While it comes as no surprise after their split from Aeroplan and their impending loyalty program relaunch, Air Canada has made it official: They’re seeking a reward credit card partner for their new program. The as-yet unveiled loyalty program, set to debut in 2020, will prove lucrative for the airline as most analysts think keen interest will result in competition for the partnership, if not an outright bidding war. Which issuer will wind up in the chair when the music stops? Stay tuned.
By Rick Ferguson
Air Canada announced last week that the airline would initiate an official Request for Proposal (RFP) from all interested parties who want to take a crack at issuing the official credit card for the new loyalty program. Air Canada will sell program miles to the issuer – a practice that has become so lucrative for airlines that in some cases they make more money issuing loyalty program miles than they do flying the planes – and the issuer will in turn reward credit cardholders with miles for their spend on the card. The license to print money puts the net present value of the new program of between C$2 billion and C$2.5 billion over 15 years.
For his part, Air Canada CEO Calin Rovinescu seems bullish on his airline’s prospects for landing a top-tier issuer. Money quote courtesy of the Toronto Star:
“Rovinescu said the move will generate financial returns and improve the value proposition for credit card users and partners. With international travel the most important reward, Air Canada said it can deliver what loyalty card members want through its extensive global network. ‘This makes us a highly desirable partner,’ Rovinescu said.”
So which banks will step up to the plate? According to loyalty consultant Steve Allmen, interest will be high across the board. Money quote from Allmen, courtesy of Skift:
“’I believe all five banks are going to look at it, but whether all five banks respond is another story,’ Allmen said in a telephone interview, citing the possibility that existing contracts might disqualify one or more banks. For example, Royal Bank of Canada, the country’s second-largest lender, already has a Mastercard relationship with Air Canada rival WestJet Airlines Ltd. Allen also anticipates a focus on a lender with a stronger Quebec presence such as Desjardins Group or Montreal-based National Bank of Canada. Some U.S. banks may be interested in a co-branding agreement, he said. And Air Canada may not have to choose just one. ‘If Air Canada can do it right, they can actually launch with multiple partners,’ Allmen said. ‘They don’t have to be with one partner.’”
And wither Aeroplan, Air Canada’s jilted, soon-to-be-divorced spouse. Parent company Aimia has announced its intention to maintain Aeroplan as a multi-partner loyalty coalition, although the company expects the majority of its redemptions to remain centered on air travel. The company continues to shed itself of both employees and assets as it reinvents itself; it recently sold its Air Miles Trademarks, license and royalty agreements for Canada for about C$53.75 million.
While all attention is focused on Air Canada, it may, in fact, be a good time to snap up some of Aimia’s bargain-basement stock. Money quote from Seeking Alpha:
“Aimia presents a very attractive opportunity to acquire very unique and valuable assets at firesale prices. Widespread fear and uncertainty over Air Canada's partnership non-renewal has gripped Aimia investors. Aimia possess assets, besides Aeroplan, worth in excess of its enterprise value. There exist tremendous safety and upside in Aimia's assets. If investors in Aimia can look three years out and beyond, common shares in Aimia yield tremendous deep value. Blood is flowing in the streets and now is time to be greedy!”
You heard it here first, folks.
Rick Ferguson is Editor in Chief of the Wise Marketer Group and is a Certified Loyalty Marketing Professional (CLMP).