Aimia Inc. bondholders are betting the loyalty-programme company can ride out the short-term turbulence caused by the loss of its key partner. Shareholders aren’t so sure.
The Montreal-based company’s C$250 million ($197 million) of May 2019 bonds have bounced back from their initial drop after Air Canada, the country’s largest airline, said in May that it will withdraw from Aimia’s Aeroplan loyalty programme and start its own rewards plan in 2020.
As the company gets ready to report earnings, Aimia shares
remain down 83 percent since the announcement.
“Initially it was a shock and there is always an overreaction to any kind of shock,” Neil Linsdell, an analyst at Industrial Alliance Securities, said. The company is unlikely to see significant redemptions or other partners moving until the second half of 2019, he said.
Aimia is searching for a new partner for its travel rewards programme to fill the hole that will be left when Air Canada’s contract ends. It has changed some management roles and reduced the size of its board.
Bondholders will see their debt mature before the Air Canada contract expires. Shareholders had their dividend eliminated.
It’s too early to expect any details on a new partner with the second quarter results, Linsdell said. The company will likely wait until it’s near the end of the Air Canada contract to make an announcement to avoid any competition between the airline and a new partner, he said.
“Undoubtedly everyone wants to know what the plan is going to be for the air travel rewards partnership,” he said.