AC To Buy Back Aeroplan?

[Guest]

Aeroplan’s charter airline to launch after end of Air Canada partnership

 

• Calgary Herald
• 20 Jul 2018
• ROSS MAROWITS

AEROPLAN Members of Aimia’s loyalty program Aeroplan will be able to buy seats on any airline, any time, to any destination by July 2020.

MONTREAL Aeroplan aims to get into the airline business by offering charter flights to its most popular destinations as the loyalty program prepares for the end of its exclusive partnership with Air Canada in 2020.

“We have routes where we have enough redemption demand today that we can fly a daily charter throughout the year on some particular routes,” Jeremy Rabe said in his first media interview since taking over in May as CEO of parent company Aimia Inc. “Those will be dedicated Aeroplan aircraft that are flying just for Aeroplan.”

Aimia is in negotiations with potential airline partners to operate narrowbody aircraft ideally suited for flights to sun destinations in the Caribbean.

Details about the number of planes, their outside look and configuration will be announced in the next year or so, Rabe said.

The big move shows the loyalty program is committed to providing the greatest value to members, he said. “We can optimize the itineraries, we can make sure that those planes are flying to the places where people actually want seats and again that’s a big difference than today.”

The Montreal-based company is preparing for July 2020 when its 30-year partnership with Air Canada expires as the airline launches its own loyalty program.

Industry analysts say the company ’s long-term prospects are unclear. As of the first quarter it cut $70 million in costs, but Stephanie Price of CIBC World Markets estimates the company will need an extra $200 million a year to buy flights at market rates after 2020.

When its exclusive partnership with Air Canada ends, Aeroplan members will be able to buy seats on any airline, any time, to any destination instead of being limited to Canada’s largest airline and its Star Alliance partners.

An Aeroplan survey found that 72 per cent of members said expanding redemptions to any airline would be a “big improvement” to the program.

Aeroplan is working to sign up preferred airline partners and is also introducing several new program features that will create a more flexible program and a better member experience.

Starting in September, Aeroplan will introduce a new online travel booking tool that will initially enable members to earn miles when they rent a car or book a hotel using cash. Within two years, miles alone or in combination with cash will be redeemable for a variety of travel, leisure and entertainment experiences, including concerts, spas and private jets.

Additional digital tools, backed by the use of artificial intelligence and machine learning, will enhance the experience by anticipating member preferences based on their travel history, Rabe said.

“So we’re going to get creative around things like suggesting maybe some cool destinations where you can think about travelling.”

Aeroplan plans to maintain the current mileage grid required for about 95 per cent of its network of flights. That answers one of the biggest questions he’s heard from members about how Aeroplan will look after 2020, Rabe said.

It is also introducing a points transfer program in 2020 that will allow members to convert Aeroplan Miles to the loyalty programs of nearly 20 airlines covering several alliances, giving them wider access to flights and hotels.

Rabe downplayed the risk that the transfer program will be a conduit for members to end their loyalty to Aeroplan. “If members see that we’re going to have an incredible loyalty program, differentiated value, flexibility and experience then I’m confident that members will continue to engage in the program ...”

[blues deville]

Interesting plan and I wish them luck but how many times can the leisure market pie be sliced?

[Guest]

2 hours ago, blues deville said:

Interesting plan and I wish them luck but how many times can the leisure market pie be sliced?

The interesting part will be "Who supplies and crews" the aircraft? To earn the necessary points will be quite the task unless their Partner base is significantly increased. https://www.aeroplan.com/earn_miles/our_partners.do

[blues deville]

1 hour ago, Malcolm said:

The interesting part will be "Who supplies and crews" the aircraft? To earn the necessary points will be quite the task unless their Partner base is significantly increased. https://www.aeroplan.com/earn_miles/our_partners.do

Yes their details are vague but perhaps the plan will be to link up with Sunwing and TransAt since the others are already spoken for. 

So their crews, their planes. Starting another holiday airline in this country would be a major error  . 

[Zan Vetter]

So, all other partner options explored and doors were closed? This can’t end well.

[Seeker]

Some charter airline will take the offer and provide scattered flights to a few destinations at odd times of the day.  Aimia will stagger on for a year or two losing more money each year as cardholders bailout when they realize the redemption of their points is getting harder and harder.  Then we'll have one day of incessant news reports about the unaware who saved points for 30 years for their dream vacation and got stuck holding the bag.  Gabor Lukacs will make his appearance yakking about passenger rights and....we're done!

[j.k.]

bingo!

[JL]

Just heading to aeroplan site now to see what I can spend the last of my points on before this slow mo car crash finishes.

[Guest]

I guess this is in reaction to the plan:

Quote

Proposal by Air Canada, TD, CIBC and Visa to Acquire Aimia's Aeroplan Loyalty Business Français

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News provided by

Air Canada / TD Bank Group / CIBC / VISA Canada Corporation

08:00 ET

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Benefits both Aeroplan members and Aimia shareholders

• Allows for smooth transition of Aeroplan members' points to Air Canada's new loyalty program launching in 2020
• Provides value to all Aimia stakeholders and a viable solution to Aimia's current business and financial challenges
• Represents a total purchase price of $2.25 billion, including $250 million in cash and the assumption of approximately $2 billion of Aeroplan points liability
• Proposal implies approximate value of $3.64 per Aimia Inc. common share, a 52.3% 30-day VWAP premium and a 45.6% premium to spot closing price as of July 24, 2018, when added to value of Aimia's other assets¹

TORONTO, July 25, 2018 /CNW Telbec/ - Air Canada, The Toronto-Dominion Bank ("TD"), Canadian Imperial Bank of Commerce ("CIBC"), and Visa Canada Corporation ("Visa"), on behalf of a corporation to be formed, have made a proposal to Aimia Inc. ("Aimia") to acquire its Aeroplan loyalty business (including approximately $2 billion of Aeroplan points liability at March 31, 2018) for $250 million in cash (the "Proposed Transaction"), representing a total purchase price of approximately $2.25 billion. 

 

The Proposed Transaction, if accepted by Aimia, will ensure value and continuity for their members as well as customers of Air Canada, TD, CIBC and Visa. The proposal implies an estimated market equivalent value of $3.64 per Aimia share, a 52.3% premium to the 30-day VWAP and a 45.6% premium to spot closing price as of July 24, 2018. The market equivalent value is comprised of the Aeroplan loyalty business proposal value of $1.64 per Aimia common share plus non Aeroplan loyalty program net assets valued at $2.00 per common share based on fair market value estimates contained in Mittleman Investment Management's Q1 2018 investor letter.¹

The parties have requested a prompt response from Aimia regarding the proposal, which has an expiry date of August 2, 2018. The Proposed Transaction is subject to the satisfactory conclusion of transaction documents and certain other customary conditions, including due diligence, receipt of customary regulatory approvals and the negotiation and satisfactory completion of credit card agreements between Air Canada and each of TD and CIBC.

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.

Given Aimia's current situation and future prospects, the Proposed Transaction delivers value to Aimia's stakeholders. Air Canada, TD, CIBC and Visa are committed to engaging with Aimia's board to complete a transaction and trust that Aimia's Special Committee and Board of Directors, in discharging their fiduciary duties, will respond promptly by August 2, 2018. A timely completion of the transaction is essential for the continued participation of the parties

 

[deicer]

https://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=jdw2500&mobile=false

Air Canada-led group seeks to buy Aeroplan business in $2.25-billion offer to Aimia

The Canadian Press, at 09:07 on July 25, 2018

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MONTREAL - Air Canada, two banks and Visa Canada say they are offering to buy the Aeroplan loyalty business from Aimia Inc. in a deal valued at $2.25 billion.

The consortium says the transaction would provide continuity for Aeroplan members as well as customers of Air Canada, Toronto-Dominion Bank, CIBC and Visa -- which all have long-standing relationships with Aimia.

Aeroplan's future has been in doubt since Air Canada announced in May 2017 that it planned to launch its own loyalty rewards plan in 2020.

Over the past 14 months, Aimia's stock has fallen to $2.50 as of the close on Tuesday, down from $8.84 prior to Air Canada's departure announcement.

Air Canada created Aeroplan as in-house loyalty program but it was spun off as an independent business, now called Aimia Inc.

TD and CIBC currently offer Visa cards with Aeroplan rewards points, which can be redeemed for Air Canada flights and other merchandise.

Companies in this story: (TSX:AIM, TSX:AC, TSX:CM, TSX:TD)

[deicer]

https://www.bnnbloomberg.ca/air-canada-td-cibc-visa-offer-to-buy-aimia-s-aeroplan-in-2-25b-deal-1.1113562

 

[rudder]

Interesting.

ACE sold off Aeroplan to reward the unsecured creditors and Cerberus. Now AC (not ACE) needs to buy it back.

Goes to demonstrate one of the many flaws in the Milton era restructuring solution.

[conehead]

It was certainly successful for Milton.

[Guest]

Aimia acknowledges receipt of a proposal to acquire Aeroplan business Français

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News provided by

AIMIA

12:37 ET

Share this article

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MONTREAL, July 25, 2018 /CNW Telbec/ - Aimia Inc. (TSX: AIM), a data-driven marketing and loyalty analytics company, today confirms that it has received a conditional proposal from a consortium (the "Consortium") consisting of Air Canada, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and VISA Canada Corporation to acquire the Aeroplan loyalty program business (the "Proposal"), and acknowledges the press release issued by the Consortium earlier today with respect to the Proposal.

This public Proposal follows prior private engagement and discussions between Aimia and the Consortium. The Board of Directors of Aimia had formed a special committee of independent directors (the "Special Committee") some time ago in connection with such engagement and discussions and had engaged legal and financial advisors. Further to its ongoing mandate, the Special Committee will consider this Proposal in consultation with its legal and financial advisors to assess whether the Proposal is in the best interests of shareholders and the Company as a whole and will make appropriate recommendations to the Board of Directors.

Given the nature of the Proposal, shareholders of Aimia do not need to and are advised not to take any action with respect to the Proposal at this time. Aimia intends to provide updates if and when necessary in accordance with applicable securities laws.

Notwithstanding the Proposal, consistent with the Company's announcement on July 19, 2018, Aeroplan remains committed to maintaining differentiation on exceptional value and delivering a more flexible and enhanced experience for the engaged base of five million members.

[Guest]

Quote

You won’t beat our bid, Air Canada boss tells Aimia

In-house loyalty program to continue even if offer for Aeroplan is rejected, CEO Rovinescu stresses

• Calgary Herald
• 28 Jul 2018
• ALICJA SIEKIERSKA

PAUL CHIASSON/THE CANADIAN PRESS Air Canada CEO Calin Rovinescu says the offer of $2.25-billion for Aeroplan is “extremely generous.”

TORONTO Air Canada’s chief executive Calin Rovinescu said Friday that its bid for Aimia Inc.'s Aeroplan reward program was “extremely generous” and that it would still pursue its own in-house loyalty program if the company rejects the surprise offer.

“The consortium proposal is not a — quote — 'steep discount’," Rovinescu told analysts on a conference call on Friday morning following the release of the airline’s second-quarter results. “It was, in fact, at a substantial premium and extremely generous, given the $2 billion unfunded redemption liability of Aeroplan that the consortium would be accepting. We believe there is no other party out there prepared to accept this $2 billion liability, nor any other buyers for the company.”

Air Canada surprised the market on Wednesday when it announced that it had partnered with Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Visa Canada Corp. to make a $2.25-billion bid for Aimia’s Aeroplan program — the same loyalty plan it spun off more than a decade ago.

The bid from the Air Canada-led consortium is comprised of $250 million in cash, or $1.64 per share, plus the assumption of $2 billion in Aeroplan points liability.

However, Mittleman Brothers, Aimia’s largest shareholder, believes the loyalty program is worth four times more than what Air Canada is offering. In a letter to investors that was obtained by Bloomberg, Mittleman Brothers said it believed Aeroplan was worth about $1 billion, or $6.57 per share. According to Bloomberg, Mittleman also said it believes Aimia is worth about $10 a share on a sum of its parts valuation.

Rovinescu rejected claims that Air Canada’s offer was a hostile bid on Friday, and said that the consortium’s proposal “looks after all of (Aimia’s) stakeholders.”

Should Aimia reject the offer, Rovinescu stressed that the company will continue to pursue its own in-house loyalty program.

“We have not abandoned our plans to launch our own loyalty plan in 2020,” Rovinescu told analysts. “Aeroplan miles would simply be converted to our new program. The acquisition (would allow) for a smooth transition for Aeroplan members.”

Air Canada’s executives declined to provide further economic details about the program, saying it was too early in the process to do so.

Rovinescu’s comments came as the company reported an operating income of $226 million in the three-month period ending June 30, down from $292 million at the same time last year. The airline said it will hike fares and consider adjusting its network capacity as it grapples with rapidly rising fuel costs, which increased in the most recent quarter by 31 per cent.

“We estimate that we’ll be able to mitigate approximately 75 per cent of the expected 2018 annual fuel price increases through fare increase, other commercial initiatives and our cost transformation program,” Rovinescu said.

Skyrocketing fuel prices prompted the Montreal-based airline to reduce several end-ofyear financial targets, including return on invested capital (ROIC), which it now expects to come in at 12 per cent, down from the previously anticipated 13 to 16 per cent. It also expects an EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent) margin of 16 per cent in 2018, compared with previous estimate of between 17 and 20 per cent.

It said it expects jet fuel will average 80 cents a litre in the third quarter and 78 cents a litre in the fourth quarter, up from the previous 2018 estimate of 75 cents a litre.

Cowen and Co. analyst Helane Becker said in a note she expects the airline to still have a fairly strong showing for the remainder of 2018.

 

[Geminoid]

Hmmmmmm. I have to wonder if this may have been the plan all along.  When Air Canada announced the end of it's affiliation with Aeroplan last year, the Aimia shares took a major beat down.  Now, along comes Air Canada with an offer to buy a significantly devalued operation. Could there be a case for some kind of nefarious economic manipulation in the series of events?

[Guest]

2 hours ago, Geminoid said:

Hmmmmmm. I have to wonder if this may have been the plan all along.  When Air Canada announced the end of it's affiliation with Aeroplan last year, the Aimia shares took a major beat down.  Now, along comes Air Canada with an offer to buy a significantly devalued operation. Could there be a case for some kind of nefarious economic manipulation in the series of events?

Or maybe just an opportunity to shut down a potential rival  in the charter world?

[dagger]

13 hours ago, Malcolm said:

Or maybe just an opportunity to shut down a potential rival  in the charter world?

Or maybe just common sense. The Aeroplan agreement with Aimia is expiring in 2020, just as the Jazz CPA with Chorus would have expired around then had the parties not negotiated a mutually agreeable extension. With such agreements, the end of the fixed term does not represent a plot, but an opportunity. It can stay and extend, or leave and do its own thing. If Aimia had a successful business model, it might have been able to absorb an extension that is more favourable to AC, but since the Nectar debacle, it's clear that Aimia doesn't have the sustainable profitability to give AC much better terms. The stock market saw this, and now AC sees benefit in acquiring the points liability. So where is the plot? 

[Guest]

as I said,  "Maybe". 

[Guest]

Quote

Rejecting Air Canada group’s proposal would be ‘suicidal’, says key shareholder

RBC hedge fund backs bid for Aeroplan as a solution to Aimia’s biggest problems

• Calgary Herald
• 31 Jul 2018
• MACIEJ ONOSZKO

One of Aimia Inc.’s biggest investors has some simple advice for the frequent-flyer program: Say yes to an unsolicited takeover from a group led by Air Canada to escape an “existential crisis.”

“It behooves the board to negotiate the very best deal they can for shareholders and other parties, but at the end of the day to not consummate something here would be suicidal,” said Hanif Mamdani, who runs a hedge fund at a unit of Royal Bank of Canada.

Mamdani, the Vancouver-based head of alternative investments at Phillips, Hager & North, described the $250-million cash offer for the Aeroplan loyalty program as a “turn-key solution” to most of Aimia’s biggest problems.

Montreal-based Aimia has been in trouble since May last year when Canada’s largest airline and its biggest partner said it would withdraw from Aeroplan and start its own rewards plan in 2020. In a surprise turn of events last week, the group led by Air Canada, Visa Inc. and two Canadian banks made Aimia the offer, pledging it would also assume the liability of about $2 billion in the program’s points.

PH&N has rotated out of Aimia bonds into the company’s preferred and common shares in recent months. Mamdani said the fund has become the biggest holder of Aimia’s preferred shares, with 4.5 million of them, or about 35 per cent of the $322.5 million outstanding. The fund has been adding preferred shares since the prices dropped after the company suspended dividend payments in June last year.

So far, the bet has paid off. Mamdani said he bought the securities at prices in their “low teens.” All three of Aimia’s preferred shares traded near $19.50 on Friday, according to data compiled by Bloomberg. Mamdani still sees that as good value as there’s a high likelihood of them getting back to par, or $25, and paying the accrued dividends. That would leave their potential worth at $26.50 to $27.

Aimia’s common shares have rebounded more than 50 per cent this month to $3.50, bolstered by the Air Canada bid. The stock is still well off its 2008 peak of about $25.

Aeroplan, which was launched in 1984, was once the in-house loyalty program of Air Canada before it was spun off as a wholly owned subsidiary in 2005. It was rebranded Aimia in 2011.

Aeroplan was also linked to Canada’s most popular credit card, Canadian Imperial Bank of Commerce’s Aerogold Visa. The twodecade partnership ended in 2013 when Toronto-Dominion Bank took over as the primary financial partner. Both banks joined the Air Canada bid last week for Aeroplan.

Air Canada upped the ante on Friday, with chief executive Calin Rovinescu saying the airline would immediately restart talks with credit-card partners to create its own loyalty program if Aimia fails to accept its offer by the Aug. 2 deadline. The offer came a week after Aimia said it planned to relaunch the program, adding more airlines to make up for the loss of Air Canada.

“For the board to roll the dice on some vague Aeroplan 2.0 plan and turn down this generous proposal that would serve all its constituents from shareholders, to customers, to creditors, to employees, would be not only incredibly irresponsible, but would border on negligence,” Mamdani said.

The fact that the offer was made by a group of Aimia’s key business partners makes it hard to resist, Mamdani said, adding the management could still negotiate a better price. He was skeptical that a sweetened bid would match the $1-billion valuation set by Mittleman Brothers, Aimia’s largest holder of the common shares.

“You’ve got some deep-pocketed people involved here and you’re not talking about a lot of money, so if it doesn’t work at $250 million, maybe there’s a solution at $300 million or $325 million,” Mamdani said. “For the board of directors of a high profile Canadian enterprise like Aimia with an obligation to five million Canadian customers to bow to the pressures of one very optimistic shareholder is unlikely and would in my opinion be the height of poor judgment.”

 

[Guest]

Quote

Aimia, Porter Airlines form Aeroplan partnership after Air Canada bid rejected

Aimia Inc. says it has a new deal for Toronto-based Porter Airlines to become a preferred Canadian airline for the Aeroplan loyalty points program as of July 2020, when the arrangement with Air Canada ends.

 

The Canadian Press · Posted: Aug 03, 2018 7:42 AM ET | Last Updated: 39 minutes ago

 

The fleet of Porter Airlines, Aimia's newly announced Aeroplan partner, is only a fraction the size of Air Canada's but Aimia has also been in discussions with the Oneworld airline alliance, whose members include British Airways, American Airlines and Cathay Pacific. (David Donnelly/CBC)

6 comments

Aimia Inc. says it has a new deal for Toronto-based Porter Airlines to become a preferred Canadian airline for the Aeroplan loyalty points program as of July 2020, when the arrangement with Air Canada ends.

The announcement follows Aimia's rejection of a bid for Aeroplan from an Air Canada-led group that included the key Aeroplan credit card partners Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada.

Porter's fleet of aircraft is only a fraction of the size of Air Canada's, but Aimia has also been in discussions with the Oneworld airline alliance, whose members include British Airways, American Airlines and Cathay Pacific.

• Aimia in talks with Oneworld alliance as potential Aeroplan partner

Aimia chief executive Jeremy Rabe said his plan is to strengthen its air offering after July 2020.

"We've committed to our five million members that they will be able to choose any seat on any airline, anywhere, any time with the new Aeroplan program."

He said Porter will be able to serve Aeroplan members on many popular routes.

The privately owned airline, which has its main hub on the Billy Bishop airport on one of the lakeshore islands near Toronto's downtown, serves Toronto, Ottawa, Montreal and other Canadian cities from St. John's to Thunder Bay, Ont., as well as U.S. destinations including the New York City area, Chicago, Boston and Washington, D.C..

"This is a unique opportunity for Porter to join a well-established travel loyalty program and, in the future, reach its vast member base to aggressively promote our airline," said Michael Deluce, Porter's chief commercial officer.

Porter's existing VIPorter loyalty points will be converted into Aeroplan miles, but it's not yet clear what will become of accumulated Aeroplan points after July 2020, when Air Canada will switch to its own loyalty program.

• Air Canada, CIBC, TD and Visa offer to buy Aeroplan

Aimia announced Thursday it had formally rejected an offer for Air Canada and its partners to buy the Aeroplan program and assume the responsibility for honouring about $2 billion worth of points accumulated by consumers.

In an email sent Friday to TD Aeroplan credit card customers, TD said it was "disappointed" that Aimia rejected the takeover offer, and the bank is evaluating its next steps. 

Aeroplan and Air Canada have both assured their customers that Aeroplan points will be honoured as usual until their long-term contract expires.

Shortly before announcing the Porter agreement, Aimia reported that spending on Aeroplan credit cards remained strong in the second quarter and the company is "making solid progress" on streamlining its business.

The Montreal-based company also that its continuing operations had a net profit of $11.1 million, or four cents per share, in the second quarter, with revenue up 3.9 per cent to $375.4 million.

A year-earlier, there was net loss of $25.1 million, or 22 cents per share, from continuing operations, or 18 cents per share if discontinued operations were included, with $361.3 million in the second quarter of 2017.

 

[rudder]

AIMIA made a counter offer to AC and it’s partners.

AIMIA wants to sell. They are just fighting over the sale price.

[Seeker]

"Aimia Inc. says it remains open to negotiating a fair deal for the purchase of its Aeroplan loyalty program by Air Canada and its partners despite striking a deal with Toronto-based Porter Airlines and holding discussions with the Oneworld airline alliance."

http://www.cbc.ca/news/business/aimia-aeroplan-porter-1.4772738

So, which is it; do they have a deal with Porter or are they open to negotiating with AC?  Obviously they don't have a deal with Porter.  If it was me negotiating for the AC side I would offer them a "new" deal - 20% less than the first offer.  The truth is that Aimia  might be able to cobble some deal together with Porter and Oneworld but it still won't save them from a slow death as cardholders bail out - the only path that results in survival is to accept a deal with AC, all other roads lead to the precipice.  

[Guest]

3 minutes ago, seeker said:

"Aimia Inc. says it remains open to negotiating a fair deal for the purchase of its Aeroplan loyalty program by Air Canada and its partners despite striking a deal with Toronto-based Porter Airlines and holding discussions with the Oneworld airline alliance."

http://www.cbc.ca/news/business/aimia-aeroplan-porter-1.4772738

So, which is it; do they have a deal with Porter or are they open to negotiating with AC?  Obviously they don't have a deal with Porter.  If it was me negotiating for the AC side I would offer them a "new" deal - 20% less than the first offer.  The truth is that Aimia  might be able to cobble some deal together with Porter and Oneworld but it still won't save them from a slow death as cardholders bail out - the only path that results in survival is to accept a deal with AC, all other roads lead to the precipice.  

the Press release would seem to say they do have a deal>

https://www.newswire.ca/news-releases/porter-airlines-and-aeroplan-announce-new-comprehensive-partnership-689966141.html

[Seeker]

Aimia says it has a deal with Porter but is still willing to negotiate with AC.  AC says it's wants to buy Aimia but hasn't abandoned it's plan to launch it's own loyalty program.  So, they both want the other but haven't found the right price - yet.