Aimia Inc. is poised to enter a new era in 2014 with TD Bank as its new partner and long-standing ally CIBC both offering credit cards linked to Aimia’s Aeroplan rewards.Ryan Remiorz/The Canadian Press
Shares of Aimia Inc., operator of the Aeroplan loyalty rewards program, were punished through most of October. Uncertainty over the expected fee changes to credit card companies weighed on the stock.
But by Oct. 31, analyst Neil Linsdell of Industrial Alliance said the worst-case scenario had been priced into the shares, and investors should expect a modest relief rally when a decision was made on so-called interchange fees, which merchants pay every time consumers use their credit cards to purchase goods or services.
That turned out to be true on Tuesday, when the stock price jumped nearly 6 per cent to $17.31.
The rise came as Visa Canada Corp. and MasterCard Inc. moved to lower their interchange fees to an average of 1.5 per cent for merchants – savings the government hopes will flow through to consumers. This five year commitment, which begins next year, is expected to produce an approximately 10 per cent reduction in transaction fees overall.
Aimia's Aeroplan program is tied to Visa through its deals with Toronto-Dominion Bank and Canadian Imperial Bank of Commerce. Aimia said Tuesday it "will be working with our key financial partners to develop the optimal outcome and thus understand and communicate the implications for our Aeroplan members and our business."
Last year, CIBC gave up a big portion of its credit card portfolio after renegotiating its relationship with Aimia. The result was thousands of customers moving to TD when it acquired about half the Aeroplan credit card portfolio. That decision allowed for a shakeup of the Aeroplan loyalty program, a transformation the company called "a multi-year journey to rework the entire member experience."
Amid these changes, there are now details of the upcoming transaction fee cuts that must be clarified by credit card companies. Aimia investors will get an initial look at the implications for Aeroplan when the company reports earnings results next week, Adam Shine, analyst for National Bank Financial said in a note to clients on Tuesday.
"Management is expected to offer preliminary 2015 guidance next week, which will dictate the stock's next move as we don't think the third quarter results… will be a market mover," Mr. Shine said.