Air Canada is reportedly close to selling a stake in its Aeroplan frequent flyer program to Blackstone for $2 billion.
The deal could be announced as early as this week, said the people, who asked not to be identified discussing confidential information. Some Canadian funds are set to invest in Aeroplan alongside Blackstone at the same time, the people said.
Air Canada is seeking to raise money in the midst of a multibillion-dollar program to buy new aircraft and renovate the interiors of existing ones as it plots new routes. The airline operates more than 300 planes and expects to reach nearly 400 by 2030.
The portion of Aeroplan being sold is being referred to as a ‘minority’ stake though I’ve also seen reference to 20%. It’s not clear whether any governance rights will come with this investment.
Aeroplan Was Spun Off Once Before
Aeroplan was created in 1984 and became the world’s first publicly traded loyalty program and the first airline frequent flyer program monetized through a public offering in 2005.
I’ve never actually figured out the true ‘sales price’ for Aeroplan twenty years ago, and most of the reported figures get it wrong.
- The IPO raised CAD$287.5 million. Those proceeds were put towards a CAD$400 million reserve against the value of accumulated points. The initial IPO sold off 14.4% giving Aeroplan an implied value of CAD$2 billion
- Air Canada’s parent later received about CAD$1.19 billion in three separate tranches, so gross proceeds totaled nearly CAD$1.5 billion.
- But they also transferred about 108 million Aeroplan units to their shareholders.
Nonetheless, the value of Aeroplan in 2005 was relatively quite small!
When the program was spun off, Air Canada agreed to a 15-year term during which Aeroplan would remain its exclusive frequent flyer program, with four potential five-year renewals that were automatic unless notice was given at least 12 months before expiration.
Air Canada Only Just Bought Back Aeroplan Before The Pandemic
On May 11, 2017, Air Canada gave notice that it would not renew and announced it would introduce its own loyalty program in 2020. Aeroplan parent Aimia’s shares fell 63% that day.
In 2018, Air Canada re-acquired Aeroplan in an announced deal that included CAD$450 million cash plus CAD$1.9 billion of point liabilities. This was eventually adjusted to CAD$516 million. TD, CIBC, Visa and American Express funded the transaction signing long-term co-brand and payment network agreements.
| Commercial consideration | Prepayment for future points | |
|---|---|---|
| TD | C$622 million | C$308 million |
| CIBC | C$200 million | C$92 million |
| Visa and Amex combined | C$390 million | — |
| Total | C$1.212 billion | C$400 million |
How Valuable is Aeroplan?
Air Canada now says Aeroplan has more than 10 million active members worldwide, versus more than five million when the acquisition closed.
In 2025, it received CAD$1.98 billion for points issued to partners. It had a deferred revenue balance of $4 billion. Aeroplan is currently about a CAD$2 billion a year points sales business. They do not disclose their gross margin.
The major U.S. airlines have reported in the past margins of 39% – 53%, but these should be treated as ‘order of magnitude’ only and aren’t really comparable to each other or other airlines, because they set their own internal prices for transactions with the airline.
Interchange in Canada is about 20% below that of the U.S., so we can assume that while cobrand deals are lucrative they may be slightly less lucrative than in the States. However, Air Canada also occupies a unique market position in a way that U.S. brands are more competitive with each other.
While there are ways of inferring program value from program size, member activity and cobrand card numbers, the best valuation exercise is going to be the market test – what Blackstone and others are ultimately willing to pay for this stake.
Wait, so Aeroplan had more partner J award availability when *checks notes* private equity “E Corp” (sorry, I mean Blackstone) owned it? Huh. Wild.
Ez way to fund growth. Keep offering 200K in yearly pyb redeems aeroplan cc.
Clever off-balance sheet financial engineering. We all know that these programs are worthless without an airline!
Blackstone is buying a share of all future program sales the airline makes (with most likely a minimum dividend of 8%), and wouldn’t be surprised if they have a repurchase agreement with Air Canada.
Voilà Air Canada gets financing without anything hitting its balance sheet.
From my perspective, living outside North America, Aeroplan is of considerably less value to me than when it launched a few years back
The massive increase of mixed cabin flights, where a single class was the norm devalues the experience financially as well as adding a unneccessary stopover.
Also the inexplicable addition of a Air-India flight to an otherwise simple route (example: HND-DEL-SYD anyone?). Get out your map of the world to see how insane that one is! A massive timewaster as well as setting your points on fire!
Mind you, UA seems to have been seduced by Air India too, doing much the same thing as Aeroplan.
Loyalty programs are a Ponzi Scheme fueled by the latest “Buy x number of points and get a 100% bonus” that stupid people regularly fall for.
@Gary Leff — You gonna comment on the President escaping Turkey by hiding in an airport catering cart after the NATO summit last month? Yikes. Top story on NYTimes.
why should he?
I find the concept of a private equity firm holding a notable stake in another airline to be a terrible idea. The corporate raider mentality is completely antithetical to the principles of stability and offering members good value. We’re gonna get hosed royally if this happens.
@cr — Aviation. Humiliation. TDS.
(Both Ben from OMAAT and Matthew from LALF already posted about it. I guess Gary was taking a siesta.)
Uh oh, @cr, looks like it was both relevant, and something Gary wanted to cover… he just posted it. Bahaha! Cry harder. Go protect ‘daddy’!
It was criminal what AC did to Aeroplan the first time around. It became a useless program to use points for flying as AC had a nearly 400$ fee on every reward flight. Was much cheaper to just buy the ticket directly. Worked fine for United domestically in US. After over 25 years we cancelled our CC and moved on.
Killing the company and then buying it back for peanuts was a ruthless move.
I’d argue the opposite side from Christian. Having a private equity owner in a separate legal points entity from the airline seems one of the few ways to ensure that value remains in the points business. Too many desperate airlines just suck the value out of their points businesses (hello, Skypesos!), devaluing the balances rapidly to meet quarterly earnings targets.
For private equity to invest significant money into the points business, there would have to be guardrails to ensure the continued profitability of the system. Overall, that’s probably better for points collectors than having an airlines run the program.
Sorry, _run, but there’s no secret repurchase agreement for Aeroplan- that would make the investment convertible debt, which would need to be disclosed on the balance sheet.
@Christian, @George — Arguing over whether a “corporate raider” or a “desperate airline” is better for your point values is like debating which side of the Titanic is more ‘comfortable’ as it sinks (is the left or right closer to the icy-cold water?)
Whether AC milks the program for quarterly earnings or Blackstone engineers dividends, the result for us is mostly the same. Dynamic pricing, fewer partner awards, and insane mixed-cabins routing via Delhi or Addis Ababa.
Regardless of who owns these platforms, I think we should set lower expectations moving forward. Earn and burn, keep most of what you have in non-existing transferable bank points, and don’t rely on any airline’s loyalty program for too long.
Some of you won’t want to hear this, because I’m about to use the dread R-word (regulations!)… the only real solution is some actual regulatory teeth. Force these programs to disclose their true breakage, stop letting them change redemption charts overnight without notice, and treat these corporate pseudo-currencies like the unregulated banks they actually are. Until there’s consumer protection, we’re just playing in their private casino.