Blackstone Buys 25% of Aeroplan for $2.5B
Air Canada retains control of loyalty program, valued at $10 billion, with option to repurchase stake in 5-8 years
Blackstone and a group of Canadian pension funds are purchasing a 25% stake in Air Canada's Aeroplan loyalty program for $2.5 billion, valuing the business at $10 billion. This deal marks a significant investment in the loyalty program, which has more than 10 million members worldwide.
The investor group includes the Caisse de Depot et Placement du Quebec, PSP Investments, and British Columbia Investment Management Corp. Air Canada will retain control of Aeroplan, ensuring the airline's continued management of the program.
Air Canada has also secured the right to repurchase the 25% stake between the fifth and eighth anniversaries of the deal's closing. This provision allows the airline to potentially regain full ownership of the loyalty program in the future.
The deal has had a positive impact on Air Canada's stock, which rose about 6% on Tuesday to its highest level since 2021. The valuation of the Aeroplan business at $10 billion is notable, as it exceeds Air Canada's stock market capitalization by about C$2.4 billion.
## What the deal means for investors The investor group, including Blackstone and the Canadian pension funds, will have their upside capped at an internal rate of return of 6.5%. This ensures that the investors will not exceed a certain level of return on their investment.
## Why it matters The deal highlights the value of loyalty programs in the airline industry. With over 10 million members worldwide, Aeroplan is a significant asset for Air Canada, providing a steady stream of revenue through point redemptions and partner network transactions. As the airline industry continues to evolve, the importance of loyalty programs in driving customer retention and revenue growth will only continue to grow.
The deal also demonstrates the appeal of the Canadian market to investors, with Blackstone and the pension funds committing significant capital to the Aeroplan program. As Air Canada expands its operations, the investment in Aeroplan will likely play a key role in the airline's growth strategy.
