The frequent flyer program Aeroplan was spun off from Air Canada 13 years ago. It’s a separate, independent business that’s part of Aimia, a loyalty company with several other interests as well (like a 49% stake in Aeromexico’s Club Premier).
Air Canada and Aimia couldn’t come to an arrangement to extend the airline’s 15 year deal with Aeroplan post-spinoff. Air Canada lost direct control over member communications. They couldn’t come to terms on economics to offer benefits to their best customers like waiving change fees on award tickets. And they saw an opportunity to derive ongoing profit from their marketing program with co-brand credit card partners, rather than incurring costs with Aeroplan.
So Air Canada announced last year that they were going to start their own program and no longer work with Aeroplan in 2020. However rather than start from scratch with a new program Air Canada, along with Aeroplan’s banking partners CIBC, TD, and Visa, came to an agreement to buy Aeroplan from Aimia.
That gives Air Canada its members to market to right away, and it would eliminate expected new major competition between the two from the marketplace before it even begins.
A definitive transaction has now been signed.
- CAD$450 million cash and assumption of estimated CAD$1.9 billion in outstanding liability of points.
- TD pays Air Canada CAD$622 million plus prepayment of $308 million in miles purchases.
- CIBC pays CAD$200 million to Air Canada plus prepayment of $92 million in miles purchases.
- Visa pays Air Canada as well
- Air Canada is “still in talks with American Express” about continued participation in their new loyalty program.
Aeroplan’s President is out after just 3 months in the role. Roughly 60% of Aimia employees are expected to continue with Air Canada.
Copyright: ronniechua / 123RF Stock Photo
Air Canada still plans to launch a new program in 2020, they’ll just move Aeroplan members and miles into it. They’ve said they would share what their new program will look like once their acquisition of Aeroplan closed. So we should learn new program details very soon. We know that Aeroplan members will still have an Air Canada relationship in two years, and will still have access to Star Alliance with their points. This gives Canadian members more of the certainty they’re looking for.
However it seems likely that the Air Canada program will be less lucrative than it otherwise would have been since it won’t have Aeroplan to compete with and it won’t have to aggressively attract members to scale up quickly.
This is going to be a devaluation as never seen before.
AC wont annouce details until people are committed for 2020 flying. Its the sleaziest Canadian company in the marketplace.
There is no competition in the ffp (or even credit card) world in Canada, OPM is pretty much resigned to fly AC, the “enhancements” will be severe.
Does not sound good. No doubt, they will copy Delta/United/American.
I have 280,000 Aeroplan points and plan to burn through them asap. I don’t trust these people.
@Gary – Do you think AC ever planned to cut ties with Aeroplan or just used it to get a better price for Aeroplan?
I can see AC copying United’s award charts but holding onto carrier surcharges. So yeah, it’ll be a massive devaluation.
Why change anything but the name, and even that can be Altitude as that’s what AC adopted for its elite tier program? AC already “devalued” the redemption chart by adjusting the earning levels for various fare classes.
As for completion, AC still has the three major US airl8ne programs since many Canadians who fly to and in the US put their flights into those programs as do many who fly overseas and use the AF/KL, BA, CX and LH programs. WestJet has continued to expand and enhance its FF program. And more Canadians are members of Air Miles than Aeroplan.
In fact, by losing Aeroplan, AIMIA really has no Canadian loyalty business left. Starting up a new program with little infrastructure (that’s all going to AC along with callcentre/customer service staff) will be costly particularly given Canada is saturated by customer loyalty programs like Air Miles and Optimum. Just shut the compan6 down and divide the AC cash among shareholders.
Hi, very good article
Thanks for sharing ,keep up the good work
Acquisitions & mergers. They learned from the US market. I wonder if they have monopoly laws in Canada? No problem they have competition with Porter airlines.
So the Air Canada spin-off of Aeroplan into a separate publicly-traded company and its re-acquisition resulted in how much of a financial gain for Air Canada at the expense of investors in Aeroplan?
Either way, take this as sign not to be a long term investor of any major US airline loyalty program in the event that such airline tried to sell off (in part or whole) a loyalty program into its own publicly-traded company.
@Daniel – I assume they really did plan to cut ties, but it sure is convenient that doing so caused Aimia’s stock to plunge…
Always take the under with Air Canada. They are without question one of the worst run and poorest examples of corporate governance out their
A large number of their employees hate the airline, loyal customers are driven away in droves.
Anyone with enough miles to get a free flight should burn through the miles as fast as humanly possible, trusting Air Canada to anything remotely considered positive to the customer is a bridge too far.
Short of an evacuation from a disaster anyone flying should avoid Air Canada.