Air Canada and Aeroplan have struck a deal for the airline to purchase the loyalty program for $450 million.
The airline will partner with financial services companies Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada to buy Aeroplan from its parent company Aimia Inc.
The two sides have been circling each other for weeks, since Air Canada went public with a hostile takeover offer for Aeroplan at the end of July. That plan valued the program at $250 million. Tuesday’s deal sees that price tag almost double.
Air Canada invented Aeroplan more than 30 years ago as its in-house loyalty program, designed to reward frequent travellers. But more than a decade ago, Air Canada sold off Aeroplan as an independent company.
Now the airline wants to buy back the program, so it can absorb all of its members into a new, as-yet-unnamed loyalty program.
“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence,” Air Canada’s CEO Calin Rovinescu said.
“This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians.”
Shareholders of Aimia still have to vote on and approve the deal, but Aimia’s largest shareholder, Mittleman Brothers, LLC, which owns 17.6 per cent of the company, has already come out in favour of it.
Pending that shareholder OK, the deal is expected to progress quickly and be finalized by the fall of this year. But there are still many questions hanging over the deal, most notably what becomes of Aimia after it has lost Air Canada — or what companies besides Air Canada who use Aeroplan will now do.
In recent weeks, Aimia was busily signing deals with other airlines in an attempt to rebuff Air Canada’s move.
The program signed deals with Flair Airlines, Porter Airlines and Air Transat to start using the loyalty program in 2020.
It’s not immediately clear what happens to those proposed plans now.
Air Canada partnering with Visa and two Canadian banks, however, makes perfect sense.
Visa has a vested interest in Aeroplan, since the credit card company offers cards that offer Aeroplan points as a reward for using them. TD has been Visa’s main partner on such a card since 2014, after it took over that partnership from CIBC. CIBC, however, still offers cards that lets its customers accrue Aeroplan points.
The two banks are some of Aeroplan’s biggest customers, between them buying about $650 million worth of points every year for their cardholders, Industrial Alliance analyst Neil Linsdell estimates.