Cards from CIBC, TD Bank and Aeroplan.Ryan Remiorz/The Canadian Press
After months of acrimonious Aeroplan talks, you simply can't assume that a three-way Aeroplan deal between Canadian Imperial Bank of Commerce, Aimia Inc. and Toronto-Dominion Bank is a sure thing. But there's hope, because all three parties have reasons to make it work.
As an Aeroplan partner for more than 20 years, CIBC's brand is, in part, tied to the loyalty rewards program. Severing that relationship could have been devastating, considering that Aeroplan is the reason CIBC was able to build such a substantial credit card portfolio over the years. Analysts estimate the cards unit now contributes 5 to 15 per cent of the bank's earnings.
By selling certain accounts to TD – chiefly those that don't also have CIBC banking relationships – CIBC is able to hedge its bet. Had it simply stood down and launched its own card, it would have had to aggressively fend off TD and other banks who hoped to steal its existing client base. A three-way deal removes a tough competitor from the arena and allows CIBC to keep the clients it wants most.
CIBC would also get the right to continue issuing Aeroplan cards for another 10 years, meaning there would be less pressure for success of the new travels rewards card it has hinted at launching.
Aimia, meanwhile, sits pretty. Right now CIBC is the only major Aeroplan partner. (American Express is one, too, but its footprint pales in comparison to CIBC's.) By making TD its primary card issuer while also keeping CIBC in the picture, the loyalty program would have two of the Big Six banks on its team.
That prompted National Bank Financial analyst Adam Shine to wonder if Aimia is "getting its cake and eating it, too?"
As for TD, because the original partnership did not involve CIBC, the country's second-largest bank would have started fresh with zero Aeroplan accounts in January. (CIBC wasn't going to sell any of its portfolio because it wanted to transition its existing clients to its new travel rewards card.)
TD, then, would have had to aggressively target existing Aeroplan members, while also fending off other banks who smelled fresh blood in a free-for-all.
Yet TD also has the most to lose. While it gains a leg up from buying over half of CIBC's existing Aeroplan portfolio, the bank will have a tougher time persuading prospective Aeroplan cardholders to sign with them because it will have to compete with CIBC.
Assuming TD isn't too miffed by that, it will be interesting to see how its Aimia agreement is re-worked. Originally, the bank promised to shell out $100-million up front, as well as pay 15 per cent more for points, but now the economics have changed.
Despite all the question markets around the partnership, one thing is for sure: customers are confused, and that's never good for loyalty. Personally, friends of mine who could care less about banking coverage have pestered me with questions about their Aeroplan cards. Readers have, too. That's forced Air Canada and Aimia to send out clarification emails to clients to explain what exactly is happening.
Makes you wonder why this battle didn't stay behind closed doors.
(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)
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Tim Kiladze