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Aeroplan to abandon trust status

BRENT JANG

Globe and Mail Update

Latest comment posted at 3:48 PM EDT 10/05/08

Loyalty program to convert to a regular corporation, anticipates dividend payout of 50 cents a year ...Read the full article

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  1. Red-necked and loving it from Canada writes: This thing is toast. With $125 oil, Air Canada is again losing money (deja vu - seems I saw that show once or twice before) and no one will be doing a lot of flying whether holding air miles or not. The air mile and cheap flight days are gone.
  2. RD Lone from Vancouver, Canada writes: @ Red-necked: Odd logic there. Wouldn't higher fuel prices mean that people would want air miles even more?
  3. David C from a constant traveler from, Canada writes: I think I will buy some stock so that I can at least get some use out of the points that they keep taking from my wife and Children's accounts. LOL
  4. Randal Oulton from Canada writes: Good for them. This whole business of rich corporations trying to dodge their fair share of taxes by converting to trusts was just icky.
  5. Johnny Canuck from Canada writes: The Government must pass a law making all these bonus point scheems have a cash value equal to the services being offered. Otherwise these Mickey Mouse scheems will continue to be a tax on the poor, as they only benefit the upper class workers. We have employees buying massive anounts of goods on their bonus point cards and then passing them on to conumers and tax payers. It's become a disgusting.
  6. Red-necked and loving it from Canada writes: RD Lone from Vancouver, Canada writes: @ Red-necked: Odd logic there. Wouldn't higher fuel prices mean that people would want air miles even more?

    Not really. Air miles will go the way of the dinosaur and Crosley automobiles. $126 (now) oil is going to weigh heavily on not only the airlines but all segments, not the least of which will be food transportation and related costs. Safeway and similar Co.'s will be hard pressed to sponsor air mile programs going forward. Then there's the actual dividend - at a $16.00 price, fifty cents annually is 3.1%. You can get as much on a GIC and buy bank preferreds that pay almost twice as much in dividends. No, this thing is toast!
  7. Ontario Man from Canada writes: What's the value of Aeroplan miles when they can never be redeemed for a flight?

    I have tried many times and have given up.
  8. Albin Forone from Canada writes: Red-necked is not wrong on the payout math (although he might be wrong about his cultural affiliation with people who decorate their living rooms with stolen orange highway cones) - the conversion at a lower annual distribution will cut 2% off the dividend. For whatever reason AER.UN is pushing $17 today - probably the reason is that unconverted trusts are still mired in the uncertain limbo the Tories created for them, while conversion creates a bet on corporate growth. My guess is some trusts that decide to stick with their structure will be able to maintain dividend tax credited (outside RRSP) payouts and be attractive on that basis after the Tory rules take effect, and if the Liberals (bless their hearts) are elected they will extend the trust conversion window.
  9. Gary Thomson from Surrey, BC, Canada writes: I wonder if the company execs who. no doubt, got whomping big bonuses for converting Aeroplan into a trust in the first place are the same execs who, no doubt, will be getting whomping big bonuses for changing it back.
  10. Albin Forone from Canada writes: Gary: AER.UN was launched as a trust, which was a very good idea much lauded everywhere, at the time.
  11. Rick Drysdale from Canada writes: Randal Oulton
    Where have you been for the last few years.

    If you had been paying attention you would know that every cent passed onto unitholders is taxed in their hands. In reality they probably paid more than the corporation will mainly because of the many ways a corporation can shelter income and the writeoffs available to all corps which we dont get as individual taxpayers.
  12. w sykora from Canada writes: Randal Oulton from Canada writes: Good for them. This whole business of rich corporations trying to dodge their fair share of taxes by converting to trusts was just icky.

    Randal Oulton, stop spouting Flaherty nonsense. Income trust holders were paying the taxes at their marginal tax rate, which is a great deal higher than corporations. You obviously haven't the foggiest how income trusts or financial markets work.

    Many of the income trusts that were devalued to the tune of $35 billion by Harper and Flaherty with the support of the financially illiterate Newly Duped Party have ended up in the hands of foreign private equity, foreign corporations, Canadian private equity or Canadian pension funds -- all outfits that don't pay a red cent into Ottawa's coffers.

    If Bell Canada had converted into an income trust, Ottawa would be getting $800 million in taxes per year from unitholders. Instead, the government will get nothing.

    Both you and I will be paying a long time for this colossal stupidity.

    The Cons will not get the vote of nearly two million seniors that were lied to and badly injured by Harper!
  13. Gary Thomson from Surrey, BC, Canada writes: Albin F. (2:22): Ooops, point taken. However, save my post and paste in some other company's name when the opportunity arises, that is, correctly arises.
  14. Albin Forone from Canada writes: Gary: Very gracious - point is that AER.UN has been sabotaged by the brainless Tory changes - look at a chart - it fought its way up from the "Halloween Massacre" but like other mainstream business trusts (e.g. YLO.UN) has been clobbered recently because of the ongoing policy vacuum.
  15. G Montcler from Canada writes: The worst and most crooked loyalty program ever!
    Just try another (any) and you'll see the difference.
    I have hundreds of thousands of points and I'm anxious to use them so I don't have to fly Air Canada.
  16. Globe Insider subscriber content
    Howard Beale from Canada writes: If you hold your units in a non registered account, the after tax yield will be about the same after the conversion to a corporation.

    As for a policy vacuum, I guess that WTE, COS and the gas trusts didn't get that memo.
  17. Albin Forone from Canada writes: HB: I hope you really own lots and lots of WTE.UN and COS.UN and didn't just do a search for outperformers. I've been puzzling why it takes $125 crude and a gas run up to take the broad trust sector funds like SIN.UN and CSR.UN out of the Tory-induced quicksand.
  18. Globe Insider subscriber content
    Howard Beale from Canada writes: AF, I've owned WTE since 4.80 and COS since about 6.00. I've never owned AER however and have never collected an air-mile.

    Since trusts are just a hybrid of an equity and a junk bond, I wonder if the fact that the financial markets have been experiencing a bit of a rough patch might account for the poor performance they along with some segments of the stock market, have been experiencing.

    A wise man might be taking advantage of this situation instead of blaming the government.
  19. Gary Dare from Portland, Oregon, Canada, writes: G Montcler writes, "Just try another (any) and you'll see the difference. I have hundreds of thousands of points and I'm anxious to use them so I don't have to fly Air Canada." Sorry but you only imagine that it's better with any other carrier ...

    http://www.katu.com/news/specialreports/18385049.html

    http://www.cnn.com/2008/TRAVEL/04/25/frequent.flier.miles/index.html

    Try using your Aeroplan miles on a Star Alliance carrier and if you wind up on United or especially US Airways, please come back and tell us about it (heheheheh!).
  20. Jeff H from Canada writes: The biggest joke ever, the only ones that benefits from this trust conversion and deconversion are the investmenk bank dealer makers.
  21. Peter Cromerovich from Erehwon, Canada writes: Randal Oulton: Do you really think that Aeroplan has decided to convert from a trust because it wants to pay more corporate tax? It wants to grab other companies and it can't do that as a trust. Personally I'd like to see it fold.
    Still trotting out the same old urban myth that trusts are gouging the public by not paying tax? Trusts shift the tax burden to the individual and individuals are taxed at a higher precentage than corporations. Do the math.
  22. Albin Forone from Canada writes: HB: You're a genius - I'd have to look at a 10 year chart to even imagine I'd bought and held those funds to their current peaks. What did you buy last week?

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