The heart of Aeroplan Income Fund's new grid for redeeming rewards will be a $20-million computer system that scrutinizes supply and demand for Air Canada flights before luring consumers to cash in their points.
Rupert Duchesne, Aeroplan's chief executive officer, said the loyalty company is developing the electronic brains behind what it hopes will be a popular new schedule of higher levels of reward miles required to book seats. "It sounds easy, but it's actually a very complex computer program to pick each of those seats out of the Air Canada reservation system, price them and make them available on a grid to the Aeroplan member."
Unless consumers book months ahead, seats are often frustratingly elusive to reserve under the current reward system, which sets aside 8 per cent of Air Canada seats for the low-cost "Classic" category.
Aeroplan plans to introduce an escalating scale of points by year-end. It will outline how many extra miles are needed to book unsold seats in economy and business class, based on supply and demand, beyond that 8-per-cent limit on Classic rewards. "The project is pretty much exactly on schedule, but we haven't picked a brand name yet. It will be launched some time this fall. The time we need it to work perfectly and be totally in place is January, 2007," Mr. Duchesne said.
During the first quarter of each year, Aeroplan sees a surge in bookings as consumers plan spring and summer vacations. In the first quarter of 2006, for instance, the volume of redemptions jumped 37 per cent from the final quarter of 2005.
Aeroplan, which holds its annual meeting today in Montreal, disclosed its plans a year ago to provide "unlimited access" to Air Canada seats this fall. The company is now within months of executing on its expansion strategy, running computer models before making final decisions.
A short-haul Toronto-Ottawa flight, under the existing basic Classic redemption level, will still cost 15,000 miles in the new system, while long-haul Vancouver-Toronto service will continue to cost 25,000 miles. Those examples are for the limited number of seats that are only available below the 8-per-cent Classic rewards ceiling.
The higher-cost "Avenue" economy-class rewards category, which currently reserves 7 per cent of Air Canada's seat inventory, will be cancelled. It will be replaced and expanded in a project that's internally code-named "Dynamic" at Aeroplan.
In total, 15 per cent of Air Canada seats are now set aside for Aeroplan members. Analysts forecast that Aeroplan-designated spots could effectively rise to 19 per cent after greater access to flights is granted to consumers by year-end. That means nearly one in five seats on a flight, on average during a month, could be designated for passengers flying on Aeroplan miles.
Avenue bookings in economy class in North America currently require 22,500 miles for short-haul flights and 37,500 miles for long-haul flights. Mr. Duchesne said the new Dynamic scale will likely start at lower figures than those amounts, but higher than the Classic level.
In general, the fuller the plane at the time of advance booking, the deeper consumers would have to dig into their Aeroplan accounts.
"Under Dynamic, it will be a sliding scale, depending on exactly when you book," Mr. Duchesne said. "Each time we buy a more expensive seat, you have to pay more miles. Say you decide you want to leave this evening for Vancouver from Toronto. You can do it, but it might take twice as many miles than if you booked that six months ago. We're working that out."
Montreal-based ACE Aviation Holdings Inc., parent company of Air Canada, owns 75.3 per cent of Aeroplan.
