Montreal-based Hopper strikes insurance deal with Air Canada

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Canadian online travel-services company Hopper is taking its business to the skies for its next stage of growth.

On Wednesday, Hopper announced it signed a deal with Air Canada AC-T – its first airline partner – to offer its cancellation insurance product for non-refundable flights.

It’s the latest in a slew of global deals from the rapidly growing tech startup, which have included partnerships with U.S. credit-card issuer Capital One Financial Corp. COF-N and Brazilian digital bank Nu Holdings Ltd., NU-N also known as Nubank.

Hopper’s new insurance feature, dubbed “Cancel for any reason,” is available to travellers directly on Air Canada’s website. It will cost anywhere from 5 per cent to 25 per cent of the value of a flight, allowing customers to cancel their air travel up to 24 hours before departure and obtain a refund of 80 per cent to 100 per cent of the original booking.

The product has been in testing by Air Canada over the past couple of months and is being used by tens of thousands of customers, Hopper said.

Hopper will split the profits with Air Canada while taking full financial risk, using its technology and vast amounts of data to dynamically price the likelihood of cancellation for individual consumers based on factors such as time of booking and route chosen.

“This is the start of a new market for Hopper,” president and co-founder Dakota Smith said.

The company has four other partnerships with airlines in the works, which it says it expects to announce before the end of the year and the holiday season’s travel chaos.

The Air Canada deal comes just weeks after travel agency Expedia terminated its five-year partnership with Hopper as a lodging-inventory supplier, as was first reported by Skift, a travel news outlet.

Expedia has criticized Hopper’s meteoric growth. Its products “exploit consumer anxiety and confuse customers, leading them to purchase services they neither need nor fully understand,” Hannah Lajara, an Expedia spokesperson, said in an e-mail.

In an interview, Mr. Smith said he was surprised when Hopper’s contract with Expedia was broken prematurely on July 12. “In my view, their actions were clearly a competitive reaction to Hopper growing its user base, gaining market share and signing meaningful business-to-business partnerships,” he said.

“I think it’s a very clear anti-competitive reaction. Going forward, we’re focused on bringing new and exciting products to market with actual partners, trusted partners,” he added.

Montreal-based Hopper started as an online travel agency that used data to predict the best time for customers to buy plane tickets through its smartphone app. It later expanded into hotel bookings, vehicle rentals and travel insurance products.

It is one of Canada’s fastest growing technology companies, despite pandemic-related uncertainties in the past four years threatening the travel and leisure industry. Its valuation neared US$5-billion last fall, and it has seen revenues surpass US$500-million a year.

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The Air Canada partnership is part of a push by the company since 2019 to launch financial technology products it markets as mitigators of consumer anxiety around travelling.

The Nubank collaboration, which was announced in late July, offers flight bookings and hotel reservations to the bank’s clients as Hopper expands in Latin America. In 2021, Hopper signed a similar deal with Capital One, while raising US$170-million in growth equity at the time, led by the credit-card provider.

Beyond the “Cancel for any reason” product, Hopper also offers its flight disruption guarantee to airlines, which allows consumers to rebook a flight on any airline or receive a refund in cases of flight delays and cancellations.

While Air Canada said it is interested in Hopper’s other fintech products, the airline did not share plans to pursue any further deals with the company.

According to Cirium, an aviation data provider, almost half of Air Canada’s flights arrived late in July. Amongst major North American carriers, Cirium ranked the airline last for flight-arrival times.

When asked if Air Canada would consider Hopper’s on-time flight guarantee given the airline’s poor performance relative to other large carriers, executive vice-president of revenue management at Air Canada Mark Galardo said: “There’s no parallels to be drawn with our operational statistics and this deal with Hopper,” adding that the current partnership is aimed at offering greater flexibility to the airline’s customers.

“This is a play for what we believe to be a leisure travel boom that we think is going to continue to sustain itself for the foreseeable future,” he said.