For the thousands and thousands of Canadians with an Air Miles account, the information that Financial institution of Montreal needs to purchase the rewards program from its financially troubled mum or dad firm could have eased worries that the dream of a free flight was useless.

However the baggage that has led this system to skid off the runway after greater than 30 years in Canada may nonetheless pose issues for this system and its collectors.

In courtroom filings regarding the mum or dad firm’s chapter proceedings in america, Air Miles mentioned it has greater than 10 million lively accounts presently.

The issue, in response to some rewards business watchers, is that it would not have lucrative-enough enterprise companions truly providing Air Miles to make this system price it for these thousands and thousands of account holders.

Air Miles misplaced some long-standing companions

The lack of Empire Co.-owned Sobeys and Safeway in 2022 was a “big blow,” in response to Ricky Zhang, founding father of Prince of Journey, an internet site that tracks and compares journey reward techniques in Canada.

“It was most likely going to be a matter of time till one thing like this occurred,” mentioned Zhang, in reference to Air Miles U.S. mum or dad firm, Loyalty Ventures, searching for chapter safety from its collectors within the U.S. and Canada.

Canada Safeway, specifically, had been with Air Miles because the early Nineties. Former Safeway clerk Albert Sirk labored at a location within the Vancouver space when this system first launched.

“The managers took us workers in and kind of outlined what was occurring, we’re bringing within the Air Miles program,” he advised CBC Information in an interview from his dwelling in Surrey, B.C.

However in response to Sirk, the price of Air Miles to his retail employer was clear, and from Sirk’s perspective it was being handed on to the shopper.

“We’re having to vary all the costs within the retailer and we kind of seen that just about each merchandise within the retailer went up by about 10 cents,” mentioned Sirk.

A 31-year-old anecdote may present some perception into the enterprise mannequin for packages resembling Air Miles. The corporate fees retailers a charge for each reward level handed out. 

When Sobeys and Safeway pulled out of this system, it misplaced these charges from considered one of its most distinguished nationwide companions.

Ten per cent of Air Miles’ mum or dad firm’s income evaporated, in response to courtroom filings.

The lack of a nationwide grocery chain within the Air Miles program contributed to its monetary issues, in response to Zhang.

“I might say it is a main hole within the lineup of companions that Air Miles has in the intervening time,” mentioned Zhang.

Air Miles relied on BMO earlier than chapter, too

The rewards program was not solely depending on income from Sobeys and Safeway. In 2020 and 2021, it misplaced retailers such because the Liquor Management Board of Ontario (LCBO) and Rona {hardware} shops.

The corporate’s chapter filings point out that these retailers had been amongst a ten per cent drop in income that occurred even earlier than Sobeys pulled out.

After Sobeys and Safeway’s departure, Air Miles says it tried to re-negotiate offers with Shell gasoline stations and the Financial institution of Montreal. Whereas it locked each firms in for longer phrases, it did so in a means that the Air Miles mum or dad firm offered to a U.S. courtroom as being much less beneficial for the rewards program.

All in all, this offered a dire monetary scenario as per the chapter filings, one which leaves Air Miles as very depending on the corporate now searching for to buy it.

One courtroom doc states that in 2022, the Financial institution of Montreal truly gave out 50 per cent of the entire Air Miles handed out to program members. In an Ontario courtroom submitting, Air Miles states that both the Financial institution of Montreal — or one other monetary establishment — should stay a associate of this system or they’d lose much more Air Miles sponsors.

BMO says rescue may ‘revitalize’ program

In an emailed assertion to CBC Information, the Financial institution of Montreal mentioned it is excited for the way forward for this system, and that “we’ve all the time believed within the worth of this system for Canadians.”

The financial institution has mentioned it would “revitalize” and “deliver new vitality” to Air Miles, if the deal is permitted, however loyalty factors consultants aren’t so certain.

“I am pondering there is not an excessive amount of they’ll do by way of gaining the nationwide glory this system as soon as had,” mentioned Patrick Sojka, founding father of Rewards Canada. 

To Sojka, BMO buying Air Miles is about sustaining their present enterprise and buyer relationships.

“They’ve so many bank card clients who’re Air Miles bank cards clients, and for them they stood to lose plenty of these bank card members if Air Miles went beneath. Folks would have a bitter style of their mouth,” mentioned Sojka.

Rewards Canada publishes rankings of the “greatest” journey rewards packages within the nation. It was initially planning to incorporate Air Miles however dropped it because of the uncertainty of the present courtroom proceedings.

“I’ve to think about it on the brink till we see BMO’s signature on the dotted line,” defined Sojka, who mentioned he did not really feel snug recommending a program with an unclear future.

“Will [Air Miles] be dissolved as a part of the chapter safety with the intention to repay their collectors? We do not know that.”

Financial institution may even see upside, however are miles protected?

Air Miles has mentioned in statements that reward level balances are protected at this level. Financial institution of Montreal has echoed that messaging from Air Miles.

BMO could possibly leverage the Air Miles buyer base to develop its personal, says Charan Bagga, affiliate professor of promoting with the Haskayne College of Enterprise on the College of Calgary.

“This presents alternatives to doubtlessly cross-sell to non-Financial institution of Montreal clients,” mentioned Bagga.

He added there may be buyer profiles on purchasing habits at different shops that might present perception for the financial institution, which says it has no plans to merge Air Miles with its present BMO Rewards program.

“Quite a lot of instances the reward packages use insider buyer information by way of offering info on shopper behaviour and preferences,” mentioned Bagga.

However to maintain clients, the providing might have to vary, in response to Nicole Rourke at St. Clair School in Windsor, Ont.

“They only have to be a bit extra artistic. And it could possibly be monetary incentives as a substitute of only a blender or piece of baggage … arising with some actual monetary incentives to encourage folks to stay loyal to BMO,” mentioned Rourke.

Financial institution of Montreal pointed to an announcement from Air Miles which indicated buyer miles are nonetheless out there to redeem presently for present journey and merchandise rewards.

Air Miles initially agreed to an interview with CBC Information, after which declined a number of days later. In response to additional requests from CBC Information, the corporate mentioned because the gross sales “course of unfolds we stay up for sharing extra particulars with collectors.”

Chapter hearings for Air Miles mum or dad firm proceed in a Texas courtroom over the following few weeks.