August 12, 2010 / 5:53 PM / 8 years ago

UPDATE 1-Groupe Aeroplan Q2 profit beats market, shares rise

* Q2 adj EPS C$0.29 vs est. C$0.25

* Sees 2010 gross billings between C$2-$2.1 bln

* Shares rise as much as 9 pct (Adds details, analysts’ comments, stock movement)

By Koustav Samanta

Aug 12 (Reuters) - Canada’s Groupe Aeroplan AER.TO, which operates Air Canada’s ACa.TO frequent flyer program, posted a higher-than-expected quarterly profit, helped by a jump in billings, sending its shares up 9 percent on Thursday.

The company remains optimistic about its prospects into 2011, boosted by its recent expansion into India and South America and its imminent investment in AeroMexico’s frequent flyer program, Chief Executive Rupert Duchesne said.

Groupe Aeroplan-owned Carlson Marketing has been working with India’s Kingfisher Airlines KING.BO over the last year to develop its King Club program.

Also, in April, Groupe Aeroplan had said it will buy a minority position in AeroMexico’s frequent flyer program, Club Premier, to expand into the Latin American market. [ID:nSGE63P0QK]

The company said it expects gross billings in 2010 to be in the range of C$2-C$2.1 billion ($1.91-2.01 billion). Consolidated gross billings for 2009 amounted to C$1.36 billion.

Groupe Aeroplan said price resetting with Air Canada was completed and a billing dispute with the airline resolved with no material impact on average cost of rewards per Aeroplan mile redeemed going forward.

Number of miles issued at Aeroplan Canada during the second quarter was 20.5 billion, up slightly from the 20.1 billion a year ago. However, the number of total miles redeemed at Aeroplan Canada fell 11.8 percent to 15 billion.

“In our view, a reduction in miles redeemed is worrisome at a time when Aeroplan needs to be reinforcing the program’s value proposition in the eyes of consumers, given the increase in loyalty program competition,” Canaccord Genuity analyst Candice Williams wrote in a note.

Groupe Aeroplan competes with Advantex Marketing International ADX.V and LoyaltyOne, owned by Alliance Data Systems Corp (ADS.N).

“Until we witness a more sustained growth in both miles issued and redeemed, we are likely to remain cautious on the name,” Williams added.

For the second quarter ended June 30, the company posted adjusted earnings of 29 Canadian cents per share, while analysts on average had expected 25 Canadian cents per share, according to Thomson Reuters I/B/E/S. [ID:nSGE67B03O]

“Solid results support our view and should mitigate investor concerns,” Dundee Capital Markets analyst Carolyn Dennis said in a note to clients.

Shares of the Montreal, Quebec-based company, which have fallen 13 percent in the past three months, were up 7 percent at C$10.21 in afternoon trade on the Toronto Stock Exchange. They touched a high of $10.40 earlier in the day. ($1=1.046 Canadian Dollar) (Reporting by Archana Shankar and Koustav Samanta in Bangalore; Editing by Valerie Lee, Editing by Unnikrishnan Nair)

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