Air Canada’s Acquisition Of Aeroplan Is Complete

In May 2017 it was initially revealed that Air Canada would be dumping Aeroplan as their loyalty program. Over a decade ago Air Canada spun off their loyalty program to raise cash, and Aeroplan has run their program ever since.

The news was that in 2020 their contract ended and they didn’t intend to renew it. What has happened since then has been quite interesting, to put it mildly.

Last summer there were talks between Air Canada and Aeroplan, as the airline was interested in acquiring Aeroplan. That’s right, they wanted to buy the loyalty program that they decided to end their relationship with (which also caused the value of Aeroplan to plummet).

There ended up being some negotiating regarding the price, but in the end Air Canada and Aimia (Aeroplan’s parent company) reached an agreement in August 2018.

Air Canada’s acquisition of Aeroplan is now complete

Just under five months later, that deal has now officially closed, and Air Canada has completed the acquisition of Aeroplan.

Here’s what Air Canada’s President and CEO had to say about this:

“Air Canada is creating an industry-leading loyalty program that aims to provide unmatched flexibility, choice and convenience for customers when it debuts in 2020. With today’s purchase of Aeroplan, we are taking a major step forward on this transformational initiative by acquiring one of Canada’s most popular loyalty programs. For many Canadians, given Aeroplan’s privileged access to Air Canada, it is the next best currency to the Canadian dollar.

We are also now able to provide confirmation to Aeroplan members that their existing Aeroplan Miles will be honoured on a one-to-one basis in our new program. Finally, with today’s transaction, customers will have certainty that they can continue to earn and redeem Aeroplan Miles confident that their existing Air Canada Altitude status and privileges are secure.”

Here are the terms of the agreement and purchase price:

The aggregate purchase price for the acquisition consists of $450 million in cash plus $47 million in cash for pre-closing adjustments. The pre-closing adjustments relate to lower net liabilities assumed than projected. The purchase price is subject to post-closing adjustments and the acquisition also includes the assumption of the Aeroplan Miles liability. Air Canada received payments from TD and CIBC in the aggregate amount of $822 million. Visa also made a payment to Air Canada and assuming completion of the American Express agreement, AMEX will do likewise. In addition, TD and CIBC made payments to Aimia Canada Inc., now Air Canada’s subsidiary, in the aggregate amount of $400 million as prepayments to be applied towards future monthly payments in respect of Aeroplan Miles.

As expected, Air Canada has also confirmed that Aeroplan miles will transfer to Air Canada’s new loyalty program at a 1:1 ratio in 2020.

Here’s what Air Canada claims that members can look forward to with the new program:

• The best reward value for Air Canada flights, plus, unparalleled access to travel on over 40 partner airlines, including the Star Alliance global network;
• Canada’s best travel rewards credit cards, offered by TD, CIBC and American Express;
• More ways to earn and redeem points for travel, upgrades, experiences, on-board product and everyday indulgences;
• An improved experience when traveling with friends and family;
• Everything Air Canada has to offer in one place, with a new digital experience.

However, as of now Air Canada still has revealed very little about the new program, even though the launch is just about a year away.

Is Air Canada’s acquisition of Aeroplan good for members?

I’ve explained in the past what Air Canada buying Aeroplan means for consumers. Whether this is good or bad news depends on what you think Aeroplan’s independent future would have looked like:

• If you think Aeroplan could have succeeded independently and offered a compelling program, having a competitor for Air Canada would have been a good thing
• If you think Aeroplan couldn’t have succeeded independently and offered a compelling program, having Air Canada acquire them would probably be the best, since your miles would be worth more

Personally I’ve been skeptical about what Aeroplan’s independent future would look like, since it’s tough for a loyalty program without an airline to deliver much value. Sure, they could have added some partnerships (as they’ve been trying to do all along), but chances are that there wouldn’t have been any outsized values with those redemptions.

I’ve been skeptical of Aeroplan’s independent future, and therefore I view this as a net positive, since it means members’ miles are safe. At the same time, Canada already doesn’t have many competitive loyalty programs, and now Air Canada will have even more of a monopoly in the travel space.

What do you make of Air Canada’s acquisition of Aeroplan?