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Is one of the most enduring marriages in corporate Canada coming to an end? After months of negotiations, Canadian Imperial Bank of Commerce and Aimia Inc. – owner of the Aeroplan loyalty program – are still haggling over an extension of their 22-year relationship enabling CIBC to offer Aerogold Visa cards to customers. Both sides suggest they would be fine if they can't renew by the expiry date at year's end. Don't be fooled; they need each other more than either may care to admit.

Renewal has been an open question for months. Last fall, CIBC began heavily promoting its Aventura World MasterCard, which allows members to earn points for use on any airline, not just Air Canada, Aeroplan's partner and former parent. In recent months both sides have suggested they have contingency plans. On Thursday CIBC executives said the bank is preparing to launch a new travel rewards card – backed by a $50-million investment – should negotiations with Aimia fail.

Aimia CEO Rupert Duchesne, for his part, said two weeks ago his company is "in discussions with another major Canadian financial institution" and could move the Aeroplan program there should CIBC not renew. "Either would provide an attractive option to drive the longer-term growth of the Aeroplan program," he said.

The CIBC renewal question is just one of several concerns hanging over Aimia, and there is no further clarity on any of those issues six months after ROB Insight first wrote about them. A decision is still pending from Canada's Competition Tribunal on credit card rules that could hit Aeroplan's gross billings. Meanwhile, the upcoming expiry of long-unused points could result in a heavier redemption of points than expected, which could impact profits.

But there are good reasons to believe CIBC and Aimia will reach a deal.

The relationship is important for both: CIBC accounts for one-quarter of Aimia's gross billings and half of its Aeroplan business – which, despite Aimia's diversification efforts, still accounts for the bulk of its profits.

Aeroplan represents a competitive advantage for CIBC, and a big reason why it is the leading credit card lender in Canada. CIBC gets a great deal from Aimia. While Aeroplan charges new entrants 1.5 cents per point and 1.24 cents on average, "CIBC, as the program's key accumulation partner, is obviously paying less" although the size of the discount is unknown, a pair of National Bank Financial analysts said in a note last month.

Aimia is looking to increase what it charges CIBC while CIBC is looking to improve its rewards offering to customers "but do it on appropriate economic terms," David Williamson, senior executive vice-president of retail and business banking, said on a conference call.

But both clearly recognize what's at stake: Aimia executives have talked about refreshing the program by offering more value for customers. And CIBC knows full well the risks of walking away: it would be jump-ball in the Canadian travel rewards business, as all card issuers aggressively go after its Aerogold customers. "Gross retention is an unknown because of the competitive forces that will come to bear" said CIBC CEO Gerry McCaughey.

With the housing market cooling along with earnings prospects for the major banks, it's hard to imagine that the weakest of the Big Five, and the one most exposed to the Canadian economy, would risk trading in one of its best franchises for an unknown alternative. Either way, Aeroplan customers seem poised to benefit: whether CIBC launches its own card, or strikes a deal with Aimia that allows it to improve its current offering, consumers are likely to be tempted with relatively better rewards than they've come to expect from the tired program.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights , and follow Sean on Twitter at @seansilcoff .


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