You won’t beat our bid, Air Canada boss tells Aimia
In-house loyalty program to continue even if offer rejected, Rovinescu stresses
TORONTO Air Canada’s chief executive Calin Rovinescu said Friday that its bid for Aimia Inc.'s Aeroplan reward program was “extremely generous” and that it would still pursue its own in-house loyalty program if the company rejects the surprise offer.
“The consortium proposal is not a — quote — 'steep discount’," Rovinescu told analysts on a conference call on Friday morning following the release of the airline’s second-quarter results. “It was, in fact, at a substantial premium and extremely generous, given the $2 billion unfunded redemption liability of Aeroplan that the consortium would be accepting. We believe there is no other party out there prepared to accept this $2 billion liability, nor any other buyers for the company.”
Air Canada surprised the market on Wednesday when it announced that it had partnered with Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Visa Canada Corp. to make a $2.25-billion bid for Aimia’s Aeroplan program — the same loyalty plan it spun off more than a decade ago.
The bid from the Air Canada-led consortium is comprised of $250 million in cash, or $1.64 per share, plus the assumption of $2 billion in Aeroplan points liability.
However, Mittleman Brothers, Aimia’s largest shareholder, believes the loyalty program is worth four times more than what Air Canada is offering. In a letter to investors that was obtained by Bloomberg, Mittleman Brothers said it believed Aeroplan was worth about $1 billion, or $6.57 per share. According to Bloomberg, Mittleman also said it believes Aimia is worth about $10 a share on a sum of its parts valuation.
Rovinescu rejected claims that Air Canada’s offer was a hostile bid on Friday, and said that the consortium’s proposal “looks after all of (Aimia’s) stakeholders.”
Should Aimia reject the offer, Rovinescu stressed that the company will continue to pursue its own in-house loyalty program.
“We have not abandoned our plans to launch our own loyalty plan in 2020,” Rovinescu told analysts. “Aeroplan miles would simply be converted to our new program. The acquisition (would allow) for a smooth transition for Aeroplan members.”
Air Canada’s executives declined to provide further economic details about the program, saying it was too early in the process to do so.
Rovinescu’s comments came as the company reported an operating income of $226 million in the three-month period ending June 30, down from $292 million at the same time last year. The airline said it will hike fares and consider adjusting its network capacity as it grapples with rapidly rising fuel costs, which increased in the most recent quarter by 31 per cent.