MONTREAL - Air Canada says it is launching a search for a co-branded credit card partner for its new loyalty program.
The Montreal-based airline says it will be inviting key financial institutions to participate in a request for proposals to join the launch of the program on July 1, 2020.
Air Canada (TSX:AC) served notice in May that it does not plan to renew its 30-plus year partnership with Aeroplan parent Aimia (TSX:AIM) when the current contract ends. However, it will continue to make Air Canada flights available for Aeroplan redemptions, as it does for other rewards programs.
Operating its own loyalty program is expected to deliver a pre-tax net present value of $2 billion to $2.5 billion over 15 years.
The move was announced Tuesday ahead of the company's annual investor day.
Air Canada CEO Calin Rovinescu told analysts that the move is in line with other airlines that operate their own loyalty program.
Aeroplan used to be a division of Air Canada before it was spun off during an IPO in 2008.
Rovinescu said the move will generate financial returns and improve the value proposition for credit card users and partners.
With international travel the most important reward, Air Canada said it can deliver what loyalty card members want through its extensive global network.
“This makes us a highly desirable partner,” Rovinescu said.
Air Canada also introduced new, financial targets between 2018 and 2020, including $2 billion to $3 billion in cumulative free cash flow.
“With several years of record results and profitability...we're confident in saying that we are on the right trajectory towards a sustainably profitable and investable company with an improved cost structure, improved debt rating, strong free cash flow and great prospects for the future,” Rovinescu said.
He also pointed to the 3,000 per cent increase in Air Canada's share price since early 2009.
Doug Taylor of Canaccord Genuity says the loyalty card returns imply another $7 to $9 per share.
“Air Canada remains our favoured way to play the Canadian airlines as we believe the company's free cash flow ramp and its focus on deleveraging and margin expansion over the coming years will lead to multiple expansion and attract new investors,” he wrote in a report.
Air Canada is also providing travel updates for customers who may be impacted by hurricane Maria, which is on track to hit many of the same areas of the Caribbean that were devastated by hurricane Irma. Updates can be found on AirCanada.com.