Air Miles sends apology to members for not living up to expectations in 2016

Air Miles wants to make amends with its members for a rough 2016, so it's emailing them an apology of sorts starting Wednesday morning.

The year was "challenging" and "we learned very difficult, public and humbling lessons," Blair Cameron, head of Air Miles, says in the letter. 

He calls Air Miles "Canada's favourite loyalty program," but admits that was "an honour that we did not live up to last year."

Cameron also promises to make it right for members with improvements to the program.

"You can look forward to an even better Air Miles experience going forward," he writes. 

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Air Miles is run by Toronto-based company LoyaltyOne. Its troubles began when numerous members rushed to cash in their miles last year to beat a looming expiry policy: Miles older than five years were set to expire and become worthless as of Jan. 1, 2017.

Many members complained the program made it difficult for them to redeem their miles for rewards.

They griped about long waits to reach customer service by phone and inadequate rewards options. Some even accused the program of hiding selected merchandise rewards from members who had enough miles to buy them.

Then, on Dec. 1 — one month before miles started expiring — LoyaltyOne backtracked and cancelled the expiry policy. The company said it did so due to "feedback from collectors" and upcoming Ontario legislation that would retroactively ban loyalty programs from imposing an expiry policy.

'We are continuing to improve'

Planned improvements listed in the letter include:

• Speeding up wait times for customer service help by phone and online.
• Better communication on program updates.
• More "new and exciting rewards" for collectors.

"We are continuing to improve the program to ensure Canadians receive incredible value," says Cameron.

Financial writer and Air Miles collector Robb Engen believes the letter is a good start.

"It addresses the fact that 2016 was a mess — they're owning it."

But Engen, who lives in Lethbridge, Alta., adds that it should have come much sooner. "It might be too little too late," he says.

Engen also notes that last month, LoyaltyOne's parent company, Texas-based Alliance Data Systems, sent a more ominous message to collectors.

It warned that Air Miles would have to adjust the program to make up for a $242-million US shortfall.

That's money the company had determined it would have gained from collectors who let their miles expire on Jan. 1 rather than redeeming them. With the cancellation of the expiry policy, the anticipated financial gain disappeared.

"Going forward, we will need to rework the Air Miles reward program to replace the lost economics," Alliance Data CEO Ed Heffernan said in a statement.

One way to do that is to devalue miles. Last month, Air Miles quietly lowered the value of miles used for vacation packages by 20 per cent.

CBC News asked the program if it has since devalued miles in any other categories.

The answer was ambiguous: "Working with many suppliers across rewards categories, the value of miles may change from time to time as prices in the market fluctuate or fulfillment requirements change,"Air Miles spokeswoman Natasha Lasiuk said in an email to CBC News.

Appeasing retailers?

Engen also suggests that perhaps the letter was motivated by retailers and other businesses that offer their customers Air Miles and were displeased with events in 2016.

"Maybe this is a way to just appease them," says Engen.

Alliance Data's 2016 annual financial report states that the amount of miles that members collected "slowed" toward the end of 2016.

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It blamed partnering businesses, saying they reduced their Air Miles promotions "due to the negative media attention surrounding the expiry."

The report stated that the continued attractiveness of the Air Miles program "will depend in large part on our ability to remain affiliated with [businesses] that are desirable to consumers."

It also noted that its contract with major partner Bank of Montreal expires in 2018.

Engen says rather than an apology letter, what moves Air Miles makes next will determine whether or not members remain loyal and — inevitably — the future success of the program.

"It's all about their actions moving forward," he says.