This is quite a week for Aimia. Aimia is the parent company of Aeroplan, which is Air Canada's spun off loyalty program. The contract between Aeroplan and Air Canada expires in 2020, and yesterday Air Canada made an offer to acquire Aeroplan at the cost of $250 million in cash, plus assuming the liability for…
Continue reading: Aeromexico Tries To Buy Back Their Loyalty Program With A Lowball Offer
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This should put to bed the ridiculous notion that Airlines should spin of their loyalty programs once and for all.
Why? The only people losing in this will be shareholders and fliers.
The airlines did well.
Probably shouldn’t feed the troll but how exactly did the airlines do well? Aeroplan was sold off for less than 600m, and Air Canada lost 12 years of earnings from the program if they kept it in house, in addition to the 250m they are now paying for Aeroplan. The sell off was hardly profitable for Air Canada (not to mention Aeroplan likely would’ve earned more if kept in house, as operating costs would likely be lowered).
They are low-balling with over 10 years left on the contract? What a joke! Granted Aeromexico isn't nearly as nice as Air Canada /Aeroplan but this was really poorly timed.
Regarding AM's Club Premier, some time in the last few months, AM (or Aimia) devalued the crap out of the Club Premier program. The program used to have great redemption rates in Business class to Europe and the Middle East from the USA. It seems most sweet spots were devalued by 50-70% and there wasn't even any notice about it either!
Buy low sell high. They made 450m selling and buying the program. They can easily devalue and make back a lot of the liability (miles outstanding) incurred.
What aeroplan might have achieved inhouse in 12 years is speculative. Obviously if they hadn't been confident they wouldn't have sold it. The price is the price and market presumably is efficient though highly manipulated.
I am not an accountant so it's just my 2c.
Aimia made more than 37.5m per year off of Aeroplan. Much more.
So no, Air Canada didn't "make" 450m selling and buying the program (as if it's an arbitrage), they lost 12 years of earnings off their own program, which is far more than 450m.
Ok thanks David. I will have to look into it more.
A stand alone ff program is nothing more than a financing company. So they make money if their models are correct and lose if not. So there has got to be a lot of risk/uncertainty involved and consequently low PE ratio.
What did they do with the money? Pay it out as dividends?
Maybe they got lucky. Standalone while travel was picking up. If they had a bright future why is their stock price so low? They had found run for 12 years but they didn't diversify quickly enough.
It would be much better if this miles nonsense, esp the huge inflation through CC's would stop. Airlines could do the same as hotels.com allowing you a 10% discount provided you fly them enough.