Aimia to cut costs further as Air Canada deal dissolves

MONTREAL • shares plunged 28 per cent Thursday after the operator of the Aeroplan loyalty card reported a wider quarterly loss and plans to pursue deeper cost cutting.

The Montreal-based company plans to trim its costs by $70 million per year by 2019 as it continues to adjust to Air Canada’s decision not to renew its long-term partnership in 2020. It has already sold several businesses, including its British Nectar coalition, and cut staffing in half since 2015 to about 1,600 people.

Chief executive David Johnston said efforts to simplify its business to drive further savings will come in ways other than further large layoffs.

“We’ve done quite a bit of that this year but there’s some corporate simplification we’re doing — properties, technology. I’m not envisaging material further job cuts,” he said in an interview Thursday.

Aimia stock ended the day at $1.71 in Toronto, down 28.1 per cent, after it reported a $214.7-million loss in its latest quarter, hurt by a charge related to the sale of its Nectar program and related assets.

Aimia shares were down 65 cents at $1.73 in trading on the Toronto Stock Exchange.

Johnston declined to comment on the stock movement but said the company delivered good 2017 results despite having to deal with Air Canada’s decision in May, which raised questions about Aimia’s future.

“The Aeroplan team and the Aimia team have delivered a fantastic financial performance in what was undoubtedly a tough year.”

Michael Goldberg of DBRS said the stock decline is due to concerns about the quarterly results, including higher fourth-quarter redemptions, rather than lingering concerns about the company’s future after Air Canada.

The company plans to unveil changes to Aeroplan in the coming months that will focus the card beyond 2020 more on leisure travel of its premium members. It will offer broader choice with multi-airline awards, tailored experiences beyond flights and a simpler customer experience.

Johnston said Aeroplan redemptions rose 9.9 per cent in the fourth quarter and four per cent in 2017 mainly because of the availability of lower airfares and more use for non-air rewards, not because of member concerns about the program.

Gross billings rose two per cent but are expected to decrease a bit in 2018.

“Even after that redemption they’re coming back reengaging with the program and earning more points and that’s a healthy behaviour in a loyalty program and I’m fine with that,” he added.

Neil Linsdell of Industrial Alliance Securities said Aimia faces challenges even though more cost cutting is inevitable to address upcoming profit pressures.

“Rather than a grand Plan B replacement of Air Canada, Aeroplan may see itself evolve steadily through 2020,” he wrote in a report.