Air Canada Acquires Aeroplan Loyalty Program at a Bargain; Raising Fair Value Estimate
We are raising our fair value estimate to $32 from $29 for no-moat Air Canada after the carrier finalized plans to acquire the Aeroplan loyalty program from Aimia for CAD 450 million ($345 million) in cash. We expect this acquisition will generate roughly CAD 1.4 billion in added value on 40% to 60% profit margins from miles sold to reward program partners. High operating margins stem from miles sold at two to three times cost and 10% to 20% of miles remaining unclaimed. After the announcement, ...Air Canada is a domestic and international airline Company. Co. is engaged in the provision of scheduled passenger services in the Canadian market, the Canada-United States transborder market and in the international market to and from Canada. Through its subsidiaries, Co. also operates in low-cost carriers segment, providing service to customers in lower density markets and also in higher density markets at off-peak times throughout Canada and the United States. Co. also provides air cargo services on domestic and the U.S. transborder flights; tour operator services which operate in the outgoing leisure travel market; and ground handling services.
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