most often is not during the most convenient times, i.e. from April to September every year. A “free” round trip ticket in this case would cost $272 plus 60,000 miles. This works out to a benefit of 1.5 cents per aeroplan mile paid for.
The difference between domestic (in this case Canada and the USA) and the rest of the world is that GST is charged on domestic flights. So if I wanted to fly to Montreal and back, it would cost me $528 for the base fare, plus $130 in fuel surcharges and GST. Aeroplan would charge 25,000 miles for the trip which would pay for $528 and this would leave me to pay $130 for the remainder. This works out to 2.1 cents per mile.
It turns out that the best “bang for the buck” is on really short-haul flights. For example, if I wanted to visit Fort St. John (a remote town in the northeast part of the province) it would ordinarily cost me $398 for the base fare plus $95 in taxes and fees. I can use 15,000 aeroplan miles which would have a value of 2.7 cents per mile.
Now the real economic issue here is that I don’t have any burning desire to go visit London, Montreal, or Fort St. John at present. It isn’t worth it for me to spend the aeroplan miles on something that is fundamentally useless to me, especially if I have to shell out hard cash in conjunction with redeeming the miles. Making matters even worse is that it is very probable that I would not be able to redeem such rewards at a time of my own choosing which would decrease the utility of the reward even further. Aeroplan has a system where you can pay 50% more miles to increase your availability of selection, but this just dilutes the value of the miles further.
Now that Aeroplan has started tinkering around with other awards, one has caught my attention: Esso gift certificates. Gasoline is something that I am guaranteed to use every year and they offer $50 gift certificates for 7000 miles and $100 gift certificates for 13500 miles. This works out to 0.71 and 0.74 cents per mile, respectively. These two numbers are significantly below the cash value you can get when booking flights, but this ultimately reflects what I consider to be the “base value” of the miles – if you don’t use your miles on anything else, it becomes much more economical to redeem them for gas certificates.
So according to this analysis, right now I am sitting on $518 worth of gasoline with my aeroplan miles which would pay for nearly 5 months’ worth of fuel for my car.
This also creates some interesting situations. For example, right now I am eligible to receive 50% extra aeroplan miles whenever I travel until February 28, 2007. If I were to take a trip from Vancouver to Sydney, that would work out to 23,280 miles which can be converted to $172 worth of gasoline whenever I get around to redeeming the aeroplan miles. This works out to be a non-trivial discount (about 10%) on the ticket price.
Future Shop also offers a $100 gift card for 13,000 miles, but there’s no point in redeeming for this since you can usually get electronics for cheaper prices elsewhere. Other places (e.g. Chapters/Indigo) offer their own gift cards, but again, I don’t have any burning desire to buy books from them. Gasoline is nearly impossible to get at wholesale prices and remains the best currency you can convert from the fiat currency of aeroplan miles especially since you are guaranteed to use it more than the aeroplan miles themselves.
Yeah, I have more Airmiles than Aeroplan, but my analysis led to a similar result, albeit as an avid reader who doesn’t have a car, I lean more towards Chapters and not towards gas (Actually, I’m not even sure if Airmiles has a gas option, but I imagine it does).
Airmiles offers Shell gas coupons – I think it’s 150 Airmiles for $20 of gas. That’s where all mine go…
I’ve ordered a $100 gas card from Aeroplan and I will likely keep redeeming my miles for gas money until my balance heads to 25k – 25,000 miles is good for a round trip ticket anywhere in Canada and the USA so I figure I might as well keep it in reserve in case if I get the urge to head to Halifax!
My mom passed away in May of 2009 and she had over 71,000 miles in her aeroplan account. When I called aeroplan they said that in order for me to transfer her miles into my own account I have to pay $30 + 1 cent for each mile in her account. That works out to $750. When I asked the support person why I have to pay money to have my mom’s miles transfered into my own account, she said that it is part of the beneficiary policy. This is stupid if you ask me.
Erica,
My condolences about your mother.
Assuming you are the executor of your mom’s estate, I would accessed your mom’s aeroplan account and liquidated the points for something that you would otherwise spend money on (e.g. Esso gas cards if you drive a car).
Air Canada totally pulled one over on me recently by not giving me miles because the travel agent put my first name last and my last name first on a ticket, and because Air Canada and Aeroplan are different companies each blamed the other for not giving me the miles (business class which I bought factoring in the miles I would receive)
This is a classic example of how the Canadian Government allows Monopoly companies to take advantage of the citizens of Canada. When they go into debt the government bails them out. Much like insurance companies that work over bad luck clients who don’t see a cent but can’t afford to sue the many lawyers of Canadian Insurance companies. When will these things be put to a halt and how does that come about? Just venting. Oh. By the way… my house burnt down 3 years ago and the insurance company told me they wouldn’t pay and that I should sue their many lawyers. I ran out of money less than a full year into the suit. No house, no points, hard working family with one hell of a government protecting the big business instead of the people.
You must also take into account that you can have more than one stop over when travelling abroad with aeroplan points. For example, I booked a flight leaving from Ottawa going to Bangkok, and I was allowed to book (over the phone, not on the internet) 2 stops overs. One in tokyo and another in Hong Kong. I didn’t do the calculations, but i imagine the value of your points goes up considerably.
Also, you can do the same thing in north america. For example, if you want an extended vacation. you can fly from vancouver, stop in Las Vegas, Stop in montreal and your final desintation be Halifax and still fly back to vancouver! you just need to plan REALLY well and call into aeroplan a couple of times to make sure you understand the process.
Does anyone know if the Aeroplan American Express Sommelier Prepaid Card can be used at the LCBO in Ontario? If so, it is good value ratio and liquor is something I would buy anyway (just like gasoline:) Cheers!
I was wandering. I know that with 25 000 miles aeroplan, you can get a ”free” ticket to any destination in Nort America.. Does this includes Hawaii?
Thank you very much!
With merchandise, do you have to pay taxes when you use your points like you do with airfare rewards? Or is it all inclusive?
And to (belatedly) answer Guillaume, Hawaii is 40,000 miles (as of this date) from Canada.
When redeeming my aeroplan miles (albeit years ago) for gas gift cards, I did not have to pay any cash for them, presumably because the taxes you do pay are at the pump – similar to how when you buy a $50 gift card at Superstore or wherever it is not taxed since you will be paying that tax later.
As for actual merchandise, good question. I don’t know.
That is not true
If you use Aeroplan on other star alliance other than air canada or Lufthansa
There is no fuel surcharge and by the way I would never fly economy, best value for your buck is business class or first class, check tge fares for that.
And extra note is never go to London or uk go to other places like France cause in the uk they charge an extra fee. FYI