Air Canada signs deal to purchase Aeroplan

MONTREAL Air Canada has signed a definitive agreement to buy the Aeroplan loyalty program from Aimia Inc. for $450 million in cash, confirming the airline as sole owner and bringing closure to credit card customers wondering how long their points would have value.

Air Canada will also assume $1.9 billion of Aeroplan miles liability in a definitive agreement that follows the announcement in August of a tentative sale.

Air Canada said it has also signed agreements with Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, and Visa that will see them stay on with the Aeroplan loyalty program until at least 2030.

TD and CIBC will pay Air Canada $822 million — $622 million and $200 million, respectively — on top of an undisclosed payment from Visa. The two banks will also fork over another $400 million in pre-payments — $308 million and $92 million, respectively — to be applied toward future monthly payments for Aeroplan miles.

The total of about $1.2 billion from TD and CIBC helps offset the hefty points liability, acquisition price and other working capital and pension assumptions, and establishes TD as “the primary credit card issuer,” said its chief executive, Bharat Masrani.

Air Canada said it is still in talks with American Express, which issues Aeroplan co-branded cards, to secure its continued participation.

Aimia shareholders must greenlight the Aeroplan purchase before it goes through, on top of closing conditions and regulatory approvals. A special meeting is scheduled for Jan. 8 in Montreal, the loyalty analytics company said.

The deal will likely close in January, Air Canada said. More details around the new program are expected to be revealed by the Montreal-based company then, as well as at the Feb. 28 investor day.

Earlier this year, questions swirled around whether the agreement would amount to a joint venture among consortium members.

“It’s not,” said AltaCorp Capital analyst Chris Murray in an interview. “That’s the first thing that we got some clarity on today ... Air Canada will own the program, full stop.”

The newly announced deal will pave the way for a “smooth transition” in 2020 to Air Canada’s new loyalty program — which will bring all current Aeroplan members with it — said National Bank Financial analyst Cameron Doerksen.