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Aeroplan cards over the years

After more than two decades as partners Aimia Inc.'s Aeroplan Program and the Canadian Imperial Bank of Commerce are stalled in negotiations to extend their agreement past its year-end expiration.

But while both sides say they're holding out for a better deal, others believe their ties to each other go much deeper. In other words: don't expect a split any time soon.

For Aeroplan, the revenue stemming from the CIBC partnership is likely too sweet to refuse, and CIBC is in no mood for disruption, according to a new report from a team of analysts at National Bank Financial.

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Analysts Adam Shine and Peter Routledge point out that the bank is going through a retail and business banking transformation, most notably the sale of the mortgage broker unit, FirstLine, which closed last year. Since the retail banking line makes up the largest part of the bank's earnings, and credit cards are the second most important product in the division – contributing upwards of 25 per cent of net income – the report said it would be unlikely for the bank to want to make big changes in both businesses at once. "We doubt CIBC would jump at the prospect of concurrently overhauling its credit card business by re-designing such a major part of its value proposition, i.e., Aeroplan rewards," the report said.

But NBF isn't saying CIBC's hands are tied in this deal. "CIBC has significant contractual rights if we're not able to reach an agreement on the extension of the current contract," said David Williamson, group head of the bank's retail and business banking unit, on the bank's first quarter conference call. "It's a relationship that we continue to explore."

The report notes that Aeroplan leans on CIBC for revenue far more than the bank does the rewards company. Worst case scenario, the bank can fall back on its lesser known Aventura credit card brand.

So even though Aimia has been increasing its Aeroplan partnerships beyond the bank, it's no surprise that more recent negotiation comments have been more positive. On Mar. 28, Aeroplan's chief executive Rupert Duchesne said the deal was a huge and important opportunity. "We believe that the Aeroplan program is now very well positioned," he added. "We've got an airline behind it and a global alliance behind it that are both in very good shape at this point. We are determined to see this asset grow as the consumer economy recovers but also grow in relative market share." Aimia has also expressed interest in growing in Mexico .

And if the two can find a way to play nice, they can move on to new projects. "CIBC customers already can earn Aeroplan Miles when signing-up and maintaining an AeroMortgage and, most recently, an Unlimited Chequing Account," the NBF report noted. "More products could be added to the mix to further enhance and differentiate CIBC's offering," it said.

(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)

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