Air Canada Warns of ‘Short Fuse’ on Aimia Rewards Plan Offer

(Bloomberg) -- Air Canada’s top executive turned up the heat on Aimia Inc. to accept its buyout offer for a Canadian frequent-flyer program, warning that $1.5 billion in unpaid rewards liability would scare off any other suitors.

The airline’s chief executive officer, Calin Rovinescu, said he’ll immediately restart talks with credit-card partners to create its own loyalty program if Aimia fails to accept its unsolicited C$250 million ($191 million) cash bid for the Aeroplan business by the Aug. 2 deadline.

“There’s a very short fuse” on the deal, Rovinescu said on a conference call with analysts Friday. “We believe there is no other party out there prepared to accept this C$2 billion liability, nor any other buyers for the company.”

Air Canada on Wednesday teamed up with Visa Inc., Toronto-Dominion Bank and Canadian Imperial Bank of Commerce to make the offer for Aimia’s Aeroplan unit, which the airline has used to run its rewards program. The deal would include the assumption of all liability for frequent-flyer credits not yet used by customers.

Aeromexico Offer

Aimia operates loyalty plan programs for airlines around the globe. Thursday, the company refused an $180 million offer from Grupo Aeromexico SAB to buy out the carrier’s PLC Premier plan.

Aimia rose 0.6 percent to C$3.46 at 1:05 p.m. in Toronto, taking its gain since the Air Canada-led bid was announced to 39 percent. Air Canada advanced 0.8 percent to C$23.67.

Acquiring Aeroplan would allow Air Canada to speed up the introduction of its own loyalty program by 2020, Rovinescu said. The carrier is looking to partner with a Canadian bank to issue credit cards that would be linked to the carrier’s new rewards program. Cardholders would accumulate points that could be exchanged for flights or various other products and services, such as hotel stays and luggage.

If Air Canada succeeds in purchasing Aeroplan, customers’ existing frequent-flyer points “would simply be converted” to Air Canada’s new plan, the CEO said.

Redemption Value

“Air Canada will have its own in-house loyalty program, one way or another,” he said. “We know lots of the Aeroplan members want to continue to be able to redeem on Air Canada. That’s where they see the greatest value.”

Canada’s biggest carrier has been negotiating with potential credit-card partners since it announced in May 2017 that it will cut ties with Aimia and go it alone after its contract with the company expires in June 2020. Aimia’s shares plunged 58 percent through the remainder of the year.

“If the expiry date lapses without a deal, we have every intention of resuming our discussions to conclude a new long-term credit card arrangement” in the fourth quarter, the CEO said.

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