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Air Canada has an update on its loyalty business

Air Canada has an update on its loyalty business

Tuesday, September 19, 2017

MONTREAL — Air Canada says it is launching a search for a co-branded credit card partner for its new loyalty program.

The Montreal-based airline says it will be inviting key financial institutions to participate in a request for proposals to join the launch of the program in 2020.

In May 2017 Air Canada served notice that it plans to not extend its current partnership with Aimia, although the company said it expects to continue making Air Canada flights available for Aeroplan redemption beyond the end of the current partnership.

Operating its own loyalty program is expected to deliver a pre-tax net present value of $2 billion to $2.5 billion over 15 years.

The move was announced ahead of Air Canada’s 2017 Investor Day, taking place Sept. 19. Air Canada said it will set new financial targets at its annual investor day. From 2018 until 2020, Air Canada is targeting an annual EBITDAR margin (earnings before interest, taxes, depreciation, amortization, impairment, and aircraft rent, as a percentage of operating revenue) of 17 – 20% and an annual return on invested capital (ROIC) of 13 – 16%. Air Canada is also projecting cumulative free cash flow of $2.0 billion to $3.0 billion over the same period and a leverage ratio of 1.2 (measured by adjusted net debt over EBITDAR) by the end of 2020.

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“We have made significant progress in executing our business plan over the last several years, as evidenced by our share price appreciation of approximately 3,000% since early 2009,” said Calin Rovinescu, President and CEO of Air Canada.

“As our business strategy continues to evolve, we have expanded margins, increased adjusted net income and improved our return on invested capital. We have strengthened the balance sheet and improved our competitive position. We have significantly reduced the company’s overall risk profile by aggressively managing our financial leverage and effectively transforming our pension plans from a large deficit to a significant surplus position. We have also built tremendous flexibility into our fleet, allowing us to effectively react to different economic environments and avail ourselves of more opportunities.

“Having achieved all of this, we are now ready to take it to a next level, building on this positive momentum with more ambitious objectives, which reflect our confidence in our strategic plan. Our business strategy that has yielded the success it has is centered on four core priorities and they remain: leveraging our international network, reducing costs and enhancing revenues, engaging our customers and fostering a positive culture within our workforce.

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“We see many opportunities ahead, including the introduction of more efficient narrow-body aircraft into the mainline fleet, incremental benefits from our amended and extended capacity purchase agreement with Jazz and from the planned launch of our own loyalty program in 2020.”

Rovinescu said the airline also anticipates realizing benefits from its investments in new technology, including a new passenger services system scheduled to deploy in 2019.

 

With files from The Canadian Press

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