FlyerTalker70

Shareholder

Thing is, without AC, Aeroplan is nothing but a wannabe shopping points program lacking the two critical retail partners: a national grocery chain and a national gas outlet. Aside from credit card earnings, those are the critical components of any such program, as Air Miles will testify to. So it's hard to see how Aeroplan can attract and keep members even if it does have access to award seats on OneWorld airlines and Porter...or even AC for a short time. The banks joined AC because they're caught in a trap: their Aeroplan contact runs through 2022 and likely has a clause restricting them from participating in any other loyalty programs. Thus they can't move over to Altitude 2.0 in July 2020, a thus fear losing a large portion of their elite cardholders who will lose AC benefits associated with the cards. And for AC it means Amex can pretty much call the terms of any partnership in Altitude 2.0 since it is likely to be the only bank/credit-charge card entity bidding. (BMO is tied to Air Miles, RBC to WestJet, and AC hates ScotiaBank because it outbid it for naming rights to the Toronto arena.)

So this shareholder highly overrates the value of Aeroplan to any entity other than AC. There are investment banks that still see airline FF programs as being under valued while operating as divisions within the airline. At the last investor meeting of AA, one bank was trying to convince them to spin off AAdvantage. As was successfully done when these same banks pretty much forced ACE to divest Aeroplan and Jazz for the "instant" cash payout. This one must be happy to have seen the stock double since the buy out offer, but it's still less than half what they likely bought their shares for.

Stranger

There was some discussion on FT on some of tese issues. Conclusion seemed to be that the contract between AC and AE imposes very low prices for rewards. Plus, given the tons of miles AE sells to banks, CCs etc., the number of seats vastly outnumbers the number of seats expected to go empty.

Presumably other airlines sell miles at a higher price so volume is not quite as high and they get value. Which AC does not.

Transpacificflyer

MUST reading. I urge all to read, It is an eye opener and provides much needed context., Christopher Mittleman has a vested interest but that said, the gentleman knows his business and has provided some much needed transparency that AC and the CC companies have not provided. IMO up until Mittelman and Rabe joined the board, AC and Calin had their way with the Aimia leadership. The new boss Jeremy Rabe knows this business as he was the founder and a managing partner of On Point Loyalty, a boutique investment and advisory firm focused on the airline loyalty industry. Perhaps a bit late to do as much as he can do, but I think he is the right guy for the job and that Calin & Co. have met their match with a guy who chews numbers and spits them out profitably.

FlyerTalker70

I'm unsure on those points. If we take UA as an example, they too have a lucrative deal with the banks/credit card companies, namely Chase (i.e. MilagePlus Explorer card) which often fork out 50,000 mile sign up bonuses. Also, there are airlines that likely sell miles for well under what Aeroplan is selling such as AV miles where it's not uncommon to encounter promos that make the effective price per mile in the 1 cent range. I don't believe they charge scam charges on their milage redemptions.

transportprof

Perhaps a grocery chain and national gas station network were essential for points programs of the past, but most of my students under 30 rarely set foot in a grocery store, or fill up at a gas station.

The economy will see a lot more Uberization of food (e.g., Uber Eats) and shared mobility. If Aeroplan were to secure agreements with ride sharing companies like Uber or Lyft, and Airbnb, then they would be well positioned for the future economy, not the past where members filled up their gas guzzlers at the pump before or after filling their trunk with a week's worth of groceries.@:-)

rehoult

To my knowledge, the RFP for the Altitude Card Issuer was very active, and AC has draft agreements for both Canadian and US cards to be issued under the Mastercard banner. I'll leave it to others to opine on who the issuers would be.

Also, saying the banks & Visa joined the bid is presumptuous. They stand to lose 10B+ a year of intercharge, to another bank and Mastercard, and they are both well aware of that and actively trying to prevent it.

Stranger

1 cent US. Vs. 0.67 Canadian...

Stranger

Full of BS though. I am sure the guy is smart. But it smells like he is going his best with a losing hand. Ditto for Rabe.

At this point, best for them is saving the furniture. My guest remains, they are gambling that AC (not so much) and mostly, TD and CIBC will raise their offer. All about bargaining.

But at the end of the day, it's really TD and CIBC which must care. For AC, not so important if we get upset because of miles get lost. They have AE to blame and not so much business to lose.

Jumper Jack

Are you saying most Canadians would not blame AC when their AE miles become worthless?

yscleo

Oh, draft agreements with MC. That'll make VISA nervous and want to fend off MC.

rehoult

What would you want them to have? Signed agreements with a $50M break fee? 2x major Canadian and US banks aren't going to let AC announce them as credit card partners just to have AC walk when Visa comes back to the table. If they sign, it's done.

AC is ready to sign a deal anytime, and this offer is probably the only way it isn't MC branded.

roubaolic

Completely agree.

roubaolic

Three things to say to counter your argument:

1. AC calculated it was worth the risk (of people getting angry at them) when they decided the non-renewal last year. Not buying AE back now does not add additional such risk.

2. Consumers can blame AC all they want but they don't really have a choice. WestJet? Maybe in the future but not now.

3. Does it really matter even if people perceive that AC screwed them on their past AE miles? For high spend travellers, as long as AC's new loyalty program benefit is "good" (or just better than WestJet's non-existent program), they will stick with AC vs WestJet. For bottom feeders buying lowest economy only, doesn't matter how much AC screwed them in the past, if a ticket today from AC is $10 cheaper than WestJet, they will buy AC.

skybluesea