Aeroplan operator Aimia expects Canadian business to cool off in 2015

MONTREAL – Aimia, operator of the Aeroplan loyalty program, expects its Canadian business will stabilize next year as the strong growth that followed last January’s switch in credit card partners levels off.

The bank added 300,000 new Aeroplan cardholders in the past nine months to its base of 1.2 million credit card customers. That number is expected to return to normal growth levels of about 30,000 per quarter.

Consequently, Aimia expects the number of accumulated miles in Canada — which accounts for more than half of the company’s global business — should drop from the 14.8 per cent growth in the third quarter to mid to high single digits in 2015.

“So that should mean our overall growth next year is actually quite attractive,” CEO Rupert Duchesne said in an interview.

Aimia’s (TSX:AIM) shares lost more than nine per cent Thursday on the Toronto Stock Exchange, down $1.52 at $15.30, after it swung to a $24.1-million loss in the third quarter.

Montreal-based Aimia reported Wednesday after markets closed that its net loss amounted to 17 cents per share and compared with net earnings of $2.5 million or less than a penny per share in the same prior-year period.

Total revenue in the three months ended Sept. 30, helped by a favourable currency impact, rose 8.7 per cent to $543.4 million from $499.7 million.

Adjusted net earnings of 18 cents per share were down 35.7 per cent from 28 cents in year-earlier quarter.

Analysts on average had expected adjusted earnings of 20 cents per share, as well as higher revenue of $565.5 million, according to figures compiled by Thomson Reuters.

They said the company’s initial 2015 guidance suggests some challenges, especially in its European business where gross billings are slated to decline.

Aimia said gross billings were up 9.8 per cent at $633.2 million in the third quarter due to a strong performance in Canada and a favourable currency impact. On a constant currency basis, gross billings were up 5.8 per cent. Canadian gross billings excluding promotions were up 8.7 per cent.

The company is feeling the effects of the ongoing economic challenges in Europe, where its main grocery partner, Sainsbury, is locked in a British price war and it is seeking a new grocery partner in Italy.

Duchesne said Aimia expects to learn in the coming days the impact on its operations from the recent decision by Visa and MasterCard to reduce the fees they charge Canadian merchants for purchases made on credit cards.

The voluntary agreements, submitted to the government separately by the two companies, will result in an average effective card “swipe” rate of 1.5 per cent for the next five years, a 10 per cent rate cut.

He said the company, which shares in the reduction according to confidential agreements, will negotiate with banking partners to minimize the impact.

“Their interests and ours are aligned on this because these are very important financial products and nobody wants to slay the golden goose here.”

The 10 per cent reduction was lower than the industry had feared. Australia cut its rates in half but merchants pocketed the savings instead of passing them on to consumers as is being demanded by Ottawa.

Meanwhile, Duchesne said Air Canada’s aggressive international expansion plans and growth of its low-cost leisure subsidiary Rouge is good for Aeroplan and its members.

“The more they grow to leisure destinations where our members want to redeem, the better it is for us and the better it is for them because we can help get some of those new destinations off the ground,” he added.

Air Canada (TSX:AC) recently said it plans to increase overall capacity by nine to 10 per cent next year following a projected increase this year of seven to eight per cent.

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