The frequent flyer program Aeroplan was spun off from Air Canada 14 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. The deal is done.
The major terms of the deal:
- CAD$497 million cash and assumption of ~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. They believe they’re likely to conclude an American Express agreement too.
- About half of Aimia’s 1500 employees stay on 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. The acquisition has closed. So we should learn new program details very soon.
We know that Aeroplan members will still have an Air Canada relationship going forward, and will still have access to Star Alliance with their points. That means the deal gives Canadian members more of the certainty they’re looking for.
Air Canada executives disasgree with me, and I’d love for them to prove me wrong, but I continue to believe that the Air Canada program will be less lucrative than it otherwise would have been without this deal.
Air Canada was going to launch a new program. They were going to need to spend a lot to build a membership file almost from scratch (they have contact details for many airline passengers). And they would have had a huge competitor in Aeroplan.
Instead now they already have the member file from Aeroplan, don’t need to spend on marketing and offers to build it. And there’s going to be less competition in the Canadian marketplace.
Now Air Canada execs, prove me wrong.