YXUFlyboy

What will be interesting is what devaluation Air Canada plans. For all the complaints on Aeroplan over scam charges, etc., it still remains one in which I get some good value. Most of the time I can find Air Canada award space when I need it, but Calin has been quoted as saying the current award space situation (8% of seats on all routes) is too high. It also depends on how much it flips from a combined FF/revenue program to pure FF. I don't have status, but Distinction is easy to get and useful. The program will have far less worth to me without it, though I know I'm likely in the minority on this board.

5mm

Stranger

Note says:

Adam Smith

And you would be wrong. Aeroplan was purchased by a consortium of AC, TD, CIBC and Visa Canada. The consortium did not buy the other bits of Aimia or have to deal with the other liabilities on its balance sheet.

This is vastly different from what was predicted by many, which was that AC would purchase Aimia, or purchase Aeroplan on its own.

The Lev

Interesting AC or the consortium buys Aeroplan for $450 million (plus assumption of $1.9 billion in liabilities) and AC immediately sells a 10-year agreement to TD/CIBC for $822 million plus $400 million of prepaid points.

Seems like a very good deal for AC, which is how it is reflected in the markets, which are flat overall. AC is up about 5%, Aimia is up almost 4% and TD and CM are both pretty much flat (this is a rounding error for them).

5mm

musicmtl

Just got a similar email from CIBC:

Thank you for being a CIBC Aeroplan® credit cardholder. We are writing to you today with some good news.

As you know, Air Canada® is planning to launch a new loyalty program in 2020, with new features and enhancements for cardholders like you. I’m pleased to share with you that as the result of an agreement between CIBC and Air Canada, your existing CIBC credit card will earn rewards for you under this new program when it launches.

This means you’ll continue to experience the benefits of your CIBC Aeroplan credit card today, and you’ll enjoy Air Canada’s new program when it launches – all with your CIBC credit card.

This is contingent on Air Canada completing their purchase of the Aeroplan loyalty business from its current owner, Aimia. We first let you know about this transaction in August, and it is expected to be completed by early January 2019.

RangerNS

The current wording seems pretty clear that it is AC and AC alone purchasing Aeroplan.

Cash seems to be coming from the CC companies paying in advance for points, but they don't seem to be getting any ownership; it does not seem to be a new co-owned company or anything else creative.

rankourabu

Exactly. Aeroplan is not that bad. Just wait until AC "enhances" it.

I predict a bloodbath in the redemption department. Maybe not so much in the Altitude aspect, but RDM-wise, it wont be pretty.

AsiaMission

TD and Air Canada Finalize Long-Term Agreement For Air Canada Credit Card Loyalty Program

TD and Air Canada Finalize Long-Term Agreement for Air Canada Credit Card Loyalty Program - Nov 26, 2018

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pitz

This new TD transaction sounds like basically TD is providing financing for AC. This sounds very positive for customers. I think AC may very well be "the big loser" in the whole scheme of things here.

When Aeroplan was originally spun off as a separate entity, the newly constituted income trust entered into a deal with Air Canada for a significant pre-payment of points. In hindsight, Aeroplan paid AC way over the true value of the points (ie: what Aeroplan was ultimately able to monetize them for), and as such, Aeroplan, as an income trust, and as a corporation, substantially destroyed its shareholder's capital. AC got the better end of the deal, ie: cheap financing of their E90 and 77L/77W purchases. The Aeroplan program added a lot to AC's bottom line that wouldn't have otherwise existed.

But we have to assume that now that AC went back for another round of financing through forward selling of redemptions, that the TD bankers drove a much harder deal, ie: paid AC significantly less than the rather generous deal AC got (in hindsight) from AP. So the question arises, "why" would AC enter into such an arrangement? Does AC feel that they have a very high cost of equity, meaning that a deal with TD was preferable? Does AC feel that there is a major economic slowdown coming right around the corner, believing that selling as many seats as possible today will help them maximize their yield during the slowdown?

Devaluation doesn't seem very likely (and even less likely with this deal, since such contracts almost certainly codify to what extent AC is even allowed to devalue, if any). But one of the big hopes of a fully in-house AP program was the ability of AC to use the program to enhance its flexibility in terms of the program, redemptions, etc. to meet market conditions and to enhance balance sheet flexibility. As a competitive tool. Entering into such heavily encompassing contracts with TD may very well impair their abilities somewhat. Basically its a 'meet the new boss, he's really the same old boss' sort of scenario.

BTW, what ever happened to the CEO's claim that being rid of Aeroplan would add billions to AC's bottom line? I think we can safely assume such was just unadulterated nonsense, at the time, and probably even more so going forward as AC starts gearing up for a much weaker domestic economy and much lower capacity utilization.

pitz

The CC companies definitely wouldn't advance AC a dime for points if they weren't provided with contractual iron-clad assurances as to the redeemability or redemption value of points. So if a devaluation has been negotiated, its already most likely been negotiated. Or alternatively, if no devaluation has been negotiated, then there will not be a devaluation at least for the life of the contract.

I think its very negative for status customers personally as the CC points collecting is here to stay, and CC points collectors with status will be able to derive disproportionately more 'reward' for their loyalty with AC than just pure AC premium customers. Thus doing nothing to fix the flaws of the existing AC/AP arrangement that true AC FF's have come to despise.

RangerNS

I would tend to agree. An ownership position in some loyalty "Switzerland" owned by a consortium would guarantee that. So would a long term contract with the all powerful AC.

Certainly depends on how one views "rewards". As a FF with status, I get rewarded every time I fly, which is mostly for cash. The day of perks, the miles for flying, 100% bonus for being "loyal" and then also miles for using my CC.

When I fly on points, I'm rewarded with being able to use the points, with IKK making that even better, and day of, the perks of my my regular status levels.

There is zero reason to believe this new paradigm will affect my flying perks. Things may change, but things always change.

Combining call centers will implicitly fix a lot of the flaws that come from finger pointing and data control.

Will various scam fees be reduced? Increased? Whose to say?

Upthread someone mentioned the 8% changing. Maybe. But how many regular CC consumer had trouble getting flights (absent IKK) and then dropped a rewards card, citing that as a reason. If points are now a core component of CC marketing strategy, there has to be a way to use them. The CC consortium could well have demanded that goes to 10%. Whose to say?

canadiancow

UA deals with this by giving XN class (poor-man's IKK) to CC holders. This is the same class that elites have access to for Y rewards.

AC already somewhat does this by releasing more seats to Aeroplan than partners, but they could easily give their own CC holders access to more seats than non-CC holdes.