Air Canada sells 25% of Aeroplan loyalty program to Blackstone and Canadian investors for $2.5B
Private equity firm and other investors will receive a 25% stake of the programme, valued at $10 billion. Air Canada has agreed to sell a stake in its Aeroplan loyalty programme to the private equity firm Blackstone and a consortium of Canadian funds, including pensions. The investors will pay $2.5 billion for a 25% stake in the programme, valuing it at $10 billion. Air Canada will use the proceeds to reduce its debt and buy back shares. Air Canada will have the option to repurchase shares in five to eight years at a price that reflects a total rate of return of 6.5% for the outside investors. Shares of Air Canada spiked more than 5% in trading following a Bloomberg report of the potential deal on Tuesday, followed by another large gain on Wednesday following the announcement and earnings report that topped investor expectations. It's not Air Canada's first time using its frequent flyer scheme as a cushion for fresh capital, though a deal like this is relatively rare among North American airlines. Aeroplan was previously spun off into a separate company in 2005 as part of Air Canada's 2003 bankruptcy. The carrier repurchased the programme in 2019. In 2014, Virgin Australia sold a 35% stake in its Velocity frequent flyer programme to Affinity Equity Partners for A$336 million. It bought back the stake in 2019 for A$700 million. And as the COVID-19 pandemic hit airlines in 2020, many carriers used their loyalty programmes and credit card business as collateral to shore up liquidity. "Aeroplan remains a core part of Air Canada’s commercial strategy, and we continue to retain full control of the programme’s strategy, operations, partnerships, and member experience, while monetising a portion of its underlying value," says departing chief executive Michael Rousseau.