Aeromexico Said to Consider IPO of Frequent-Flier Program

Grupo Aeromexico SAB (AEROMEX*), Mexico’s biggest airline, is considering an initial public offering of its frequent-flier rewards program, according to two people with direct knowledge of the talks.

While the carrier wants to expand the Premier Loyalty & Marketing SAPI business further before a share sale, Aeromexico has studied a listing, said the people, who asked not to be identified because the company hasn’t yet decided to go forward with the transaction and an IPO may still be years away.

Carlos Torres, a spokesman for Aeromexico, declined to comment on the Mexico City-based airline’s plans for its rewards business, known as PLM.

Brazil’s Gol Linhas Aereas Inteligentes SA took its loyalty plan Smiles SA public last year, setting off a 54 percent post-IPO rally as investors got the chance to value the business independently from its parent, which fell 30 percent. Sao Paulo-based Tam SA, which is now part of Latam Airlines Group SA, took its Multiplus SA rewards program public in 2010.

Tam has cited the IPO of Air Canada’s frequent-flier plan as the inspiration for Multiplus. Air Canada’s former parent, ACE Aviation Holdings Inc., sold shares in the loyalty program in 2005 and finished unloading the rest of its stake in 2008. The Montreal-based business is now known as Aimia Inc. (AIM)

Aimia’s Stake

Aimia bought an additional 20 percent stake in PLM in 2012, valuing it at $518 million, according to a statement at the time from Aeromexico. After the deal, the Canadian company held 49 percent of the rewards program, with the Mexican airline owning 51 percent.

Frequent-flier programs make money by selling miles to banks or hotels to give to customers, earning interest on the cash before awards are redeemed by customers. They can also sell points to carriers and retailers and then buy airline seats and other rewards at a discount, pocketing the difference.

Aeromexico fell 0.9 percent to 19.3 pesos at the close today in Mexico City, paring the stock’s year-to-date gain to 7.5 percent. That performance still outpaced Mexico’s benchmark IPC index, which has dropped 6.2 percent in 2014.

To contact the reporters on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net; Ed Dufner at edufner@bloomberg.net

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