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Streetwise Aeroplan parent in talks with Oneworld airline alliance amid Air Canada’s hostile takeover bid

A Cathay Pacific plane in Oneworld livery descends as it approaches Hong Kong International Airport on April 4, 2018. If Aimia signs a new preferred partnership with Oneworld, the Aeroplan parent would have financial incentives to promote travel on the alliance’s airlines – which could siphon customers from Air Canada.

Bobby Yip/Reuters

Aeroplan’s parent company, Aimia Inc., is in partnership talks with the Oneworld airline alliance as it fends off a hostile takeover bid from Air Canada and three financial partners.

The talks, which Aimia confirmed on Wednesday, extend the company’s efforts to reposition Aeroplan once its contract with Air Canada expires in 2020.

Under new leadership, the loyalty program has recently promised not to change the cost of booking flights for members once the Air Canada contract ends. It has also publicly stated members will be able to book seats on any airline come 2020.

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Behind the scenes, Aimia has also been negotiating a new partnership with the Oneworld alliance, whose member airlines include British Airways, American Airlines and Cathay Pacific. Oneworld is a direct competitor to Star Alliance, of which Air Canada is a member.

Related: Air Canada CEO says airline is only realistic bidder for Aeroplan

Opinion: Air Canada CEO Calin Rovinescu’s hardball tactics benefit everyone but Aimia

“I can confirm that we are in discussions with Oneworld as a potential preferred airline partner,” an Aimia spokesperson wrote in an e-mail to The Globe and Mail.

The negotiations are continuing and may not result in a partnership. However, their revelation casts a new light on the takeover bid led by Air Canada – which expires on Thursday.

Last week, the airline teamed up with Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada Corp. on an offer to purchase the Aeroplan program for $250-million in cash. Air Canada and its partners would also 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.

The bid comes a year after Air Canada unveiled plans to launch its own loyalty program, prompting shares in Aimia to plummet 63 per cent in a single day.

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When announcing the offer, Air Canada and its partners gave Aimia eight days to reply. It was unclear why they provided such a tight window.

When Air Canada reported earnings last Friday, chief executive Calin Rovinescu said the bid has such a short time frame because the airline will need to refocus on building its own in-house program if it is rejected.

However, in a question-and-answer section of its website, Air Canada has stated that it became aware of talks between Aimia and others – but wouldn’t specify which discussions they were. “There have been other proposed transactions to purchase Aimia over the past several months,” the website reads.

Last week, a day after the consortium’s bid became public, Aeromexico announced its own hostile offer to purchase Aimia’s stake in a Mexican loyalty-rewards program. Although it was not a bid for the whole company, it is possible Air Canada became aware of Aeromexico’s interest.

Air Canada has reason to fear a partnership with Oneworld. For decades, the airline has counted on a steady stream of customers from the Aeroplan partnership to fill its seats, and while Air Canada decided to build its own loyalty program, Aeroplan members would still book a sizable number of its seats, assuming they would be able to book seats on any airline.

Yet, if Aimia signs a new preferred partnership with Oneworld, it would have financial incentives to promote travel on the alliance’s airlines – which could siphon customers from Air Canada.

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The revelation of talks with Oneworld also indicates Aimia is developing a strong business plan under new CEO Jeremy Rabe – something that would threaten an Air Canada in-house loyalty program.

For the first year after the airline announced its breakup from Aeroplan in May, 2017, Aimia spent most of its time putting out fires, including cutting its dividend and selling a loyalty business it owned in Britain.

However, after 12 months with little progress on a business strategy, Aimia replaced its CEO in late May; Mr. Rabe has a history in the loyalty-rewards market. In the three months since, Aeroplan has quickly revamped.

Air Canada declined to comment for this story. Oneworld could not be reached for comment.

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