Air Canada wants to buy back the Aeroplan program, which is spun off into a separate company. The program is owned by Aimia, which also owns 49% of Aeromexico’s frequent flyer program. Either Aimia sells Aeroplan back, or Air Canada starts its own new program in July 2020.

• Unquestionably Aeroplan members will prefer to continue to have their miles associated with the country’s largest airline. They participated in Aeroplan largely because of this association to begin with.

• And Aeroplan’s financial partners prefer this outcome too, they’re providing funding for the Air Canada deal and would take partial ownership.

• Aimia’s shareholders seem to prefer it also, since shares in the company jumped about 40% with the offer.

However Aimia has rejected Air Canada’s offer. Talks broke off last night, Air Canada’s formal deadline.

Air Canada and its bank partners in the deal had offered $250 million plus assumption of the program’s liabilities. They had raised their offer to $325 million. Aimia was willing to sell, but they wanted $450 million.

Copyright: ronniechua / 123RF Stock Photo

The initial offer seemed like a good solution, ultimately almost too clever by half — Aimia’s share price nosedived after Air Canada announced they would not renew their 15 year agreement with Aeroplan and would compete with it instead. Then they were able to come in and offer to buy Aeroplan at a discount.

Re-acquiring the program would allow them to start their new program with 5 million members, rather than having to spend handsomely to build their membership back from almost scratch (they do have contact information for customers flying the airline who booked direct). It also would reduce the need to spend as lavishly on benefits and redemptions because they wouldn’t need to compete against their older more established program.

While $450 million wouldn’t have been a good price a year ago, and Air Canada clearly played hardball, $325 seems like a good price today. For Aimia’s shareholders it’s a good option consider. Prior to Air Canada’s offer the entire Aimia company’s market cap was about $300 million. After selling Aeroplan they’d still own 49% of Club Premier. So it’s hard to fathom the deal actually falling apart. Though my view of probabilities will be heavily influenced by what happens to AIM shares when the market opens.