Air Canada faces constraints on selling its frequent flyer program

Reported in Canada’s National Post:

    GE Capital Aviation Services could receive part of the proceeds of a sale involving Air Canada’s Aeroplan, according to terms of the US$1.5-billion financing pact between the U.S. company and the carrier.

    Under the agreement, GECAS will provide the Montreal airline with US$1.5-billion in financing, designed to help Air Canada emerge from creditor protection and acquire regional jets.


    One of the wrinkles in the agreement stipulates that should Air Canada sell 100% of Aeroplan — its popular and cash-producing frequent-flyer program — to another investor, it is obliged to set aside 25% of the proceeds, or no less than US$125-million, for GECAS. The money will go toward paying down loans supplied by the aircraft lessor.


    However, if Air Canada, during the first six months following its exit from bankruptcy protection, sells a stake in Aeroplan of 35% or less at a minimum price of $250-million, the airline gets to keep the proceeds. But if such a sale is for more than $350-million, proceeds over that amount are forwarded to GECAS.


    Also, Air Canada must obtain GECAS consent before going ahead with an Aeroplan sale.


    Prior to filing for bankruptcy protection, Air Canada and Onex Corp. had agreed to a deal that would see the Gerry Schwartz-led company pay $245-million for a 35% interest in the loyalty reward plan. At the time, a sale would provide much-needed cash.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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