Aeroplan profit falls as reward costs rise

Thu Aug 14, 2008 4:24pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Second-quarter profit at Groupe Aeroplan Inc fell 36 percent as its cost of rewards and other expenses rose, the consumer loyalty program operator said on Thursday.

Aeroplan, best known as Air Canada's frequent flier program operator, earned C$31.5 million ($29.7 million), or 16 Canadian cents a share, down from year-earlier C$49.5 million, or 25 Canadian cents a share.

Despite the drop in earnings, shares of the Montreal-based company rose 10 Canadian cents to C$13.30, on volume of 6.4 million shares, making it the third most heavily traded issue on the Toronto Stock Exchange.

Neil Linsdell, analyst at Versant Partners, attributed the gain to optimism over Aeroplan's new partnerships.

Aeroplan said it has signed up supermarket chain Sobeys, a unit of Empire Co Ltd, as a reward partner, allowing customers to earn Aeroplan miles on their grocery purchases.

And, earlier this month, it joined Expedia in Britain, to allow some members to earn points when booking flights, hotels, car rentals and full travel packages.

However, Aeroplan won't likely see the benefits of the partnerships in the next 18 to 24 months, said Linsdell.

Aeroplan's results were in line with expectations, but the short-term outlook may be affected by a sluggish Canadian economy, which can hit consumer spending and airline travel, said Linsdell.   Continued...