TD Bank Bets A Billion On Aeroplan’s Future Success
Bruce Parkinson, Open Jaw
Toronto-Dominion Bank is betting heavily on the success of Air Canada’s takeover of Aeroplan by committing to $1-billion worth of upfront payments and future expenses as the lead financial partner.
Air Canada and its partners – TD, CIBC and Visa Canada Corp. – won a battle in August to acquire Aeroplan from its parent company, Aimia Inc. The deal is set to close in JAN.
As the Globe and Mail reports(subscribers only), until yesterday, it was unclear which of the three financial partners would hold the most power following the purchase, because the deal’s intricate details took months to finalize. But it is clear now that TD is the dominant player, and the bank’s investment signals that it strongly believes the loyalty program will be a key profit driver for the next decade. Its contract with Air Canada will start in 2020 and last until 2030.
The investment caps off a major strategic shift for TD. Until recently, the bank did not have much of a profile in the credit card market, which became problematic as Canadians started buying more with plastic. To change course, TD made a splash by acquiring the Canadian card portfolio of Bank of America Corp. in 2011, then teamed up with Aimia to become Aeroplan’s lead credit card partner in 2014.
The new contract with Air Canada marks an even bigger investment in Aeroplan, with TD agreeing to spend a total of $1.03-billion. CIBC will take a back seat in the new arrangement. The bank will make two payments to Air Canada: $200-million to participate, as well as $92-million as a prepayment for future Aeroplan miles.
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.