Aimia Announces Groundbreaking Transformation of Aeroplan Program; Signs New
10-year Financial Credit Card Agreement to Commence in 2014
MONTREAL, June 27, 2013 /CNW Telbec/ - Aimia (TSX: AIM) announced
groundbreaking changes to the Aeroplan program today. The transformation,
which is expected to reinforce Aeroplan's position as the leading premium
coalition loyalty program in Canada, was announced in conjunction with a
framework for an enhanced ten year financial credit card agreement to become
effective from January 1, 2014.
"Today's announcement is about launching an outstanding loyalty experience
that puts members first and extends Aeroplan's position in the Canadian
loyalty market" said Rupert Duchesne, Group Chief Executive of Aimia. "We have
built an Aeroplan program that provides high earning members with the rewards
and recognition that they deserve and desire, rewarding them for the miles
they earn - whether it is with our airline, travel, retail or financial card
partners - while maintaining the fantastic core value that benefits all of our
The changes announced today are expected to redefine the Canadian loyalty
space, and reinforce Aeroplan's market leadership in Canada over the next
decade by providing significantly improved benefits to members through major
new investments in the Aeroplan value proposition. The changes create a
paradigm shift for global travel-based loyalty programs, extending access to
an unrivalled loyalty experience to both top accumulating financial
cardholders and frequent flyers. Aimia expects these changes to drive
improved growth and strong free cash flow generation over the longer term for
Aeroplan Program Enhancements
In addition to the market leading value of Aeroplan's ClassicFlight rewards
which will continue to give members access at low fixed mileage levels to Star
Alliance carriers and to 8% of seat capacity on Air Canada routes, members
will also start enjoying a range of important and innovative program
enhancements as of January 1, 2014. These will include:
-- The launch of Distinction, a new tiered recognition program
that rewards top accumulating members with preferential mileage
levels for redemption. Distinction is a unique member
recognition program independent from Air Canada's Altitude
program. Distinction levels are achieved based on total miles
earned across all coalition partners including airline, travel,
retail and financial card partners;
-- New Market Fare Flight Rewards to replace ClassicPlus Flight
Rewards; offering members significantly improved value, with
all members able to take advantage of mileage levels reduced by
up to 20%, and Distinction members enjoying reductions of up to
-- The cancellation of the seven-year mileage redemption policy,
with miles no longer expiring for members active in the program
"Aeroplan has been driving innovation in customer loyalty since its inception
in 1984 and we're proud of all we've achieved. Our members' feedback has
inspired the transformative changes that we will be bringing to the program in
2014. It is this commitment to delivering the best customer loyalty program in
Canada that will not only foster continued member engagement, but we are
confident it will also attract new members to the program," added Duchesne.
"This is also about getting the right economics in place for the future. New
investment should deliver growth, ensure alignment for coalition anchor
partners like Air Canada and deliver significant value for our shareholders
over the longer term."
A Framework for a Financial Credit Card Partner for the Next Decade
Over the last 18 months, Aimia has run a renewal process for Aeroplan's
financial card portfolio to define an enhanced partnership aimed at delivering
growth over the next decade.
The agreement announced today sets out a framework for an enhanced financial
credit card relationship. The provisions of the new agreement will help fund
the enhancements to the Aeroplan program being announced today.
TD Bank Group ("TD") will become Aeroplan's new financial credit card partner
for the 10-year period effective from January 1, 2014, replacing CIBC, unless
CIBC chooses to exercise its contractual right to match the terms of the
agreement which expires on or before August 9, 2013.
Aeroplan's current agreement with CIBC will continue until December 31, 2013.
Members can continue to earn miles as usual on their CIBC Aerogold co-branded
credit cards and take advantage of any Aeroplan promotions related to these
cards for the remainder of 2013.
Negotiations with American Express are proceeding in parallel and are ongoing.
"We entered into this process with a clear objective - to grow the portfolio
with a bank who is committed to building the Aeroplan program with us. The
process we have run has confirmed the attractiveness of the Aeroplan
portfolio. Under the terms of the new agreement, our financial card partner
will contribute to the funding and support required to transform the program
and drive increased engagement among premium Canadian consumers," added
Duchesne. "Recognizing that more than half of Aeroplan Miles accumulated in
2012 were earned through financial card spend, a successful credit card
partnership is an important element of our longer term evolution."
Features of New Credit Card Offerings
New Aeroplan co-branded financial credit cards, to be launched in 2014, will
provide cardholders with more flexible options, better earn rates and new
recognition features; all of which is in addition to the benefits to be added
under the Distinction program.
A new enhanced premium card targeted at high net worth Canadian households,
with a higher earn rate, will be offered, in addition to premium and
mid-market credit cards.
The launch of two additional co-branded targeted credit cards is expected to
-- one aimed at customers travelling frequently between Canada and
the United States; and
-- a second specifically for Canadian small business owners, which
will allow small business owners to choose additional features
and benefits specifically designed to their needs.
Both the enhanced premium and premium cards will include a suite of unique Air
Canada features and benefits.
In a number of instances during 2014, annual fees will be waived and bonus
miles awarded to welcome members to the new cards.
Terms of a New Financial Credit Card Agreement
The terms of a new 10-year financial credit card framework agreement will
-- a more than 15% increase in price per mile to align to market
-- a commitment to minimum miles purchases for the first three
-- a joint marketing spend of around $140 million over four years
to support new cards and new program features;
-- use of Aeroplan bonus miles to drive future member acquisition
and longer term growth in Gross Billings; and
-- more comprehensive collaboration around data and customer
In addition, the agreement provides for
-- a $100 million upfront contribution payable in 2014 to Aimia to
help fund program enhancements; and
-- an $80 million contractual break fee payable in 2013 by Aimia
to TD in the event CIBC exercises its contractual right to
match on or before August 9, 2013.
Should the agreement with TD become effective, Gross Billings growth could be
dampened through the transition period to a new bank, however the miles
purchase commitment would guarantee a value equivalent to the Gross Margin
that would have been generated on approximately 65% of CIBC's 2012 Gross
Billings in 2014, increasing to a value equivalent to over 90% in 2015 and
2016. When combined with the upfront program contribution of $100 million and
tax benefits to be realized, this should also ensure solid cash flow
generation to maintain the dividend through any transition in 2014.
Higher Gross Billings, combined with new contract economics, are expected to
offset increased program costs, and generate improving cash flow returns
2013 Breakage Adjustments to Reflect Aeroplan Program Enhancements
While enhanced Aeroplan benefits will only be launched on January 1, 2014,
Aimia is making a significant adjustment to its long term breakage rate
estimate, effective immediately, in accordance with IFRS and to align with our
current expectations for an increase in member engagement and the cancellation
of the seven-year mileage redemption policy.
As a result, the estimate of the breakage rate for the Aeroplan program will
decline from 18% to approximately 11%. 2013 Adjusted EBITDA will be adjusted
downwards by approximately $50 million to reflect the change in the breakage
The breakage rate change will also result in a non-cash, after-tax adjustment
to net earnings of approximately $520 million. Aimia also expects to realize
the benefit of a taxable loss from this breakage adjustment, which will
include a substantial loss carryback to be received in 2014. In addition,
Aimia does not expect to pay cash taxes in Canada for the remainder of 2013 or
for the next few years.
In line with the financial adjustments described above, Aimia is today
revising its previously provided 2013 annual guidance with respect to Adjusted
EBITDA, Free Cash Flow before dividends and Income Taxes.
The Corporation had previously guided 2013 Adjusted EBITDA to be approximately
$425 million, which is now being revised to be approximately $375 million. The
revision is principally due to the $50 million reduction to Adjusted EBITDA,
reflecting the full year impact of the lower breakage rate described above.
In the event that CIBC exercises its contractual right to match and is
confirmed as the program's financial credit card partner, Adjusted EBITDA
would be revised downwards by a further $80 million due to the contractual
break fee which would become payable to TD.
The Corporation had previously guided 2013 Free Cash Flow before dividends to
be between $255 million and $275 million. While our current view on free
cash flow remains unchanged, in the event that CIBC exercises its contractual
right to match and is confirmed as the program's financial credit card
partner, Free Cash Flow before dividends is expected to be revised downwards
by $80 million due to the contractual break fee which would become payable to
While Aimia's 2013 tax rate is expected to approximate 27% in Canada, it now
expects that it will not be required to pay any further cash taxes in 2013 as
a result of the realization of tax losses from adjustment to net earnings of
approximately $520 million described above.
A number of other factors, including additional marketing and transition costs
incurred in the second half of 2013 to ensure the successful introduction of a
new partner, and the enhanced Aeroplan program could result in the
Corporation's actual 2013 results differing from its revised 2013 annual
guidance for Adjusted EBITDA and Free Cash flow before dividends. Aimia is
unable to reasonably assess these factors until the identity of its credit
card partner is confirmed on or prior to August 9, 2013 but expects to be in a
position to provide more precision with respect to the revised 2013 guidance
ranges following confirmation of the identity of its credit card partner.
The above guidance should be read in conjunction with the more detailed
guidance provided in earnings releases dated February 27, 2013 and May 13,
2013. It does not include the one-time benefit in 2013 of $25.7 million
(£16.7 million) to Adjusted EBITDA and a one-time cash outflow of $7.0
million (£4.5 million) expected as a result of the UK Supreme Court's ruling
in Aimia's favour relating to Value Added Tax (VAT) litigation, as announced
on June 20, 2013. The above guidance excludes the effects of fluctuations in
currency exchange rates. In addition, Aimia made a number of economic and
market assumptions in preparing its 2013 forecasts, including assumptions
regarding the performance of the economies in which the Corporation operates
and market competition and tax laws applicable to the Corporation's
operations. The Corporation cautions that the assumptions used to prepare the
forecasts for 2013, although reasonable at the time they were made, may prove
to be incorrect or inaccurate. In addition, the above forecasts do not
reflect the potential impact of any non-recurring or other special items or of
any new material commercial agreements, dispositions, mergers, acquisitions,
other business combinations or other transactions that may be announced or
that may occur after June 27, 2013. The financial impact of these transactions
and non-recurring and other special items can be complex and depends on the
facts particular to each of them. We therefore cannot describe the expected
impact in a meaningful way or in the same way we present known risks affecting
our business. Accordingly, our actual results could differ materially from our
expectations as set forth in this news release. The outlook provided
constitutes forward-looking statements within the meaning of applicable
securities laws and should be read in conjunction with the "Caution Concerning
Forward-Looking Statements" section.
Investor and Analyst Call
Aimia will host a conference call to discuss the announcement at 8:00 a.m. ET
today, Thursday, June 27, 2013. The call can be accessed by dialing
1-888-231-8191 or 647-427-7450 for the Toronto area. The call will be
simultaneously audio webcast at:
Further Information about Aeroplan Program Enhancements
For more information on the program enhancements, read the press release and
FAQs at www.aeroplan.com/new. Consumer questions can also be addressed on
Twitter (@Aeroplan) or Facebook (www.facebook.com/Aeroplan) or by contacting
the Aeroplan Contact Centre at: 1-800-361-5373.
Use of Non-GAAP Financial Information
In order to provide a better understanding of the results, the following
indicators are used:
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
EBITDA adjusted for certain factors particular to the business, such as
changes in deferred revenue and Future Redemption Costs ("Adjusted EBITDA"),
is used by management to evaluate performance, and to measure compliance with
debt covenants. Management believes Adjusted EBITDA assists investors in
comparing the Corporation's performance on a consistent basis without regard
to depreciation and amortization and impairment charges, which are non-cash in
nature and can vary significantly depending on accounting methods and
non-operating factors such as historical cost. Adjusted EBITDA also includes
distributions and dividends received from equity-accounted investments.
Adjusted EBITDA is not a measurement based on GAAP, is not considered an
alternative to operating income or net income in measuring performance, and is
not comparable to similar measures used by other issuers. For a reconciliation
to GAAP, please refer to the Summary of Consolidated Operating Results and
Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Earnings and Free Cash
Flow included with the financial results dated February 27, 2013 and May 13,
2013. Adjusted EBITDA should not be used as an exclusive measure of cash flow
because it does not account for the impact of working capital growth, capital
expenditures, debt repayments and other sources and uses of cash, which are
disclosed in the statements of cash flows.
Adjusted Net Earnings
Adjusted Net Earnings provides a measurement of profitability calculated on a
basis consistent with Adjusted EBITDA. Net earnings attributable to equity
holders of the Corporation are adjusted to exclude Amortization of
Accumulation Partners' contracts, customer relationships and technology, share
of net earnings (loss) of equity accounted investments and impairment charges.
Adjusted Net Earnings includes the Change in deferred revenue and Change in
Future Redemption Costs, net of the income tax effect and non-controlling
interest effect (where applicable) on these items at an entity level basis.
Adjusted Net Earnings also includes distributions and dividends received from
Adjusted Net Earnings is not a measurement based on GAAP, is not considered an
alternative to net earnings in measuring profitability, and is not comparable
to similar measures used by other issuers. For a reconciliation to GAAP,
please refer to the Summary of Consolidated Operating Results and
Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Earnings and Free Cash
Flow included with the financial results dated February 27, 2013 and May 13,
Standardized Free Cash Flow ("Free Cash Flow")
Free Cash Flow is a non-GAAP measure recommended by the CICA in order to
provide a consistent and comparable measurement of free cash flow across
entities of cash generated from operations and is used as an indicator of
financial strength and performance.
Free Cash Flow is defined as cash flows from operating activities, as reported
in accordance with GAAP, less adjustments for:
(a)total capital expenditures as reported in accordance with GAAP;
(b)dividends, when stipulated, unless deducted in arriving at cash
flows from operating activities.
For a reconciliation to cash flows from operations please refer to the Summary
of Consolidated Operating Results and Reconciliation of EBITDA, Adjusted
EBITDA, Adjusted Net Earnings and Free Cash Flow included with the financial
results dated February 27, 2013 and May 13, 2013.
EBITDA and Free Cash Flow are non-GAAP measurements recommended by the CICA in
accordance with the recommendations provided in their October 2008
publication, Improved Communications with Non-GAAP Financial Measures -
General Principles and Guidance for Reporting EBITDA and Free Cash Flow.
Because exchange rates are an important factor in understanding period to
period comparisons, the presentation of various financial metrics on a
constant currency basis or after giving effect to foreign exchange
translation, in addition to the reported metrics, helps improve the ability to
understand operating results and evaluate performance in comparison to prior
periods. Constant currency information compares results between periods as if
exchange rates had remained constant over the periods. Constant currency
isderived bycalculatingcurrent-year results usingprior-year foreign
currency exchange rates. Results calculated on a constant currency basis
should be considered in addition to, not as a substitute for, results reported
in accordance with GAAP and may not be comparable to similarly titled measures
used by other companies.
Caution Concerning Forward Looking Statements
Forward-looking statements are included in this news release. These
forward-looking statements are identified by the use of terms and phrases such
as "anticipate", "believe", "could", "estimate", "expect", "intend", "may",
"plan", "predict", "project", "will", "would", and "should" and similar terms
and phrases, including references to assumptions. Such statements may involve
but are not limited to comments with respect to strategies, expectations,
planned operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and are
subject to important risks and uncertainties. Any forecasts, predictions or
forward-looking statements cannot be relied upon due to, among other things,
changing external events and general uncertainties of the business and its
corporate structure. Results indicated in forward-looking statements may
differ materially from actual results for a number of reasons, including
without limitation, dependency on top accumulation partners and clients, the
effective implementation of Aeroplan program enhancements and a new financial
card partnership and associated cardholder migration, conflicts of interest,
greater than expected redemptions for rewards, regulatory matters, retail
market/economic conditions, industry competition, Air Canada liquidity issues,
Air Canada or travel industry disruptions, airline industry changes and
increased airline costs, supply and capacity costs, unfunded future redemption
costs, failure to safeguard databases and consumer privacy, changes to
coalition loyalty programs, seasonal nature of the business, other factors and
prior performance, foreign operations, legal proceedings, reliance on key
personnel, labour relations, pension liability, technological disruptions and
inability to use third party software, failure to protect intellectual
property rights, interest rate and currency fluctuations, leverage and
restrictive covenants in current and future indebtedness, uncertainty of
dividend payments, managing growth, credit ratings, as well as the other
factors identified in this news release and throughout Aimia's public
disclosure record on file with the Canadian securities regulatory authorities.
The forward-looking statements contained herein represent Aimia's expectations
as of June 27, 2013, and are subject to change after such date. However, Aimia
disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise,
except as required under applicable securities regulations.
Aeroplan, Canada's premier coalition loyalty program, is owned by Aimia Inc.,
a global leader in loyalty management. Aeroplan's millions of members earn
Aeroplan Miles with its growing network of over 75 world-class partners,
representing more than 150 brands in the financial, retail, and travel sectors.
In 2012, approximately 2.3 million rewards were issued to members including
more than 1.6 million flights on Air Canada and Star Alliance carriers which
offer travel to more than 1,000 destinations worldwide. In addition to
flights, members also have access to over 1,000 exciting specialty,
merchandise, hotel, car rental and experiential rewards.
Aimia Inc.("Aimia" or the "Corporation") isaglobal leader in loyalty
management.Employing more than 4,000 people in over 20 countries
worldwide,Aimiaoffers clients, partners and members proven expertise in
launching and managing coalition loyalty programs, delivering proprietary
loyalty services, creating value through loyalty analytics and driving
innovation in the emerging digital, mobile and social communications spaces.
Aimiaowns and operates Aeroplan,Canada'spremier coalition loyalty
program andNectar, theUnited Kingdom'slargest coalition loyalty program.
In addition,Aimia owns stakes in Air Miles Middle East, Nectar
Italia,Mexico'sleading coalition loyalty program Club
Premier,Brazil'sPrismah Fidelidade, and i2c, a joint venture
withSainsbury'soffering insight and data analytics services in theUKto
retailers and suppliers.Aimiaalso holds a minority position in Cardlytics,
a US-based private company operating in transaction-driven marketing for
electronic banking.Aimiais listed on theToronto Stock Exchange(TSX:
AIM). For more information, visit us atwww.aimia.com.
Media JoAnne Hayes 416-352-3706 firstname.lastname@example.org Analysts Karen Keyes
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