Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Air Canada has made a hostile bid to buy back Aeroplan at a heavily discounted price, 13 years after it spun off the popular Canadian loyalty rewards program.

The bid comes a year after Air Canada unveiled plans to launch its own program, prompting shares in Aimia Inc., the company that currently runs Aeroplan, to plummet 63 per cent in a single day at the time. The drop, from $8.93 to $3.33, was due largely to the fact that Air Canada represented roughly 80 per cent of the earnings Aimia typically reports. The stock dropped further the following year, with the company slashing its dividend and overhauling its operations. Air Canada’s partnership contract with Aimia and Aeroplan expires in July, 2020.

Rather than starting from scratch, the airline and its partners Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada Corp. are now offering to pay $250-million in cash to Aimia for a program that in 2005 had a $2-billion valuation through an initial public offering.

Story continues below advertisement

In response to Air Canada’s announcement, Aimia’s stock surged on Wednesday, climbing 36 per cent. Air Canada’s shares had a much more muted reaction, rising 1.4 per cent.

In the the offer announced Wednesday, Air Canada and its partners would assume a $2-billion outstanding liability on Aimia’s books for loyalty points that have not yet been redeemed. Aimia currently has $300-million in cash reserved to cover these liabilities.

As Aimia retooled in preparation for the 2020 divorce with Air Canada, there was speculation in financial circles that the airline could make a bid to buy back the rewards program. In a statement on Wednesday, Aimia said the public offer follows private negotiations between the consortium and a special committee of its board directors “some time ago.” The company said the board is now reviewing the current bid.

Founded in 1984, Aeroplan was originally built as Air Canada’s in-house loyalty program. When the airline announced its intention to launch an in-house rewards program a year ago, it promised shareholders that doing so would deliver a return with a net present value exceeding $2-billion.

"Despite some of the ambiguity that we see in Air Canada’s latest move, we see the acquisition [of Aeroplan] as a shrewd (albeit still costly) means of avoiding the inevitable war of attrition that we foresaw in the future as the two parties were destined to battle fiercely for loyalty members once the current arrangement finally ended,” Raymond James Financial analyst Ben Cherniavsky wrote in a research note.

“The net financial implications, however, remain to us unclear at this point. We also continue to view this kind of financial engineering as a sideshow to Air Canada’s underlying airline business,” he added.

In an e-mail to its frequent fliers Wednesday, Air Canada addressed the current situation. “Straight to the point: we heard from many customers who were excited about our plans, and would prefer to transfer their Aeroplan Miles to the new Air Canada loyalty program,” the airline wrote. “Aimia is an independent company and it’s ultimately their decision to accept or reject the proposal."

Story continues below advertisement

Both Air Canada and Aimia declined to comment beyond their releases and CIBC and TD declined to comment. Visa was unavailable for comment. Air Canada and its partners have put an expiry date of Aug. 2 on their current offer.

The deal comes with incentives for the banks involved. TD and CIBC are Aeroplan’s lead financial partners, and each has an Aeroplan-branded credit card. CIBC has been an Aeroplan partner for decades, while TD started a 10-year partnership in 2014 that runs until 2024.

“Credit cards are one of the highest return businesses the banks have, and the Aeroplan portfolio is a high-quality one,” National Bank Financial analyst Gabriel Dechaine wrote in a research note.

Aimia investors have feared that many current Aeroplan members will leave the program come 2020, because they are frequent Air Canada flyers.

The takeover bid comes on the heels of major changes at Aimia, a revamp that started a couple of months ago when the company named a new chief executive. Aimia has had three different chief executives in the span of 18 months.

After Mittleman Brothers, a New York-based firm that invests in “severely undervalued securities,” became Aimia’s largest shareholder with an 18-per-cent stake, the firm installed two directors to Aimia’s board this spring, and later named partner Jeremy Rabe as Aimia’s new CEO.

Story continues below advertisement

Mr. Rabe has a history in the loyalty rewards market, having previously run Club Premier, a Mexican frequent-flier program. On the same day that he took over, Aimia started marketing its vision for Aeroplan. By 2020, the program was expected to allow members to book seats on any airline.

While Aimia’s new strategy was viewed as a necessary development by analysts because of the impending breakup with Air Canada, there were questions about what it would mean for Aimia’s finances. The long-standing Air Canada contract allowed Aimia to buy seats at cheap prices. Starting in 2020, members would likely have been able to buy seats on any airline, but it would cost them much more.

Amid the uncertainty, some Aeroplan members had started redeeming points at faster rates than normal. Accelerating redemptions are troublesome for Aimia, because as of April 30, its reserves amounted to only 15 per cent of the rewards for which it was liable.

To calm members, Aeroplan announced late last week that flights making up 95 per cent of Aeroplan bookings will still cost the same amount for members after the Air Canada contract ends. However, analysts questioned how the company could financially support this promise.

With a report from James Bradshaw

Story continues below advertisement

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies