AC To Buy Back Aeroplan?

[Guest]

16 minutes ago, seeker said:

Aimia says it has a deal with Porter but is still willing to negotiate with AC.  

Strange, I don't see that in the press release, what am I missing?

[Zan Vetter]

All due respect to porter but if you’re a current Aeroplan member this ain’t anywhere close to cutting the mustard. 

[Seeker]

7 hours ago, Malcolm said:

Strange, I don't see that in the press release, what am I missing?

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

 

It's not in a press release it's in a CBC article.  Not as high quality of a source as a news release but it does have direct quotes from the Aimia CEO:

"We never stop negotiating. Should the consortium want to engage with us in a constructive dialogue, we would be happy to entertain that," Aimia CEO Jeremy Rabe said Friday during a conference call.

"At the same time, we feel very confident about our future plans. So either or, we're happy to go down either path."

 

So, they have a tentative deal in case the deal with AC doesn't work out.

[Lakelad]

.

How Air Canada’s approach failed to land Aeroplan

Fri  August 3, 2018 - The Globe and Mail
by Tim Kiladze

After a week spent swapping counteroffers, it came down to an ultimatum.

When the markets closed on Thursday afternoon, officials at Aimia Inc. were nowhere close to accepting an offer for their Aeroplan loyalty program from a group that included Air Canada, two major banks and one credit-card firm.

The group, which launched a $250-million bid for the Aeroplan business on July 25, had agreed to increase the price to $325-million and change some other terms. At a meeting late Thursday in a Bay Street office tower, Air Canada and its partners decided to turn up the pressure, according to a source familiar with the talks. You’ve got 32 minutes to give us a ‘yes’ or ‘no,’ the group said to Aimia representatives – and no more negotiating fine details.

A half-hour later, Aimia walked away, leaving the fate of one of Canada’s most popular loyalty plans up in the air.

Air Canada and its partners – Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada Corp. – have not indicated what their next move will be. Aimia took the highly unusual step of disclosing that it had asked for $450-million during the negotiations.

In the meantime, it is pressing forward with its own restructuring plan, which includes trying to find new partners. Earlier in the week, the company confirmed that it is in talks with the Oneworld airline alliance, whose members include British Airways, American Airlines and Cathay Pacific, and on Friday it announced a deal with Porter Airlines Inc. The arrangement will allow those flying Porter to collect Aeroplan points and Aeroplan members to use their points to book tickets on the airline, beginning in July, 2020.

While Porter is small relative to Air Canada, it flies on crucial routes along the eastern corridor – particularly between Toronto, Ottawa and Montreal – that are attractive to business travelers and are dominated by Air Canada flights.

Aimia shares jumped another 8 per cent on Friday, bringing their total rise to 50 per cent since the Air Canada group’s bid.

In its battle against the unsolicited offer, Aimia is fighting against a rich history. Air Canada built Aeroplan as its in-house loyalty program in 1984, then spun it out in a 2005 initial public offering.

Aimia grew as an independent company – but then suffered a devastating blow last year when Air Canada said it would pull out of the companies’ partnership in 2020. For Aeroplan members, the ability to redeem points for Air Canada flights is by far the most important reason to belong to the loyalty program.

The playing field in this takeover battle appears lopsided. Air Canada has teamed up with two of Canada’s largest lenders and also brought along the country’s largest credit card company. The four titans hold immense power, and they have huge balance sheets, which they argued could easily absorb Aimia’s $2-billion redemption liability – the estimated future cost of flights and other rewards for the billions of Aeroplan points that exist.

Aimia, meanwhile, had been struggling to figure out its future. The Aeroplan business has always been heavily dependent on Air Canada, and the relationship matters so much to Aimia that when the airline announced that it would let their contract expire, Aimia’s stock fell 63 per cent in a single day.

Amid the resulting turmoil, Aimia is on its third chief executive in 13 months. While it now has stable leadership in Jeremy Rabe, who started in May, the new CEO was just starting to turn the loyalty program away from Air Canada when the bid was made public.

To win investors over, Aimia has used the consortium’s hardball tactics against it. By revealing that it brought its asking price for Aeroplan to $450-million, it made it clear that Aimia really was trying to make a deal happen.

“We have a number of shareholders who are frankly upset that we offered a number that low,” Mr. Rabe said on a conference call Friday morning. “We think that was a very reasonable number – perhaps too reasonable.”

Meanwhile, an Aimia shareholder expressed exasperation at Air Canada’s final bid. “We’re scratching our heads as to why the offer is so low."

With the Porter announcement, Aimia has also demonstrated that it is not necessarily doomed without its current Air Canada contract. The company also confirmed that the revamped Aeroplan will allow members to book seats on any airline, which some members prefer, and is dangling the potential for still more new partnerships.

Those developments put the $2-billion redemption liability in a new light. While Air Canada and its partners want investors to believe it will sink Aimia, which currently has about $530-million in cash to cover it, the liability is troubling only if Aeroplan members rush to cash in their miles before the Air Canada contract expires.

After Aimia reported quarterly earnings Friday morning, RBC Dominion Securities analyst Drew McReynolds noted the latest numbers suggest there are “no signs of meaningful changes to member behaviour at Aeroplan.”

Now Air Canada must play defence. On Bay Street, there are questions swirling as to why the airline apparently reversed course on building its own in-house loyalty program and sought to reacquire Aeroplan instead.

It is possible that building from scratch is harder than Air Canada anticipated. Banking sources have noted that most potential financial partners are already tied to an existing travel rewards plan, which could affect a potential credit card deal for Air Canada.

In an e-mailed statement, Air Canada rejected these theories. “The reality is that Aimia’s business plans are precarious at best, given their liquidity outlook,” said a spokesperson for the airline, adding that “there remains significant interest from numerous [credit card] partners.”

TD and CIBC declined to comment for this story. Visa could not be reached for comment.

While talks have broken off, Aimia’s CEO stressed on Friday that it would come back to the table and have a “constructive dialogue.”

Whether that ever happens remains to be seen. If it doesn’t, everyone involved will have to find a way to get along: Air Canada remains an Aeroplan partner for two more years, while TD and CIBC, which issue Aeroplan credit cards, are tied to the program until 2024.

.

 

[rudder]

The AIMIA BOD has a fiduciary obligation to maximize shareholder value. If there was an unsolicited offer then they are obliged to either get maximum return from the soliciting party or to investigate maximizing value through an auction or other method.

Make no mistake - AIMIA wants to sell. And AC plus partners want to buy. It seems the fight is mostly over price.

The Porter announcement is a joke. Suggesting that AIMIA will somehow establish a new airline is a joke. The Aeroplan members expect a much more robust CDN flight redemption portfolio.

The leverage for AC is that no one else appears interested in making an offer. The leverage for AIMIA is that it is a massive undertaking to set up a brand new rewards program.

Deadlines are artificial and thus far meaningless. Both parties playing hardball. We will see if either party blinks.

[MD2]

A very wise choice by AIMIA to partner with Porter because its product and hub are highly regarded in the industry.

[Guest]

29 minutes ago, MD2 said:

A very wise choice by AIMIA to partner with Porter because its product and hub are highly regarded in the industry.

And then you have to wonder , why not someone else....   Of course this could be why.

[dagger]

Aimia wants to sell- and other airlines should hope AC is the buyer - because if AC builds up its own plan, it would not have a $2 billion point liability and could throw around points like it did in the bad old bankruptcy days - like super duper bonuses. 

[rudder]

13 minutes ago, dagger said:

Aimia wants to sell- and other airlines should hope AC is the buyer - because if AC builds up its own plan, it would not have a $2 billion point liability and could throw around points like it did in the bad old bankruptcy days - like super duper bonuses. 

This is vintage CR.

Put a vendor/supplier in distress and then offer to negotiate.

In this case, CR better hope that a credible suitor does not come calling AIMIA.

[Guest]

2 hours ago, rudder said:

 

In this case, CR better hope that a credible suitor does not come calling AIMIA.

I would live to know who that would be. The majors already have their connections. why would anyone want to purchase the outstanding points and their liability?

 

[Geminoid]

I thought that the One World Alliance was looking at Aeroplan/Aimia.    I wonder what the status of those talks are.

[Fido]

1 hour ago, Malcolm said:

why would anyone want to purchase the outstanding points and their liability

Because the 'liability' means that there is a hell of a swack of cash to balance it out.

[Guest]

13 hours ago, Fido said:

Because the 'liability' means that there is a hell of a swack of cash to balance it out.

I had thought so too but it appears from their 2017 annual report that is not overwhelming .

[Guest]

Quote

ANALYSIS: Porter sees marketing gold in Aeroplan deal

• 06 August, 2018
• SOURCE: FlightGlobal.com
• BY: Jon Hemmerdinger
• Boston

Porter Airlines' agreement with Aeroplan owner Aimia will bring the Toronto carrier substantial marketing heft and marks a shift by Aeroplan away from reliance on Air Canada and its Star Alliance affiliates, executives say.

"It is a very exciting deal for us and allows us to transform our own loyalty [programme] into a broader offering," Porter chief commercial officer Michael Deluce tells FlightGlobal.

Perhaps most valuable, the deal gives Porter access to Aeroplan's broader customer base, enabling Porter to market its flights to new potential customers

"It’s a pretty compelling offer," Deluce says.

Porter announced the deal, which takes effect in July 2020, on 3 August, one day after news broke that Aimia had rejected a bid by Air Canada to purchase Aeroplan.

Aeroplan has been Air Canada's loyalty programme for decades. But that carrier is creating a new, in-house loyalty scheme that will replace Aeroplan on 30 June 2020, the day after Air Canada's contract with Aimia expires.

Air Canada declines to comment on the Porter-Aeroplan news.

Now Porter will become Aeroplan's "preferred" Canadian airline. In July 2020, Porter will transfer points held under its existing VIPorter programme into Aeroplan and begin allowing customers to earn Aeroplan points when flying with Porter and to redeem points on Porter tickets.

The airline will open up to 60% of its inventory for purchase via Aeroplan miles, it says.

Porter will keep VIPorter active as a means to provide frequent fliers with benefits such as priority boarding, complimentary seat selection and waiver of baggage fees, Porter says.

MARKETING ALLIANCE

The agreement marks a strategic shift for both Porter and Aimia, according to Deluce and Aimia chief executive Jeremy Rabe.

Currently, VIPorter members can redeem points only on Porter's network, which primarily radiates from Billy Bishop Toronto City airport to about two dozen cities, most of whica are in eastern Canada but several of which in the USA.

Porter operates 29 Bombardier Q400 turboprops, according to Flight Fleets Analyzer.

Likewise, Aeroplan members can largely only redeem points for travel on Air Canada and its Star Alliance affiliates, Deluce notes.

But Aimia intends to significantly broaden Aeroplan's offering by 2020 to allow its more than 5 million members to redeem Aeroplan points on seats with any airline worldwide, including Air Canada, Rabe told investors on 3 August.

Aimia will do so by purchasing those seats and reselling them for points.

"We are strengthening our air offering by giving members the ability to choose any seat on any airline, anywhere at any time. Today, our programme is limited to booking with one airline in its alliance partners," Rabe says.

At the same time, Aimia is signing "preferred" deals like the Porter agreement, which calls for Porter to sell discounted seats to Aeroplan, says Deluce.

In return, Porter's customers gain broader redemption opportunities – strengthening the value of their points – and Porter will be able to market to Aeroplan's broader customer base, Deluce says.

For instance, Porter could market its Toronto-New York flight to an Aeroplan member who flies the same route on competing airlines, he says.

"It’s the… precision marketing that can boost share from the incumbent airline," Deluce says. "It creates a very powerful position for preferred partners."

AIR CANADA SHIFT

Air Canada formed its Aeroplan loyalty programme in 1984, then sold the programme to Aimia's corporate predecessors in 2008. Aeroplan has remained Air Canada's loyalty programme since.

In 2017, however, Air Canada announced its intention to create its own in-house loyalty programme as a means to have better control over customer relationships.

Air Canada said its new programme will replace Aeroplan on 30 June 2020, the day after its contract with Aimia expires.

"The new program, launching in 2020, will offer additional earning and redemption opportunities, more personalised service and a better digital experience for Air Canada customers," Air Canada president Benjamin Smith said in a 2017 media release.

Air Canada estimated the new programme will be worth up to C$2.5 billion ($1.9 billion).

But on 25 July, Air Canada announced an offer to purchase Aeroplan from Aimia for C$250 million in cash and about C$2 billion in liabilities. The carrier made the deal in partnership with Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada Corporation, it says.

Air Canada later upped its cash offer to C$325 million, according to Aimia, which rejected the proposals.

Aimia called Air Canada's offers not reflective of the "value of the Aeroplan business", and countered with a C$450 million cash offer, Aimia said on 2 August.

 

[Guest]

Aeroplan and Flair Airlines Announce Preferred Partnership Français

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News provided by

Aeroplan

08:15 ET

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Aeroplan Members will be able to earn and redeem with Flair Airlines beginning July 2020

TORONTO, Aug. 7, 2018 /CNW/ - Aimia Inc. (TSX: AIM) and Flair Airlines today announced a preferred partnership that will see Aeroplan become Flair's loyalty program. Starting July 2020, Aeroplan Members will be able to both earn Aeroplan Miles when booking flights on Flair routes and redeem for flights at fixed-rate fares.

"The addition of Flair Airlines as a preferred partner airline further strengthens our air offering in Canada for Aeroplan Members come July 2020," said Jeremy Rabe, Chief Executive Officer, Aimia. "In addition to providing members with the ability to fly any airline, anywhere, this relationship with Flair will give our members exceptional value for popular Western Canada routes."

When flying with Flair Airlines, a Canadian low-fare airline, Aeroplan Members will earn Aeroplan Miles for their flight and ancillary product purchases and have the ability to redeem for Flair flights at fixed-rate fares.  The relationship with Flair Airlines will give Aeroplan Members new redemption options, particularly those travelling out of Flair's Edmonton hub, extending from coast to coast and upcoming southern destinations.

"At Flair we provide affordable flight options for Canadians. Our arrangement with Aeroplan helps further that commitment," said Jim Scott, CEO Flair Airlines. "Our passengers will now be rewarded for their loyalty with the ability to earn and redeem Aeroplan Miles for flights. This partnership strengthens our value proposition, giving more people the ability to fly to their preferred destination."

Aeroplan continues to build out its member offering to provide Canadians with the best travel loyalty program experience come July 2020. Preferred airline agreements, coupled with bulk and block purchasing and stand-alone charters, unlock meaningful discounts, ensuring the delivery of great value for members on flight redemptions

[Guest]

Quote

Aeroplan Announces Air Transat as a Preferred Partner Français

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Partnership will bring Aeroplan Members closer to their favourite holiday and sun destinations beginning July 2020

TORONTO, Aug. 7, 2018 /CNW Telbec/ - Aimia Inc. (TSX: AIM), today announced a new preferred partnership arrangement with Air Transat, Canada's number one holiday airline, effective July 2020. Aeroplan Miles will be earned and redeemed on all Air Transat flights and vacation packages.

"Adding Air Transat to Aeroplan come July 2020 further differentiates and significantly enhances our Aeroplan experience by bringing our members closer to their favourite sun and holiday destinations," said Jeremy Rabe, Chief Executive Officer, Aimia. "This is an exciting step toward our goal of providing Aeroplan Members with great value when both earning and redeeming miles on travel bookings to popular holiday and transatlantic destinations."

"We are thrilled about this agreement in principle and look forward to Air Transat, recently recognized by Skytrax as the World`s Best Leisure Airline, partnering with Aeroplan for its members' leisure travel needs to some 60 destinations in the Americas, Europe and the Middle East," said Joseph Adamo, Chief Distribution Officer, Transat.

Aeroplan continues to expand and enhance its member offering to provide Canadians with the best travel loyalty program experience come July 2020 including the flexibility to fly any airline, anywhere at any time. Preferred agreements, like the one announced today, coupled with bulk and block purchasing and stand-alone charters, unlock meaningful discounts supporting the delivery of great value to members on flight redemptions.

 

[dagger]

Bargaining is bargaining

 

AC and partners get a deal with Aimia for Aeroplan

https://www.newswire.ca/news-releases/air-canada-td-cibc-visa-and-aimia-reach-agreement-in-principle-for-acquisition-of-aeroplan-loyalty-business-691341691.html

Air Canada, TD, CIBC, Visa and Aimia Reach Agreement in Principle for Acquisition of Aeroplan Loyalty Business

• Purchase price consists of $450 million in cash and the assumption of approximately $1.9 billion of Aeroplan Miles liability 
• Agreement in principle was unanimously approved by Aimia's Board of Directors and is supported by Mittleman Brothers 
• Transaction would provide value for Aimia and its shareholders and continuity for Aeroplan members and customers of Air Canada, TD, CIBC and Visa
• Transaction subject to negotiation of definitive agreements and other conditions; completion expected fall 2018

TORONTO, Aug. 21, 2018 /CNW Telbec/ - Air Canada, The Toronto-Dominion Bank ("TD"), Canadian Imperial Bank of Commerce ("CIBC"), Visa Canada Corporation ("Visa") (collectively, "the Consortium") and Aimia Inc. ("Aimia") announced today that they have entered into an agreement in principle for the acquisition of Aimia's Aeroplan loyalty business.

"We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence. 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," said Calin Rovinescu, President and CEO of Air Canada, on behalf of the consortium. 

The transaction is expected to deliver significant value to Aimia's stakeholders and the agreement in principle was approved unanimously by Aimia's Board of Directors upon recommendation by its Special Committee of independent directors.  Mittleman Brothers, LLC, Aimia's largest shareholder who owns approximately 17.6% of Aimia's common shares, has provided a lock-up and support agreement under which it has agreed to vote in favour of the proposed transaction.

The aggregate purchase price consists of $450 million in cash and is on a cash-free, debt-free basis and includes the assumption of approximately $1.9 billion of Aeroplan Miles liability. 

 

[blues deville]

Good news.

[Guest]

I wonder if this changes the inclusion  of Porter etc?

[blues deville]

24 minutes ago, Malcolm said:

I wonder if this changes the inclusion  of Porter etc?

Good question. Both Air Transat and Porter were on the Aeroplan radar for 2020. 

[dagger]

42 minutes ago, Malcolm said:

I wonder if this changes the inclusion  of Porter etc?

One would think the Porter and Transat arrangements weren't cast in stone, or would have weakened Aeroplan's appeal to the buyers. The incentive to up the offer probably reflected a deadline from Aimia about signing those contracts. I'd be surprised if AC and the partners are on the hook for those proposed additions.

[rudder]

This is the least surprising news of the day.

When the near 18% shareholder signs off in the deal, seems the momentum is unstoppable. They were quite vocal about valuation and seem to have gotten what they wanted.

Will Aeroplan revert back to a wholly-owned subsidiary of AC? Or become an integrated division of AC?

[dagger]

6 minutes ago, rudder said:

This is the least surprising news of the day.

When the near 18% shareholder signs off in the deal, seems the momentum is unstoppable. They were quite vocal about valuation and seem to have gotten what they wanted.

Will Aeroplan revert back to a wholly-owned subsidiary of AC? Or become an integrated division of AC?

Well, it probably depends on the partnership agreement between AC and the two banks/VISA. I assume call centre employees are still with Unifor. Anyone know if they are part of the AC Unifor group, or will they have to petition to be re-integrated with their AC colleagues? 

[moeman]

The market likes the news. Up over 6% this morning.

[Zan Vetter]

What if porter and Air Transat are still in? Great data mining opportunity for AC, which is the raison d’être for rewards programs anyway (loyalty is for n00bs). For that reason, I’d expect them both to back out voluntarily. Alternatively, they both could submit to full takeover/consolidation.