Aimia couldn’t get sky high plans for Aeroplan airborne
Firm once had ambitious strategy to make rewards program a global powerhouse
What was that all about?
Aeroplan customers are entitled to their surprise/exasperation/worries/ querulousness over the latest development affecting the loyalty rewards program owned by the ambitiously named Aimia Inc., a company that had sky-high plans for expansion and then went pfft.
Some poet once said a man’s reach should exceed his grasp.
But let’s be reasonable. The publicly traded Aimia was constructed on the notion of transforming what had been Air Canada’s rewards program — that is, Aeroplan — into a global leader in the loyalty game, hence the bland reachfor-the-sky brand name that failed to fully achieve lift off. Feel free to disagree. As evidence, allow me to table a memory of the great fanfare that greeted Aeroplan Income Fund, as it was known, in the waning days of 2007. In acquiring the privately held U.K.-based Loyalty Management Group Ltd. for $715.4 million, Aeroplan gained, the company touted “an unparalleled breadth of retail, financial services, travel, as well as data analytics skills and experience, as well as a leading position in one of the most important and active loyalty markets in the world.”
The big name that came with the transaction was Nectar, launched by Sir Keith Mills in 2002. Mills’s reputation in the world of loyalty rewards programs was secured when he founded Air Miles in 1988. With first partners Sainsbury’s and Debenhams and BP, Nectar swiftly became an enormously popular loyalty program, rewarding frequent shoppers in the U.K. with movie tickets, money-off vouchers, flights, etc.
A year before the sale to Aeroplan, Marketing Week reported that more than 50 per cent of U.K. households carried the distinctive purple and gold Nectar cards. That’s an impressive ramp up. Understandably, the sight of the Canadians stepping in to buy a Brit success story came as a surprise.
Aeroplan Income Fund, which became Groupe Aeroplan before being renamed Aimia in 2011, had a goal: to make this ephemeral thing called “loyalty” a stand-alone business, and to make a Canadian loyalty company the world leader.
The strategy wasn’t simply about getting customers to buy stuff, or, with loyalty rewards, buy more stuff, but to goose expenditures through cross branding (a Sainsbury’s customer becoming loyal to BP), thus appealing to even more retailers. Bonus: all that shopping armed Aimia with an arsenal of data, making the company an international analytics company too.
The customer may not remember this period with such excitement, recalling instead the use-’em-or-lose-’em deadline being dropped to 12 months from 36. (Acquiring or redeeming at least one mile a month.) And here’s a statistic: the time of the Nectar acquisition marked the moment at which unredeemed frequent flyer points worldwide had grown to 17 trillion. Points vapourized, seats were unavailable or ridiculously limited, taxes and service charges made the adventure not worth taking, etc. Disgruntled pointsholders wondered: what price loyalty?
In other news, Aeroplan/ Aimia spent three years securing a deal with Sobeys, announcing in the summer of 2008 that the grocery retailer’s stores in some provinces, including Ontario, would reward customers with Aeroplan miles.
In 2012, Aimia paid $88 million for a further 20 per cent stake in Mexico’s Premier Loyalty & Marketing (PLM), which owns and operates Aeromexico’s frequent flyer program. That transaction took Aimia’s interest to 49 per cent.
Other transactions included the acquisition, in 2014, of a 25 per cent stake in Travel Club, a loyalty program launched in Spain in the mid-90s. “Aimia’s expertise in delivering smart, data-driven loyalty analytics worldwide makes the company a natural partner for us,” Travel Club’s director general said at the time of the deal’s announcement. And then it all came undone. The strategic partnership with Sobeys unravelled over time. Aimia started talking a great deal about streamlining, and finding its core focus and keying in on potential asset sales. By February 2017, Aimia announced it was in the process of selling Travel Club. By the spring of that year, it had exited a rewards sourcing initiative in New Zealand and an employee loyalty business in the U.S. In May 2017, as it released its first quarter results, the company allowed that the “tenor” of discussions with Air Canada had led the board to believe that the airline did not intend to renew its Aeroplan partnership, set to expire in June 2020. Air Canada lowered the boom the very next day, informing Aimia that it would not be renewing its partnership contract and would be launching its own frequent flyer loyalty program as of June 30, 2020.
For those who had followed the great promise of a worldbeating, data- profiling and loyalty rewards company, a telling moment arrived in February of this year when Aimia announced that it had sold the Nectar loyalty program to Sainsbury plc for $105 million. According to Aimia CEO David Johnston, the sale would allow for a “sharper focus on Aeroplan, our largest and most profitable business.”
If that doesn’t sound like a getting-ready-for-sale strategy, I don’t know what does.
And in fact Aimia had struck a special committee with just that intention and had commenced discussions with Air Canada, in league with the CIBC and the TD (Aimia has contracts with both cardholders that extend to 2024) as well as Visa Canada. That consortium has offered $250 million in cash for the company and will assume what it says is $2 billion in Aeroplan points liability. An Aug. 2 expiry date was set.
As if to demonstrate that it really still is a viable company, Aimia rejected a subsequent offer from Grupo Mexico to purchase the PLM business for $180 million (U.S.).
The story ends where it began. With Air Canada and a loyalty program called Aeroplan and a customer base of more than five million members begging to have their loyalty rewarded.