May 11, 2017 / 10:48 AM / a year ago

Air Canada to launch own loyalty program in 2020

(Reuters) - Air Canada said it would launch its own loyalty program in 2020, replacing the current program, Aeroplan, sending its shares to their highest in nearly 10 years.

FILE PHOTO: An Air Canada Express flight descends over a boat to land at the Billy Bishop Toronto City Airport, also known as the Toronto Island Airport, in Toronto, May 12, 2015. REUTERS/Mark Blinch/File Photo

Shares of Canada’s biggest carrier closed up 10.5 percent at C$16.46, while those of Aimia Inc, which owns and operates Aeroplan, ended down 62.7 percent at C$3.33 on Thursday.

Aimia’s shares plunged as much as 65 percent to a record low of C$3.13 during regular trading.

The contract with Aimia will be in effect until June 29, 2020, and miles earned from Air Canada and Star Alliance flights will be credited to the new program after that, Air Canada said.

Aimia in its quarterly earnings report on Wednesday had said the “tenor” of its discussions with Air Canada indicated that the carrier would not renew its partnership with Aeroplan.

Air Canada, which started Aeroplan in 1984 as an incentive program for frequent flyers, spun it off in 2002.

“Aeroplan’s pending reformulation will inevitably see it lose its point of differentiation and has implications not only for members but also financial card partners whose contracts will still continue through 2024,” National Bank Financial analyst Adam Shine wrote.

Air Canada said it would provide greater detail at its Investor Day on Sept. 19 about the expected financial benefits and costs involved in the transition.

The move “greatly improves” Air Canada’s ability to manage its revenue, analysts at AltaCorp Capital said in a client note.

Air Canada said last week that it had not ruled out expanding its own discounted offering to take on the new ultra low-cost carrier planned by smaller rival WestJet Airlines.

Reporting by John Benny in Bengaluru; Additional reporting by Anya George Tharakan; Editing by Martina D'Couto and Sriraj Kalluvila

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