This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.
In a surprising announcement Wednesday morning, Air Canada and three financial institutions — TD, CIBC and Visa Canada — have announced a joint offer to buy the Aeroplan loyalty program from its current parent company Aimia for C$250 million (US$191 million) in cash.
If the offer is accepted by Aimia management, this will reunite the Aeroplan loyalty program with the airline that spun it off 16 years ago in 2002. Aimia has until August 2 to decide whether or not to accept the offer of C$1.64 (US$1.25) per share for the Aeroplan assets.
In the announcement, Air Canada says that this C$1.64 offer implies a C$3.64 per share valuation for Aimia — around a 50% premium to the trading price for the company’s shares. However, the C$250 million (US$191 million) offer for Aeroplan is a fraction of its C$2 billion (US $1.5 billion) valuation when Air Canada sold off the loyalty program in an IPO.
This unification move could be see as an act of pure financial genius by Air Canada. Air Canada announced in May 2017 that it was ending its partnership with Aeroplan and would launch a new in-house loyalty program in 2020. It’s possible that it was considering scooping up the devalued program after this announcement.
If this was the plan, it worked. Aimia’s shares — which were at C$8.84 before the announcement — plummeted 83% in the month following. Now, Air Canada is swooping in a year later with an offer to buy Aeroplan back from the struggling loyalty company at a “premium” that values the company at 59% less than its value immediately before the breakup announcement.
Wednesday morning, I spoke with a senior Air Canada representative, who denied that this was Air Canada’s plan, referencing good-faith negotiations between Air Canada and Aimia to continue the partnership. Air Canada’s stance is that these negotiations broke down in 2017 due to the short-term focus of a major Aimia shareholder. Air Canada points to how Aimia hasn’t added any new partners and has lost major partners such as American Express Membership Rewards since the split was announced in May 2017.
Whatever the reason behind this offer is, it looks like the plan might work. As Air Canada was sure to highlight in its press release about the offer, Aimia has continued to struggle over the last few years, churning through CEOs and seeing its net loss balloon from C$65 million (US$50 million) in 2016 to C$271 million (US$207 million) in 2017. Its shareholders would likely be thrilled to get the cash offer at an almost 50% premium to the stock’s recent trading price.
What does this mean for Aeroplan members?
The announcement is short on details, but Air Canada doesn’t seem to be backing down from its plans to launch a new loyalty program in 2020. And there would be some sort of “transition” from Aeroplan miles to the new program’s miles:
If completed, the Proposed Transaction would result in a positive outcome for Aimia shareholders and Aeroplan members, allowing for a smooth transition of Aeroplan members’ points to Air Canada’s new loyalty program launching in 2020, safeguarding their points and providing convenience and value for millions of Canadians.
In my discussion this morning with the representative, Air Canada confirmed that the points will transfer from Aeroplan to Air Canada’s new program at a 1:1 rate. However, Air Canada is unable to say at this time whether the new program’s redemption rates would be kept the same as Aeroplan’s current rates. Mirroring statements we heard in Aeroplan’s recent announcement about its plan for 2020 and beyond, Air Canada assured me that its new program would provide more even more value to customers.
Air Canada also pointed out that having the mileage program in-house would allow for more seamless integration into its loyalty program with new offers. One specific improvement that the representative mentioned: mileage upgrades for elites.
While these type of integrations might be better for Aeroplan members than Aimia’s plan for the future of Aeroplan, our recommendation remains the same: Use your Aeroplan miles now. The program currently offers solid value — especially in premium cabins — and that’s the only known that we have at this time.
Featured image courtesy of Air Canada.
The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.
- Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
- Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
- 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
- 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
- Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
- Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
- $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
- Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
- $550 annual fee.
- Terms Apply.
- See Rates & Fees