This morning I wrote that Air Canada made an offer to buy Aeroplan at a $2.25 billion valuation.

Aeroplan was spun off from Air Canada 13 years ago. It’s a separate, independent business that’s part of Aimia, a loyalty company which several other interests as well. Air Canada announced last year that they were going to start their own program and no longer work with Aeroplan.

The Air Canada offer is in conjunction with Aeroplan’s banking partners CIBC, TD, and Visa.

• Aeroplan’s co-brand bank issuer partners presumably see partnering with Air Canada as more valuable, and this deal would lock that in.
  
• Visa likely doesn’t want to lose the charge volume to Mastercard when Air Canada does a co-brand deal for its new program.

Air Canada and Aeroplan couldn’t come to an arrangement to extend their 15 year deal 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.

The offer this morning to buy Aeroplan at $3.64 a share sent shares of parent Aimia soaring.

Buying Aeroplan would give 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.

I’ve done some additional digging into the Air Canada offer, what we know about the future if this deal happens, and what we don’t know.

Air Canada is Offering to Buy Aeroplan – Not the Rest of Aimia’s Assets

Air Canada is offering to buy the Aeroplan business and not the rest of Aimia. That means the intellectual property, data, brand and infrastructure of Aeroplan. Aimia would retain things like (Aeromexico) Club Premier and Air Miles Middle East. There’s still details to be worked out on what that would mean for elements of the Aeroplan business, for instance unionized call center workers.

If this works it will mean a new credit card agreement between Air Canada, TD, CIBC, and Visa for the Canadian market. Of course Air Canada will also be doing deals in the U.S. market separately.

Air Canada Will Still Launch a New Program in 2020, With Points Transferring 1:1

Air Canada would run the Aeroplan program after they acquire it, and is still planning to launch a new program in July 2020. Points would transfer 1:1 from Aeroplan into Air Canada’s new program.

For some time Air Canada has been saying this is going to be a better program. No doubt there will be things they can do managing the program themselves, and starting from scratch, that they couldn’t do with the loyalty program operating as a separate business and without direct contact with their customers. I have to think some of the pain points like award change fees for top tier elites, that Aeroplan wanted Air Canada to pay for to accomplish in the past, go away.

Deal Gives More Certainty to Members, But We Don’t Know What the Future Program Will Look Like

Although we don’t know what the new Air Canada program will look like. We know if this deal happens that customers with Aeroplan points will still have an Air Canada relationship in two years, and access to Star Alliance in two years. I think existing Aeroplan balances are probably better off if this deal happens, although I think Air Canada would have had to compete aggressively to make Aeroplan members their own — member bonuses, opportunities to build balances quickly — which is a pressure that this deal would remove.

This would certainly give Canadian members more of the certainty they’re looking for, that Aeroplan has also been trying to get out ahead of with announcements last week about award prices, points transfers, and charter flights, although in either scenario – an independent Aeroplan or an Air Canada acquisition of Aeroplan – we don’t really know details of what the future looks like yet.