Aeroplan transition to be seamless: TD
The transfer of Aeroplan-branded credit card-holders to TD Bank Group from Canadian Imperial Bank of Commerce will be “seamless,” without any interruption in Aeroplan miles earned by customers, TD Bank Group said yesterday.
TD Bank, CIBC, and rewards company Aimia Inc. reached a compromise on the Aeroplan loyalty credit card program that handles billions of dollars worth of transactions annually.
“From our point of view, this is a very customer-friendly deal,” TD chief executive Ed Clark told analysts after the announcement.
Clark said TD Bank will be the primary issuer of Aeroplan Visa credit cards on Jan. 1, 2014.
CIBC will continue to provide services to those card-holders until they’re transferred.
The 10-year deal will give the bank a “solid” base of earnings, Clark added.
“Instead of going out and having to win every customer, you start off with more than 500,000 customers,” he noted.
TD said the roughly 550,000 card-holder accounts it’s getting from CIBC represent about $3 billion in card balances and $20 billion in annual retail spending.
The bank said it will be easier to earn flights under the program and it will introduce five new credit cards, including a TD Aeroplan high net-worth card, a small business card, and a TD Aeroplan U.S. dollar card.
Aimia chief executive Rupert Duchesne said the deal is good for all three parties.
“Being with two leading credit card providers, and what that will do to drive immediate growth for us, is very encouraging,” Duchesne said in a conference call.
“It will also take out any uncertainty for credit card-holders,” he added. “And that is a great asset of this deal.”
Canadian Imperial Bank of Commerce will retain the half of the portfolio that includes Aerogold customers that are bank clients with financial products such as mortgages.
CIBC has been the primary Aeroplan credit card issuer for more than 20 years.
CIBC chief executive Gerry McCaughey also called the deal “very client-friendly” and said it gives them more choice.
McCaughey wouldn’t go into detail when asked why the bank couldn’t reach a renewal agreement with Aimia.
CIBC noted the new deal ultimately will lower its ongoing earnings per share by about 45 cents.
The three companies have been in negotiations for weeks, following Aimia’s decision to pick TD as the primary issuer of Aeroplan Visa credit cards.
CIBC objected to the decision and the three parties agreed to seek a compromise.
Aimia said about $312.5 million will be paid to CIBC for the shift of half its Aeroplan cards portfolio to TD, with Aimia funding about $150 million of the payments.
TD will pay $162.5 million, including $50 million when the deal closes.
The rest will be paid over three years—about $37.5 million annually.
CIBC also said it plans to introduce its own travel loyalty rewards card later this year.