Posted by William Charles on August 21, 2018
Airline Rewards

Published on August 21st, 2018 | by William Charles

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Air Canada Announces Acquisition Of Aeroplan For $450 Million In Cash + Point Liability

In case you didn’t already know Air Canada spun off Aeroplan (the current Air Canada loyalty program) in 2002 as a separate entity, Aeroplan was eventually sold to Aimia who are the current owners. Aimia has an exclusive contract with Air Canada until June 29th, 2020. Recently Air Canada made a bid for Aeroplan for $2.25 billion ($250 million in cash and a $2 billion Aeroplan points liability), this was rejected and Aimia/Aeroplan indicated they would partner with Porter instead.

In the latest update Air Canada along with TD, CIBC & Visa have reached an in principal agreement to purchase Aeroplan. The purchase price consists of $450 million in cash and approximately $1.9 billion in Aeroplan miles liability. Aimia/Aeroplan had originally asked for $450 million, so it looks like they were able to make the threat of a competing program real enough to get Air Canada to pay up. Hopefully this serves as a lesson to both airlines and potential purchasers that selling of the loyalty program is not a good long term play.



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Tigris23
Tigris23

Hey Doc, in your best guess based on your experience/knowledge & the history of these deals/programs, do you believe a devaluation is coming now that AC will buy back Aeroplan?

Adam

ofc, it’s common sense… that when AC pays a ridic price for Aero – only way to recoup that is to ream current, loyal customers who’ll have to suffer the consequnces of yet another M&A

Rob W
Rob W

To the point 100% Adam, corporate world only sees their bottom line , let customers go to the hell. I just wanted to understand about aero plan miles, will my miles become AC frequent flyer miles? I have quite a few aero plan miles but do not have status on AC since I did not take any flight on AC. Will my aero plan miles gain AC status or I am stuck in their vicious cycle of miles not flown on AC nor $ accumulated on AC ( pretty much the same CRAP/BS/BLACKMAIL of UAL)

Rob W
Rob W

I just wanted to understand about aero plan miles, will my miles become AC frequent flyer miles? I have quite a few aero plan miles but do not have status on AC since I did not take any flight on AC. Will my aero plan miles gain AC status or I am stuck in their vicious cycle of miles not flown on AC nor $ accumulated on AC ( pretty much the same CRAP/BS/BLACKMAIL of UAL)

CM

How much did they sell it for originally?! The whole idea just always seemed weird.

Radster
Radster

I agree. Gary Leff has written some articles on the economics of loyalty programs but I still cant wrap my head around it.

DCJoe
DCJoe

When they did the IPO (sold 12.5% in 2005) the implied value was $2 billion Canadian. They sold the final shares in 2008. Not sure how much cash they eventually raised. Another key question is how much in liabilities Aeroplan took on when it was started. Because that is a key part of the current valuation.

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