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Aeroplan cards over the years

Canadian Imperial Bank of Commerce appears ready to end its long-standing relationship with Aeroplan and venture out with a brand new travel rewards card.

CIBC and Aimia, Aeroplan's parent company, have been partners for 20 years, but their current contract expires at the end of the 2013 calendar year. During the first quarter CIBC hinted that the contract may not be renewed, and on Thursday the bank laid out plans to end the relationship and launch its own card.

Though CIBC made sure to say that negotiations with Aimia are still ongoing, the bank noted that it is expecting to spend $50-million in the next year to launch and market a brand new card. Few details were provided about the potential card, but CIBC hinted that it could be equivalent to RBC's Avion credit card, meaning its travel points can be used to fly on any airline.

"The intent here is to build something that is truly a market leading travel card, so it would be a new offering," chief executive officer Gerry McCaughey said on a conference call.

The $50-million expense is expected to be an additional spend over and above CIBC's regular expenses. "It's an investment in the possibility that we will be working with a CIBC travel card," Mr. McCaughey said.

CIBC wouldn't say just how many clients it expects to lose because of the transition, but Mr. McCaughey said "we expect some attrition."

He also noted that CIBC expects the country's other big banks to adjust their spending by boosting their marketing expenses in order to steal credit card customers from CIBC.

"Frankly we expect several market players will also spend significantly," Mr. McCaughey said, without naming names.

CIBC does not disclose how much it currently makes from the Aeroplan arrangement. David Williamson, head of retail banking, said more information on this front may be provided should the contract not be renewed.

However, CIBC did note that they, not Aimia, hold the existing client information, and that should help the bank to retain certain segments of their credit card customer base. "We will be targeting a subset of the portfolio," he said.

The move to branch out appeared to catch many analysts by surprise on the conference call. Even though CIBC warned in the first quarter that there was no guarantee the contract would be renewed, its language was very mundane and appeared to be more of a legal warning that the contract was up for renewal this year.

Yet last quarter, analyst Rob Sedran at CIBC noted that the bank has made some pretty big strategic moves in the past few years – such as parting ways with brokered mortgages – and ending ties with Aeroplan would fit with this trend.

The news that CIBC might not renew the contract was welcomed by Royal Bank of Canada. On the bank's quarterly conference call Thursday, Dave McKay, head of personal and commercial banking, said "disruption is good for RBC," adding that this "is a significant opportunity for us to present our solutions to a large number of Canadians."

(Tim Kiladze is a Globe and Mail Reporter.)

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