Why Air Miles needs more than just a new owner to appeal to customers

For the millions of Canadians with an Air Miles account, the news that Bank of Montreal wants to buy the rewards program from its financially troubled parent company may have eased worries that the dream of a free flight was dead.

But the baggage that has led the program to skid off the runway after more than 30 years in Canada could still pose problems for the program and its collectors.

In court filings relating to the parent company's bankruptcy proceedings in the United States, Air Miles said it has more than 10 million active accounts at this time.

The problem, according to some rewards industry watchers, is that it doesn't have lucrative-enough business partners actually offering Air Miles to make the program worth it for those millions of account holders.

The loss of Empire Co.-owned Sobeys and Safeway in 2022 was a "huge blow," according to Ricky Zhang, founder of Prince of Travel, a website that tracks and compares travel reward systems in Canada.

"It was probably going to be a matter of time until something like this happened," said Zhang, in reference to Air Miles U.S. parent company, Loyalty Ventures, seeking bankruptcy protection from its creditors in the U.S. and Canada.

Canada Safeway, in particular, had been with Air Miles since the early 1990s. Former Safeway clerk Albert Sirk worked at a location in the Vancouver area when the program first launched.

"The managers took us employees in and sort of outlined what was going on, we're bringing in the Air Miles program," he told CBC News in an interview from his home in Surrey, B.C.

But according to Sirk, the cost of Air Miles to his retail employer was clear, and from Sirk's perspective it was being passed on to the customer.

"We're having to change all the prices in the store and we sort of noticed that pretty much every item in the store went up by about 10 cents," said Sirk.

A 31-year-old anecdote could provide some insight into the business model for programs such as Air Miles. The company charges retailers a fee for every reward point handed out. 

When Sobeys and Safeway pulled out of the program, it lost those fees from one of its most prominent national partners.

Ten per cent of Air Miles' parent company's revenue evaporated, according to court filings.

The lack of a national grocery chain in the Air Miles program contributed to its financial problems, according to Zhang.