Blackstone Inc. is nearing a deal to pick up a minority stake in Aeroplan, Air Canada’s travel loyalty program, for about $2 billion, according to people familiar with the matter.
The deal could be announced as early as this week, said the people, who asked not to be identified discussing confidential information. Some Canadian funds are set to invest in Aeroplan alongside Blackstone at the same time, the people said.
Like its peers, Air Canada has been hard hit by the surge in jet-fuel prices due to the Iran war. In recent months, it has added flights to Europe and Asia to compensate for the drop in flying to the US, due to geopolitical tensions.
Still, the firm is expected to report an 85% drop in adjusted net profit from the prior year when it releases earnings on Wednesday, according to Bloomberg Intelligence estimates.
The move echoes similar fundraising efforts during the pandemic. When travel came to a halt, airlines turned to every financing source they could find — even their previously untouched frequent-flier programs, considered crown jewels of their businesses.
United Airlines Holdings Inc., Delta Air Lines Inc. and American Airlines Group Inc. raised more than $25 billion through debt deals backed by their traveler loyalty programs.
The current stake sale to Blackstone would mark the second time in a little more than 20 years that Air Canada brought outside investors into Aeroplan, which is one of the best-known loyalty programs in its home country. The first occurred as part of a broader restructuring of the airline after it went into bankruptcy protection in 2003. Aeroplan was listed in 2005 as a separate public company, which later added other loyalty businesses and was renamed Aimia Inc.
The relationship between Aimia and Air Canada eventually soured, and investors were stunned in 2017 when Air Canada announced it wouldn’t renew the contract and would start its own competing loyalty program. Aimia shares plunged 63% in a single day. Facing the loss of its most valuable asset, the company agreed the following year to sell Aeroplan back to Air Canada for C$450 million ($323 million) in cash, plus the assumption of certain liabilities.
Credit card issuers such as American Express Co. and Toronto-Dominion Bank pay Aeroplan for the right to offer its loyalty points to customers, who exchange them for plane tickets or other perks. Both institutions promote Aeroplan-branded cards to lure higher-spending consumers.
Aeroplan has more than 10 million members worldwide who can earn or redeem points on Air Canada’s airline partner network of more than 50 airlines and through its hotel and car rental partners.
Blackstone is providing the equity investment from its credit and insurance business, the people said. The $1.3 trillion asset manager has referred to these types of deals as corporate solutions, and they are “a really new avenue,” Blackstone Chief Financial Officer Michael Chae said in a call with analysts following second-quarter results last month.
“There’s a substantial opportunity for investment-grade rated corporates where we’ve become a trusted solutions provider,” Chae said.
In July, Blackstone’s credit and insurance business led a $5.34 billion investment in Williams Cos. power plants alongside Apollo Global Management Inc. and KKR & Co. Inc. It also backed Rogers Communications Inc.’s wireless network infrastructure with a C$7 billion ($5.02 billion) deal last year.
In addition, Blackstone’s credit and insurance business provided EQT Corp. with $3.5 billion of cash in exchange for a non-controlling common equity interest in a new joint venture for infrastructure assets.
—With assistance from Siddharth Philip.
