Canada’s biggest airline is selling a stake in its most valuable asset. No, not its planes — its points.
What happened: Air Canada is selling a 25% stake in its Aeroplan loyalty program in a $2.5 billion deal led by PE giant Blackstone and pension fund Caisse de dépôt et placement du Québec. Two other Canadian pensions are also in on the deal.
The airline, which is keeping operational control of Aeroplan, will use the cash to repay bonds and buy back shares.
AC will have the opportunity to repurchase its stake in five-to-eight years. The airline has previously sold off a stake in the program only to later repurchase total control.
By the numbers: The deal gives Aeroplan a valuation of over $10 billion. To put that into perspective, that’s about $1.4 billion more than Air Canada’s total estimated market cap, as of writing. Yes, that means the airline points program is more valuable than the actual airline.
Why it matters: Air Canada is not alone. For years, loyalty programs have kept carriers in the skies. These days, airlines are basically banks for loyalty points that just so happen to operate flights. Without the programs, no major North American airlines would make money.
Critics argue programs have been cheapened by this dependence on selling points to credit card companies, leading to devalued perks and overcrowded lounges.
Our take: Air Canada shares may have hit a five-year high on news of the sale, but other metrics aren’t looking too peachy. The airline cut its outlook, despite forecasting continued strong travel demand, because of rising costs. The fact that it’s now essentially mortgaging the core part of its business to steady the books doesn’t inspire long-term confidence.—QH
